If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue, why does the ad valorem tax reduce output less than the specific tax?
What will be an ideal response?
While the per unit amount of the specific tax stays constant, the ad valorem tax, on a per unit basis, increases with price. The demand with the ad valorem tax is more inelastic than the demand curve with the specific tax. Output is reduced less along the more inelastic curve.
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For the typical student, taking an introductory course in economics should
a. turn the student into an economist. b. teach the student solutions to most social problems. c. teach the student how to answer complex social questions. d. help the student learn to rationally analyze social problems. e. All of the above are correct.
A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for c, we can use observed values for Q and I and then set the estimated income elasticity of demand equal to:
What will be an ideal response?
The movement from socialism to capitalism undertaken by Poland in the early 1990s represents:
A. neither a policy change nor a regime change. B. a regime change. C. a policy change. D. both a policy change and a regime change.
Country 1 produces two goods, A and B. Country 2 produces the same two goods. Currently, country 1 produces 100A and 200B and country 2 produces 300A and 700B. Which of the following statements is true?
What will be an ideal response?