Suppose the market for grass seed can be expressed as Demand: QD = 100 - 2p Supply: QS = 3p If government imposes a 10% ad valorem tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected?
What will be an ideal response?
First rearrange the supply curve, p = Q/3. Sellers must receive this price plus 10% more to pay the tax. Thus, p + tax = (1.1Q)/3. Substituting into the demand curve yields Q = 100 - (2.2/3)Q or (5.2/3)Q = 100 or Q = 57.69. Solving for price plus tax yields p + tax = (100 - 57.69)/2 = 21.15, i.e. the price that consumers will pay is 21.15. Note price does not rise by 10% of the old price of 20. 21.15 represents the new price plus the 10% tax. Solving for the price yields p = 21.15/1.1 = 19.23. Tax revenue equals (21.15 - 19.23 ) ∗ 57.69 = 110.76.
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The price reflecting the true social opportunity costs of a resource is known as
(a) a shadow price. (b) an equilibrium price. (c) a world price. (d) a price index.
What additional complexities arise when multinational corporations consider capital projects on a global basis?
What will be an ideal response?
Social Security payments were:
A. originally adjusted for inflation, causing the real value to retirees to decrease over time. B. originally adjusted for inflation, causing the real value to retirees to increase over time. C. not originally adjusted for inflation, causing the real value to retirees to increase over time. D. not originally adjusted for inflation, causing the real value to retirees to decrease over time.
Compensation of employees:
a. excludes the monetary value of fringe benefits. b. excludes paid vacations. c. is the largest component of GDP. d. excludes employer's taxes paid for employees' Social Security. e. includes rental income.