Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon. What most likely happens next?
a. Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas.
b. Service station operators grumble, but pay the tax without passing the cost along to you.
c. Service station operators pass along as much of the tax to you as they can, probably about 6 cents/gallon.
d. None of these choices.
c
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A change in relative factor prices will always result in
A) a change in the slope of the isoquants. B) a tangency between the new isocost line and a new isoquant. C) a rotation of the isocost lines. D) All of the above.
The Fed's mostly used tool for changing the size of the money supply is
A. its power to change the discount rate. B. its power to change legal minimum reserve requirements. C. open market operations. D. changing the size of the government budget deficit.
Which of the following is not one of the strengths of the Cobb-Douglas production function?
A) Both marginal product and returns to scale can be estimated from it. B) It can be converted into a linear function for ease of calculation. C) It shows a production function passing through increasing returns to constant returns and then to decreasing returns. D) The sum of the exponents indicates whether returns to scale are increasing, constant or decreasing.
Vertical contracts between manufacturers and retailers often aim to
a. Incentivize the retailers to undertake costly activities, which they otherwise may not realize the full benefits of on their own b. Reward the retailer for undertaking the risk inherent in introducing a new product c. Reimburse the retailer for the cost of managing an extended inventory d. All of the above