Suppose that the demand for lava lamps is elastic, and the supply of lava lamps is inelastic. A tax of $2 per lamp levied on lava lamps will increase the price paid by buyers of lava lamps by
A. $1
B. less than $1
C. between $1 and $2.
D. $2
B. less than $1
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Sammy has a drone that he values at $1,500. Dean values the same drone at $2,000. Sammy decides to sell the drone to Dean for $1,800. What is the total cooperative surplus gained as a result of this trade?
A) $0 B) $200 C) $300 D) $500
If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set
A) equal to the marginal private cost of production at the economically efficient level of pollution. B) equal to the amount of the deadweight loss created in the absence of a pollution tax. C) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product. D) equal to the marginal external cost at the economically efficient level of pollution.
In the above figure, if the real interest rate is 6 percent, the quantity of loanable funds demanded is
A) $150 billion. B) $300 billion. C) $450 billion. D) $600 billion.
In the long run, most economists agree that a permanent increase in government spending leads to
A) a decrease in private spending by less than the amount that government spending increased. B) a decrease in private spending by the same amount that government spending increased. C) no decrease in private spending. D) a decrease in private spending by more than the amount that government spending increased.