How does the size of the deadweight loss from a tax depend on the price elasticities of supply and demand?
Other things being equal, the less elastic the demand curve, the smaller the deadweight loss. Similarly, the less elastic the supply curve, other things being equal, the smaller the deadweight loss. However, when the supply and/or demand curves become more elastic, the deadweight loss becomes larger, because a given tax reduces the quantity exchanged by a greater amount.
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Recall the Application about how cable TV providers respond to the threat of potential competitors to answer the following question(s).Recall the Application. Because cable TV had to fend off potential entrants into their markets, cable TV providers are considered ________ as long as they successfully deterred entry.
A. insecure monopolists B. duopolists C. perfect competitors D. monopolistic competitors
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point E to Point A, the opportunity cost of hybrid cars, measured in terms of motorcycles
A. increases. B. initially increases, then decreases. C. decreases. D. remains constant.
Economic growth allows a society to consume
A. a higher quality of goods. B. a wider variety of goods. C. more goods per person. D. all of the above.