How does the method of increasing revenue differ when demand is price inelastic and price elastic? Explain.
What will be an ideal response?
When demand is price inelastic, an increase in price and a decrease in quantity will increase revenue. The reason is that with an inelastic demand, the percentage of price change is greater than the percentage of quantity change. Therefore, the price increase will generate more income than the amount lost by the quantity decrease. When demand is price elastic, a decrease in price and an increase in quantity will increase revenue. The reason for this is that with an elastic demand, the percentage of price change is less than the percentage of quantity change. Therefore, if price decreases, the income generated by the increase in quantity demanded will be greater than the income lost by the decrease in price.
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The tax represented here is
A. progressive.
B. proportional.
C. regressive.
D. None of these choices
The perfectly competitive widget industry is in long-run equilibrium. A profit-maximizing manufacturer receives total revenue of $55,000. He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets. The manufacturer
A. is earning an economic profit of $25,000. B. must have an opportunity cost of labor of less than $25,000. C. must have an opportunity cost of labor of exactly $25,000. D. must have an opportunity cost of labor of more than $25,000.
The chief function of the Federal Reserve is to be the federal government's tax collection institution
a. True b. False Indicate whether the statement is true or false
Which of the following is a macroeconomic policy?
A. Regulations limiting automobile emissions. B. Requiring locks on all guns. C. Tax cuts to bring the federal budget into balance D. How an early freeze in California will affect the price of fruit.