The figure above shows the market for gasoline. The government has imposed a tax on gasoline
a) What is the amount of the tax per gallon of gasoline? b) How much of the tax is paid by consumers? How much is paid by producers? Which is more elastic, the supply or demand for gasoline?
a) The tax is $1.50 per gallon, the amount by which the supply curve has been shifted upward.
b) Consumers pay $1 of the tax, as the price they pay rises from $1.50 to $2.50 per gallon. Producers pay $0.50 of the tax, as the price they receive falls from $1.50 to $1.00 per gallon. The supply is more elastic because suppliers pay a smaller fraction of the tax than do buyers.
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Which of the following statements is true when the consumer is in utility-maximizing equilibrium?
A) The number of units of each good purchased is equal. B) The prices of the goods in question must be equal. C) The total benefits the consumer receives from every good consumed must be the same for all goods. D) The rate at which the consumer is willing to trade one good for another is equal to the ratio of their market prices.
According to the Lucas critique, changes in economic policy are likely to have important effects on
A) the available amounts of natural resources. B) the behavior of consumers and firms. C) the preferences of consumers. D) none of the above
If real GDP increases by 5 percent and the population increases by 10 percent during the same period, real GDP per capita
a. increases. b. decreases. c. remains unchanged. d. increases if prices rise.