A tax on the buyers of cereal will increase the price of cereal paid by buyers,
a. decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal.
b. decrease the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal.
c. increase the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal.
d. increase the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal.
a
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Assume that a 3% increase in income across the economy produces a 1% decrease in the quantity of fast food demanded. The income elasticity of demand for fast food is ________, and therefore fast food is ________
A. positive; an inferior good. B. negative; a normal good. C. positive; a normal good. D. negative; an inferior good.
Which of the following is considered contractionary fiscal policy?
A) The New Jersey legislature cuts highway spending to balance its budget. B) Legislation removes a college tuition deduction from federal income taxes. C) Congress increases the income tax rate. D) Congress increases defense spending.
In long-run equilibrium, the typical perfectly competitive firm has no incentive to:
a. change output. b. change plant size. c. enter or leave the industry. d. do any of these.
Answer the following questions true (T) or false (F)
1. When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society. 2. When a tax on output is imposed to internalize the external costs of pollution, the supply curve shifts down by the amount of the tax. 3. One problem with using a command-and-control approach to pollution reduction is that the monitoring costs may be too high.