The Laffer curve illustrates that, in some circumstances, the government can reduce a tax on a good and increase the
a. deadweight loss.
b. price paid by consumers.
c. equilibrium quantity.
d. government's tax revenue.
Ans: d. government's tax revenue.
The Laffer curve shows the relationship between the tax on a good and the amount of government tax revenue received. In some instances, as the size of a tax increases, tax revenue grows. But as the size of the tax increases further, tax revenue falls because the higher tax drastically reduces the size of the market. See Section: Deadweight Loss and Tax Revenue as Taxes Vary.
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Perfect Shots is company specializing in wedding photos and they have a fixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $14,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $4,800 and the marginal benefit from television advertising is
$14,250. To optimally allocate their advertising budget, Perfect Shots should ________. A) decrease the amount of advertising in radio and television B) increase the amount of advertising in radio and decrease the amount of advertising in television C) decrease the amount of advertising in radio and increase the amount of advertising in television D) increase the amount of advertising in radio and television
Refer to the above figure. Demand will be elastic when quantity is between
A) 0 and A. B) 0 and B. C) A and B. D) B and C.
Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104 . What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?
Suppose there is an increase in the supply of a good. Which of the following statements is true?
A. The closer the demand curve is to being vertical, the larger the decrease in equilibrium price, and the smaller the increase in equilibrium quantity. B. The closer the demand curve is to being horizontal, the larger the decrease in equilibrium price, and the smaller the increase in equilibrium quantity. C. The closer the demand curve is to being vertical, the smaller the decrease in equilibrium price, and the larger the increase in equilibrium quantity. D. The closer the demand curve is to being vertical, the larger the increase in equilibrium price, and the smaller the decrease in equilibrium quantity.