Comment on the following statement: "Average fixed cost falls as output rises, but average fixed cost will never be equal to zero."
What will be an ideal response?
The statement is true. Because average fixed cost is equal to fixed cost divided by the number of units of output, average fixed cost declines as output rises. However, as long as fixed cost is not equal to zero, average fixed cost cannot be equal to zero.
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What would be a way for the Federal Reserve to stimulate a sluggish economy?
A) buy government bonds on the open market B) encourage the stock market C) print more money D) sell more government bonds
The above figure shows the market for bicycles. When there is a physical fitness craze so that everyone wants to exercise the
A) demand curve for bicycles shifts from D1 to D2. B) demand curve for bicycles shifts from D2 to D1. C) demand curve and the supply curve of bicycles do not shift. D) supply curve of bicycles shifts from S1 to S2.
Suppose the local government places a sales tax on hotel rooms and that the demand for these rooms is elastic while the supply is perfectly inelastic. The tax incidence is such that the tax will be paid by
A) only the consumers. B) equally by the consumers and the producers. C) only the producers. D) the taxpayers.
Based on the table demonstrating three tax systems, under which system(s) would a high earner pay an amount of tax closest to that paid by a low earner?
a. progressive
b. proportional
c. regressive
d. both proportional and progressive