Bill the butcher is upset because the government plans to tax beef $.10 a pound. "I hate paying taxes," he says. "Because of this, I'm raising all my beef prices by $.10 a pound. The consumers will bear this burden, not me." Do you see anything wrong with this way of thinking? Explain
The demand for Bill's beef is probably less than perfectly inelastic. In other words, substitutes are available. If other sellers raise their prices by less than $.10 a pound, they should attract some of Bill's customers. Also, since the prices of pork, poultry, and fish have not been affected by this tax increase, we would expect consumers to substitute other products for the now more expensive beef. Just as the law of demand predicts, Bill will sell less beef at this higher price. If Bill really could raise the price without any loss of sales, he wouldn't wait for a tax increase to do it!
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The unemployment rate at full employment is
A) the natural unemployment rate. B) equal the amount of unemployment caused by job search. C) zero. D) equal to the rationed rate of unemployment. E) undefined because the economy is never at full employment.
Economists using marginal utility theory assume that consumers' objectives are to
A) maximize their total utility. B) maximize their marginal utility. C) maximize their income. D) none of the above.
Which of the following cultural events likely increased the demand for the product highlighted in the event?
A) the banning of cigarette advertising on television B) the inclusion of Reese's Pieces in the movie E.T. C) increased environmental awareness about the impacts of sport utility vehicles (SUVs) D) concerns over "Mad Cow" disease in beef
The way in which an oligopolist acts in response to a price change by a competitor is known as a
A) zero-sum game. B) positive-sum game. C) reaction function. D) cooperative game.