Suppose the supply of coal is perfectly inelastic, and the price elasticity of demand for coal is -0.4. If the government imposes a binding price ceiling for coal at a price that is 20 percent below the market equilibrium price, what is the impact of this policy on the market quantity?
A. Excess demand equals 16 percent of the market equilibrium quantity.
B. Excess demand equals 80 percent of the market equilibrium quantity.
C. The policy does not affect the market quantity.
D. Excess demand equals 8 percent of the market equilibrium quantity.
D Excess demand equals 8 percent of the market equilibrium quantity.
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A kinked demand curve is most likely to occur when other firms
a. follow any change in price by a rival firm. b. engage in collusive practices. c. follow a downward change in price but not an upward change by a rival firm. d. ignore any change in price by a rival firm.
The tax rate that maximizes the government's revenues is:
A. not always the level that is "best" for the economy. B. the level that is "best" for the economy. C. 30 percent. D. 85 percent.
Why does the census data overstate inequality?
a. They overestimate the non cash transfers received by the people from the government. b. They take into account the after-tax incomes. c. They take into account the gifts and transfer receipts from friends and relatives staying abroad. d. They do not consider the in-kind transfers received by the people from the government. e. They overestimate the medical benefits received by the people from the government.
In principle, a cap-and-trade program would
A) cause firms to generate more pollution than their allowed limits. B) cause firms to generate less pollution than their allowed limits. C) raise the production costs of all firms. D) lower the production costs of all firms.