________ of the payroll tax if labor supply is perfectly elastic.
A. Employers and employees will evenly share the burden
B. Employees will bear the full burden
C. Employers will bear the full burden
D. If labor supply is perfectly elastic, there is no tax burden.
Answer: C
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In a command system, the decision about what should be produced is made by
a. a central authority b. the market c. repeating what was done in the past d. business firms e. consumers
Suppose the demand for good X can be represented by the following equation: X d = 22 - (1/4)P. Furthermore, suppose that the demand for good Y can be represented by Y d = 50 - P.
(A) Find the elasticity of demand for both good X and good Y when the price is $10. (B) Suppose that an ad valorem tax is placed on both goods. Good Y is taxed at a rate of 5%. To ensure that the inverse elasticity rule holds, what must be the rate at which good X is taxed? Reminder: Elasticity at a given price is found using the formula ? = -(1/S)(P/X), where S is the slope of the demand curve, X is the quantity demanded, and P is the price.
Beginning at the horizontal axis intercept, as a consumer moves upward along the budget line, he will find that
a. the marginal utility per dollar spent on the vertical axis good increases b. the marginal utility per dollar spent on the horizontal axis good increases c. the marginal utility per dollar spent on the horizontal axis good decreases d. the marginal utilities per dollar spent on both goods increase e. the marginal utilities per dollar spent on both goods remain constant along that particular budget line
Which of the following best expresses the central idea of countercyclical fiscal policy?
a. Planned deficits are experienced during economic booms and planned surpluses during economic recessions. b. The balanced-budget approach is the proper criterion for determining annual budget policy. c. Actual deficits should equal actual surpluses during a period of deflation. d. Deficits are planned during economic recessions, and surpluses are utilized to restrain inflationary booms.