Suppose that the government wants the burden of the cigarette tax to fall equally on buyers and sellers and declares that a $1.00 tax be imposed on each. Is the burden of the tax shared equally? Why or why not?
What will be an ideal response?
Not necessarily. A tax has the same effect regardless of whether it's imposed on buyers or sellers. The division of the burden of a tax between buyers and sellers depends on the elasticities of demand and supply, not on the tax law.
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Starting at full employment (RGDPNR), a. expansionary monetary policy can potentially result in increased real output, but only in the short run
b. expansionary monetary policy can potentially result in increased real output in both the short run and long run. c. contractionary monetary policy can potentially result in increased real output, but only in the short run. d. contractionary monetary policy can potentially result in increased real output in both the short run and long run.
Which of the following is true about perfect competition?
a. Each firm faces a downward-sloping demand curve. b. Each firm must face a horizontal demand curve. c. Firms are price-makers. d. Marginal cost equals average cost. e. Firms can increase sales by lowering their price.