The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service
If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride. A) $0.75
B) $1.60
C) $1.25
D) $3.25
A
You might also like to view...
Diminishing marginal returns occur when
A) the average product of the variable input eventually diminishes. B) the marginal product of an additional worker is less than the marginal product of the previous worker hired. C) the firm hires cheap, less-skilled workers in place of expensive, high-skilled workers. D) total product diminishes.
Which of the following represents the most expansionary fiscal policy?
A. A $10 billion tax cut. B. A $10 billion increase in government spending. C. A $10 billion tax increase. D. A $10 billion decrease in government spending.