Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping. A tax is imposed on specialty license plates. Which of the following is true?
A) Drivers pay the smallest share of the tax.
B) Drivers pay none of the tax.
C) Drivers pay all of the tax.
D) The government pays all of the tax.
E) The government collects nothing in tax revenues.
C
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An inferior good is one for which an increase in income causes a(n)
a. increase in supply b. decrease in supply c. increase in demand d. decrease in demand
Which of the following statements about the marginal rate of substitution is NOT correct?
A) It measures the number of units of the good on the horizontal axis that a consumer must be compensated with to give up a unit of the good on the vertical axis, while remaining on the same indifference curve. B) It is measured by the slope of the indifference curve. C) It decreases in value when moving downward along a typical-shaped indifference curve. D) It is constant for goods that are perfect substitutes.