The existence of positive economic profits induces firms to:
A. enter an industry, which shifts the market supply curve to the left and decreases market price.
B. enter an industry, which shifts the market supply curve to the right and decreases market price.
C. exit an industry, which shifts the market supply curve to the right and decreases market price.
D. enter an industry, which shifts the market supply curve to the right and increases market price.
Answer: B
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If the elasticity of demand for a product equals 3 and the supply is perfectly elastic, then if a tax is imposed on this product,
A) the buyer pays all the tax. B) the seller pays all the tax. C) the buyer pays 3/4 of the tax. D) the seller pays 3/4 of the tax. E) the buyer pays 4/3 of the tax.
If a tariff is imposed on imported televisions, we expect domestic demand for televisions to:
A) fall, and the total supply to increase. B) rise, and the total supply to decrease. C) rise, and the total supply to rise. D) remain unchanged, and the total supply to decrease.