Suppose the supply of diamonds is relatively inelastic. A tax on diamonds would generate a
a. large DWL and the burden of a tax would fall on the buyer of diamonds.
b. small DWL and the burden of a tax would fall on the buyer of diamonds.
c. large DWL and the burden of a tax would fall on the seller of diamonds.
d. small DWL and the burden of a tax would fall on the seller of diamonds.
d. small DWL and the burden of a tax would fall on the seller of diamonds.
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Which of the following statements about private and social costs is TRUE?
A) Social costs include externalities. B) Private cost do not include externalities. C) Social costs are never smaller than private costs. D) All of the above.
A downsloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting:
A. The increase in the utility-maximizing quantity of that product demanded B. The decrease in the utility-maximizing quantity of that product demanded C. A substitution effect that encourages more consumption of that product D. An income effect that encourages more consumption of that product