Assume that the United States levies a high tariff against Japanese steel. How is the tariff likely to affect a. U.S. steel workers? b. General Motors? c. Bethlehem Steel? d. Japanese automobile producers? e. U.S. electric utilities?
What will be an ideal response?
a. U.S. steel workers will benefit through continued employment and high wages.
b. As a purchaser of steel, General Motors will be worse off because it will pay more for the steel it uses in producing automobiles. As a competitor with Japanese car manufacturers, it will be worse off because the steel costs for the latter will actually go down.
c. Bethlehem Steel will be better off because it will be protected against foreign competition.
d. Japanese automobile producers will be better off because the price of Japanese steel will be lower (because of increased supply).
e. U.S. electric utilities will be better off because of the increased demand for electric power by U.S. steel producers, but worse off because of decreased demand by U.S. firms that buy steel.
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In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax on X-rated movies was unconstitutional. When the affected cinemas sought a refund of collected taxes, they were denied on the grounds that the tax, although collected by the theater, was indeed paid by the theatergoers. The Supreme Court apparently believed
a. the supply of X-rated movies was perfectly elastic. b. the demand for X-rated movies was perfectly inelastic. c. the legislation intended that the theatergoers pay the tax. d. the burden fell on the theatergoers-there are no excess burdens on the theater.
A benefit to consumers of monopolistically competitive markets is that:
A. consumers only have to choose from one product. B. consumers have a variety of products from which to choose. C. goods are sold at the lowest possible average cost of production. D. price is equal to marginal cost in equilibrium.