Consider the market for automobile transportation services, which are produced by taxicabs, buses, and companies like Uber and Lyft. Suppose that the federal government imposes a tax on producers of transportation services, and a separate tax on consumers of transportation services. What would you expect to happen to the equilibrium quantity and price of transportation services?
a. The equilibrium quantity decreases and the equilibrium price decreases.
b. The equilibrium quantity decreases and the equilibrium price increases.
c. The equilibrium quantity increases, and the change in the equilibrium price is ambiguous.
d. The equilibrium quantity increases and the equilibrium price increases.
e. None of the above.
Ans: e. None of the above.
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Money prices are an extremely effective device for promoting social cooperation because
A) most people want money more than they want anything else. B) people are basically selfish. C) scarcity can be eliminated through appropriate changes in money prices. D) they don't change rapidly when circumstances change. E) they help to clarify the options available to people.
Economic theory predicted that the price of a depletable resource would rise by 10 percent. In reality, the price fell by 5 percent. Which of the following events could explain this discrepancy?
a. Known reserves of the resource were depleted. b. The interest rate rose by 15 percent. c. Antitrust enforcement broke up a cartel among major suppliers of the resource. d. The government imposed an effective price floor.