The government imposes a unit excise tax on bubble gum. What happens as a result?
A) The equilibrium quantity of bubble gum increases.
B) At the original market price, there will be a bubble gum surplus so price decreases.
C) At the original market price, there is a bubble gum shortage and so price rises.
D) There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less.
C
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Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that
a. GDP will increase in 2011. b. the producer price index will increase by more than 1.5 percent in 2011. c. interest rates will decrease in the future. d. the consumer price index will increase in the future.
Which product is most likely to be the most price elastic?
A. Milk B. Housing C. Clothing D. Automobiles