Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?
a. They are equal.
b. The after-tax equilibrium quantity is greater than the socially optimal quantity.
c. The after-tax equilibrium quantity is less than the socially optimal quantity.
d. There is not enough information to answer the question.
a
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The GDP deflator: a. takes government purchases into account, unlike the CPI
b. takes business investment purchases into account, unlike the CPI. c. is generally used to adjust nominal GDP to calculate real GDP. d. All of the above are true.
Refer to the total revenue graph below. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was:
A. Reduced and the demand is elastic
B. Increased and the demand is elastic
C. Reduced and the demand is inelastic
D. Increased and the demand is inelastic