If demand is perfectly elastic, a sales tax is paid by
A) only the buyers.
B) only the sellers.
C) both the buyers and sellers.
D) None of the above answers is correct.
B
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Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by five units per hour, then to maximize profits the firm should
A) hire the additional worker. B) lay off some of its workers. C) not change the number of workers it currently hires. D) There is not enough information to answer the question.
Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called
A) moral selection. B) risk sharing. C) asymmetric information. D) adverse hazard.