The Grinch is now the mayor of your hometown, and he's still trying to steal Christmas. On the day after Thanksgiving, he announces a $25 tax on fresh Christmas trees. Tree farmers are angry to hear this because they have already delivered this season's
freshly cut trees to the tree lots in your town. You hear your neighbors planning to buy an artificial tree, and your family decides to drive to the next town to buy a tree. a . Who will bear the biggest share of the burden the first Christmas season this tax is in effect? Why? b. Will your answer change for subsequent Christmases? Why?
a . The tree farmers will bear the biggest burden. Their supply curve is the perfectly inelastic market-day
curve. They will have to reduce their prices by the full $25 tax in order to sell their fixed quantity.
b. The burden will be more evenly distributed in the future. The tree farmers will respond to the tax by
reducing the number of trees that they deliver to your town.
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Which of the following is not a usual consequence of inflation?
A) Income is redistributed among people. B) People are misled into supposing that their earnings have risen substantially. C) People believe that rising prices have made them worse off. D) The cost of living goes up for everyone. E) The value of money falls.
Strategic dependence is found in
A) monopoly markets. B) oligopolistic markets. C) monopolistic competitive markets. D) perfect competitive markets.