A tax equal to the external marginal cost of an activity yields the efficient level of production because the tax
A) achieves the competitive equilibrium.
B) forces producers to face all costs of production including the external cost.
C) ensures greater profits for the firm.
D) eliminates all pollution.
B
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Picture a linear downward-sloping demand curve. The price elasticity of demand
a. remains the same for all price ranges on that demand curve b. varies among the price ranges on that demand curve c. varies but is always greater than one whatever the price range on that demand curve d. is always 1.0 for any price range where the price difference is $1, such as $10 and $9 e. is always zero
During the American Revolution, the Pennsylvania legislature enacted price controls on essential commodities. The result of this legislation was
a. a large increase in the availability of those items, ending shortages. b. a severe shortage of those essential commodities. c. an increase in the price of those items, thus alleviating shortages. d. new efforts to increase production of those commodities. e. a minor inconvenience as persons adjusted to the new law.