Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1. If the government imposes a tax on the product, then
A) buyers and sellers pay exactly the same share of the tax.
B) buyers pay all of the tax.
C) sellers pay all of the tax.
D) buyers pay a smaller share of the tax than do sellers, but both buyers and sellers pay some of the tax.
E) because the elasticity of demand is zero, the government collects no revenue from this tax.
B
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If the interest rate is below its equilibrium value, the price of
a. bonds will fall. b. money will fall. c. bonds will rise. d. stocks will fall. e. real estate will fall.
Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit-maximizing output level, then in the long run
a. more firms will enter the market. b. some firms will exit from the market. c. the equilibrium price per bottle will fall. d. average total costs will fall.