Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

The deadweight loss will be $800 because the deadweight loss rises by the square of the tax increase. Thus, if the tax doubles, the deadweight loss quadruples.

Economics

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Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP. Explain what happens to aggregate demand, real GDP, and the price level

What will be an ideal response?

Economics

Which of the following has a production process that would be considered capital intensive?

A. A chorale B. Police detective work C. Auto manufacturing D. Serving food at a restaurant.

Economics