An optimal corrective tax should be placed on _____
a. the sellers of the externality-generating activity
b. the inputs into the externality-generating activity
c. the externality-generating activity
d. the purchasers of the output of the externality-generating activity
c
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Suppose Thelma and Louise both sell fried green tomatoes in a perfectly competitive market. If Louise increases her output,
a. Thelma must reduce output b. the price Thelma can charge falls c. the price Thelma can charge rises d. the price Thelma can charge is unaffected e. Thelma's profits must fall
A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami. The elasticity of demand for rice is
a. greater in Miami than in Gainesville, even taking into account the population difference. b. greater in Gainesville than in Miami in spite of the population difference. c. equal in Gainesville and Miami regardless of the population difference. d. impossible to compare because of the population difference.