Static tax analysis assumes that
A. an increase in a tax rate will lead to an increase in the tax base.
B. an increase in a tax rate will leave the tax base unchanged.
C. the tax base will always remain unchanged.
D. an increase in a tax rate may lead to a decrease in the tax base.
Answer: B
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A tax on primary resource use would
a. Increase recycling rates and raise the costs of some products b. Increase recycling rates and not affect product costs c. Decrease recycling rates and raise the cost of some products d. Decrease recycling rates and not affect product costs e. Decrease recycling rates but the effect on prices is unknown
Consider a market with just one firm. The demand in the market is p = 18 – Q and the firm has a linear cost function C(Q) = 2Q
a. How much output will this firm produce. What will be the profit and consumers surplus? b. Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style (simultaneous output choice). What will be the equilibrium price and quantity in the market? What is the total market profit and CS?