Last year, Joan bought 50 pounds of hamburger when the household income was $40,000. This year, the household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant Joan’s income elasticity of demand for hamburger is ()
A. positive, so Joan considers hamburger to be an inferior good.
B. positive, so Joan considers hamburger to be a normal good and a necessity.
C. negative, so Joan considers hamburger to be an inferior good.
D. negative, so Joan considers hamburger to be a normal good.
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The burden of a luxury tax falls ()
A. more on the rich than on the middle class.
B. more on the poor than on the middle class.
C. more on the middle class than on the rich.
D. equally on the rich, the middle class, and the poor.
The major difference between tariffs and import quotas is that ()
A. tariffs create deadweight losses, but import quotas do not.
B. tariffs help domestic consumers, and import quotas help domestic producers.
C. tariffs raise revenue for the government, but import quotas create a surplus for import license holders.
D. All of the above are correct.
Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. The social cost of producing the steel includes the ()
A. private costs of the steel producers and the price consumers pay for the steel.
B. private costs of the steel producers and the costs to the bystanders affected by the pollution.
C. costs to the bystanders effected by the pollution only.
D. price consumers pay for the steel.
Which of the following statements is most correct about a market which is characterized by a negative production externality? ()
A. The equilibrium quantity of output is equal to the socially optimal quantity.
B. The equilibrium quantity of output is greater than the socially optimal quantity.
C. Government intervention is not required to achieve a socially optimal quantity of output.
D. The cost to the producer exceeds the cost to society.
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