If the market elasticity of demand for potatoes is 0.3, then the individual farmer’s elasticity of demand ( )
A. is also 0.3.
B. depends on how large a crop she produces.
C. will range between 0.3 and 1.0.
D. will be infinite.
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Tommy’s Tires operates in a perfectly competitive market. If tires sell for $50 each and ATC = $40 per tire 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 tire will rise.
D. average total costs will fall.
Suppose demand for electricity is perfectly inelastic. A tax on electricity will be ( )
A. split between producers and consumers in equal shares.
B. paid only by producers.
C. paid only by consumers.
D. split between producers and consumers in unequal shares.
A per-unit tax on a good will ( )
A. result in a decrease in total surplus.
B. generally hurt only consumer surplus.
C. generally hurt only producer surplus.
D. result in an increase in total surplus.
If the supply curve is perfectly elastic, a per-unit tax ( )
A. does not create deadweight loss.
B. does not reduce consumer surplus.
C. does not reduce producer surplus.
D. reduces consumer surplus but increases producer surplus.
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