Suppose Elasticity of Demand Is 1, Elasticity of Supply Is

question 134

Multiple Choice

Suppose elasticity of demand is 1, elasticity of supply is 2, and a 5 percent excise tax is levied on consumers. Which of the following changes will reduce the burden of the tax on consumers?

• A) Elasticity of demand falls to 0.
• B) Elasticity of demand rises to 2.
• C) Taxing authorities levy the tax on suppliers.
• D) Nothing will change the burden of the tax.

Explain the relationship between marginal cost, marginal revenue, average total cost, and the firm's supply decision.

Describe the demand curve faced by perfectly competitive firms and its implications.

Recognize the impacts of market entry and exit on the supply, demand, and pricing in the long run.

Discuss the notion of economic versus accounting profits in the context of perfect competition.

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Definitions:

Syntax

The set of rules that dictates the structure of sentences in a language; it governs how words and phrases are combined to form coherent sentences.

Morphemes

The smallest grammatical units in a language that have semantic meaning.

Grammar

The set of structural rules governing the composition of clauses, phrases, and words in any given natural language.

Surface Structure

In linguistics, the term refers to the literal arrangement of words in a sentence, as contrasted with the deeper meaning (deep structure) conveyed by the sentence.