-The Demand for Bus Service Is Perfectly Elastic at a Price

question 223

Multiple Choice

-The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride.

• A) $0.75
• B) $1.60
• C) $1.25
• D) $3.25

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Definitions:

Labor

The effort exerted by humans, encompassing both mental and physical activities, to create goods and services.

Machines

are mechanical or electronic devices that perform tasks, either automatically or with human input.

Short-Run Total Cost

The total of all costs, both fixed and variable, involved in the production of goods or services in the short run.

Production Function

This concept describes the relationship between inputs used in production and the resulting output.