7. Lump-Sum Tax The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Average fixed cost will increase. Marginal cost will increase. Average total cost will increase. Average variable cost will remain unchanged. Which of the following statements is true as a result of the per-burger tax? Check all that apply. Average total cost will remain unchanged. Marginal cost will increase. Average fixed cost will decrease. Average variable cost will increase.
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- The city govermment is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. O Average total cost will increase. O Marginal cost will increase. O Average variable cost will remain unchanged. O Average fixed cost will increase. Which of the following statements is true as a result of the per-burger tax? Check all that apply. OAverage total cost will increase. O Average variable cost will increase. O Average fixed cost will remain unchanged. O Marginal cost will remain unchanged. 52°F Mostly cloudy Cop 441 DI & 8.KK Enterprises' average total cost curve (ATC) has shifted up, but its average variable cost curve (AVC) and marginal cost curve (MC) haven't changed. Which of the following would cause the change in ATC, but not affect AVC or MC ? Select one: O a. a tax on a variable cost of production O b. an improvement in productivity Ос. a decline in productivity O d. a tax on a fixed cost of productionuse diagramsa. What is the effect on the equilibrium price and quantity traded in market of theintroduction of a new technology that reduces costs of production for all firms?b. What is the effect on the equilibrium price and quantity traded in a market of a changein tastes that reduces the demand for the product?c. What is the effect on the equilibrium price and quantity traded in a market of theimposition of a tax per unit sold on suppliers?d. What is the effect on the equilibrium price and quantity traded in a market of thepayment of a subsidy per unit sold paid to suppliers?
- 10. Suppose a firm must pay an annual tax, which is a fixed sum, independent of whether itproduces any output.a. How does this tax affect the firm’s fixed, marginal, and average costs?b. Now suppose the firm is charged a tax that is proportional to the number of items itproduces. Again, how does this tax affect the firm’s fixed, marginal, and average costs?6. The long-run supply curve for a particular type of kitchen knife is a horizontal line at a price of $3 per knife. The demand curve for such a kitchen knife is Q,=50– 2P where Q, is the quantity of knives demanded (in millions per year) and P is the price per knife (in dollars). a. What is the equilibrium output of such knives? b. If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives? (Assume the tax is collected by the government from the suppliers of knives.) c. After the tax is imposed, you buy such a knife for $3.75. Is this the long- run equilibrium price?17) JA perfectly competitive market has a market price of $10 and a quantity of 50 is traded. When the government imposes a $3 per-unit tax on the market, market price increases by 10%. Which of the statements below could be true based on this information. A Consumers pay the tax and supply is relatively more inelastic than demand. B Consumers pay the tax and demand is relatively more inelastic than supply. C Producers pay the tax and supply is relatively more inelastic than demand. D Producers pay the tax and demand is relatively more inelastic than supply. E Producers pay the tax and the elasticity of supply is the same as demand (in absolute terms).
- a. Explain the relationship between marginal product and average product. b. Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why?20. Which of the following would increase the short-run supply for a business, regardless of market structure? A-An income tax on consumers. B-A transfer payment. C-A lump-sum production subsidy D-A per-unit production subsidy. E-An excise tax 21.How would the creation of an import quota affect the market for a good? A-Imported supply increases. B-Domestic supply decreases. C-Market price increases D-Consumer surplus increases. E-Producer surplus decreasesMU₁ MU2 P₁ P2 In words, please describe why this condition must be true. C. As we showed in class, a firm's profit-maximizing production occurs when marginal revenue is equal to marginal cost. 1. Discuss what would happen if the firm is producing at a quantity where MR> MC. What can the firm do to raise profit? Explain your reasoning. 2. Discuss what would happen if the firm is producing at a quantity where MR< MC. What can the firm do to raise profit? Explain your reasoning.
- Show the short-run impact of a $2 per unit excise tax imposed on firms in a competitive industry. (Assume the industry is in long-run equilibrium before the tax was imposed.) 1.How would the long-run results differ? (Explain briefly.) What is the impact on efficiency of the tax?Business Selling Price Total Sold Cost of Goods Sold Sales Profit First Aid Kits 28.95 25 400 723.75 323.75 Leg Casts 50 10 300 500 200 Rubbing Liniment 12 5 5 60 55 Resuscitators 70 2 130 140 10 Sun Burn Ointment 25 25 1000 625 -375 Question #1 Economists are always calculating the costs and the benefits of alternatives. Economic profit, as distinct from the accounting profit you calculated in question 1, is the additional profit that is earned by choosing the best, rather than the second best, profit opportunity. Profit maximizers should always calculate economic as well as accounting profit. What is the economic profit you would receive if you decided to purchase the business's best profit maker?1. A profit-maximizing dairy farm is currently producing 10,000 gallons of milk per day. The government is considering two alternative policies. One is to give the farm a lump sum subsidy of $500 per month. The other policy is to give the farm a subsidy of $.05 per gallon of output. Both kinds of subsidy will increase production at this farm. Neither subsidy will affect production at this farm, since output is determined by profit b. maximization. C. Production at this farm will be increased if the per-unit subsidy is adopted but not if the lump sum subsidy is adopted. d. Which subsidy has the greater effect on production at this farm depends on whether fixed costs are greater than variable costs. Production will be increased by either kind of subsidy if and only if there are not decreasing returns to scale. e.