True, False, Explain: Indicate if you believe each statement is true or false, t

Question

True, False, Explain: Indicate if you believe each statement is true or false, then give a short explanation for your answer I. A sales tax which is the same for all goods (e.g. 5% added onto the sale price of anything bought anywhere) can be considered a regressive tax. 2. In a perfectly competitive market, if a single firm's supply decreases, price will ncrease. 3. In the short run, producers cannot change any of their production costs. t. emegodcan be rival or non-rival depending on the number of consumers using it. 5. Because a monopolist has market power, they can choose both the price they charge, and the quantity that is sold of their good.

Explanation / Answer

(1) False

Any tax that remains the same percentage of price is a proportional tax.

(2) False

In perfect competition, each firm is too small to influence market price through a change in its output. So if one firm raises production (supply), market supply changes insignificantly to increase market price.

(3) False

In short run, producers can change the variable costs of production but not the fixed costs.

(4) False

Whether a good is rival or non-rival depends on whether consumption of the good by one consumer excludes another consumer from using (consuming) the good. This is independent of number of consumers.

(5) False

Though monopolist has market power, they face downward sloping demand curve, meaning that if they raise (lower) price, quantity demanded (sold) falls (rises). So, if they decide to raise (lower) price, quantity falls (rises), and if they decide to lower (raise) output, they can raise (lower) price. But they cannot control both price and quantity.

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