If a tax is imposed on the sellers in the market for cigarettes, and cigarettes
ID: 1197753 • Letter: I
Question
If a tax is imposed on the sellers in the market for cigarettes, and cigarettes are a very price inelastic good, then:
A. The sellers will bear the burden of the tax
B. The buyers will bear the burden of the tax
C. Both the buyers and sellers will bear the burden of the tax
d.Not enough information given
30.
A monopoly is considered a "natural monopoly" if:
A. The government allows it to exist
B. It operates in a public utilities market
D. It does not profit maximize at the quantity where marginal revenue equals marginal cost
A. The sellers will bear the burden of the tax
B. The buyers will bear the burden of the tax
C. Both the buyers and sellers will bear the burden of the tax
d.Not enough information given
30.
A monopoly is considered a "natural monopoly" if:
A. The government allows it to exist
B. It operates in a public utilities market
C. Its average total cost curve is everywhere downward slopingD. It does not profit maximize at the quantity where marginal revenue equals marginal cost
Explanation / Answer
25. Answer : option 'c'
Explanation:
In perfect competitive firm, if marginal revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marginal revenue is less than marginal cost, marginal profit is negative and a lesser quantity should be produced.
Where, Total Marginal profit= Total marginal revenue - Total marginal cost
26. Answer: option 'A'
Explanation: Profit = total revenue - (fixed cost + variable cost)
here fixed cost=( rent i.e) $5000
variable cost = $ 7500
total revenue = $10000
therefore Profit = 10000 - (5000+ 7500) = - 2,500
Hence, when the company losses are greater because it does not make enough revenue to offset the increased variable costs plus fixed costs, so it should shut down immediately.
28.Answer: option b
Explanation: if price is inelastic the buyers have to bare the tax while buying the product
30.Answer: option: b
Explanation:Natural monopolies are common in markets for ‘essential services’ that require an expensive infrastructure to deliver the good or service, such as in the cases of water supply, electricity, and gas, and other industries known as public utilities. Because there is the potential to exploit monopoly power, governments tend to nationalise or heavily regulate them.
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