Suppose the U.S. government put a 'special 20 percent luxury tax' on the retail price of yachts in order to collect more taxes from boat owners. Assume the price elasticity for yachts is elastic at 2.50. Conclusion: We can probably expect that the government will collect less tax revenue.
True or False?
During 2009-2012, the U.S. federal government shut off the water supply to a huge section of farmland in the California Central Valley. The result was that tens of thousands od acres of good farmland have turned into desert land and many farmers went bankrupt. This is a good example of a positive externaility.
True or False?
Unitary elasticity is always equal to 1.
True or False?
The law of demand says that all else being equal, as the price rises, the quantity demanded will fall. Conversely, as the price falls, the quantity demanded will rise.
True or False?