What will the effects of the tax be in the short run

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1. "IBM should never sell its product for less than it costs to produce." If "costs to produce" is interpreted to mean IBM's average total cost, is this correct? If it is interpreted to mean average variable cost, is the statement correct? If it is interpreted to mean marginal cost, is the statement correct?

2. For a given increase in demand, will output increase by more if the MBA education industry is a constant-cost or increasing-cost industry? For a given decrease in demand, will output fall by more if the industry is a constant-cost or increasing-cost industry?

3. How would each of the following phenomena affect the long-run supply curve of apples?

a. Workers in the apple industry form a union.

b. Consumers ?nd out that apples cause cancer.

c. Hard-to-control bugs that eat apples invade from Mexico.

d. The government passes a law requiring apple trees to be planted at least 60 feet apart.

e. The government sets a maximum legal price (price ceiling) at which apples can be sold.

f. Immigration laws change to permit more itinerant applepickers to enter the country.

g. The government passes a minimum wage law for apple pickers

4. "Because agricultural demand is inelastic, a technological advance that lowers production costs will reduce total revenue. Thus, farmers have no incentive to introduce such a technique." True, false, or uncertain? Explain.

5. As the industry moves from point B to C in Figure 9.10b, how can the industry's output increase yet NYU's output fall?

6. Suppose that the gasoline retailing industry is perfectly competitive, constant cost, and in long-run equilibrium. If the government unexpectedly levies a ?ve-cent tax on every gallon sold by gasoline retailers, depict what will happen to the representative ?rm's cost curves. What will the effects of the tax be in the short run on industry output and price? Will the price rise by the full ?ve cents in the short run? In the long run? How would your answers change if the industry was increasing cost?

Reference no: EM1346394

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