Current price of gasoline at the pump

Assignment Help Microeconomics
Reference no: EM13693849

Suppose the current price of gasoline at the pump is $3.89 per gallon and that 1 million gallons are sold per month. A politician proposes to add a 10¢ tax to the price of a gallon of gasoline. She says the tax will generate $100,000 tax revenues per month (1 million gallons × $0.10 = $100,000). What assumption is she making in terms of price elasticity of demand? Is she correct in her assumption? Please explain

Reference no: EM13693849

Questions Cloud

Monopolistically competitive firm-profit-maximizing price : You are the manager of a monopolistically competitive firm. The inverse demand for your product is given by P = 200 - 10Q and your marginal cost is MC = 5 + Q.
Phillips curve : Philips Curve: Assume an economy recently suffered a demand shock and is currently in a recession. Assume that in response to a recession, there is a large boost in government spending
Variety of smartphones problem : A small shop sells a variety of smartphones. Suppose we know that the battery life of smartphone a is normally distributed with a mean of 15 hours and a standard deviation of 6.4. also suppose we know that the average battery life of smartphone b is ..
Macroeconomic events-what happens to borrowing-investment : Analyzing Macroeconomic Events (Monetary Policy) with the IS Curve. Consider the following changes in the Macro economy. Show how to think about them using the IS curve graph and explain how and why GDP is affected in the short run.
Current price of gasoline at the pump : Suppose the current price of gasoline at the pump is $3.89 per gallon and that 1 million gallons are sold per month. A politician proposes to add a 10¢ tax to the price of a gallon of gasoline.
Inelastic-elastic or unit elastic between two prices : Explain very briefly and with a good example, how a seller can determine whether the demand for his or her good is inelastic, elastic, or unit elastic between two prices with suitable examples.
Income elasticity of demand or cross elasticity of demand : Failure to understand elasticities can lead to expensive mistakes by business managers in making important business decisions. Discuss this statement by referring to any one of the concepts of elasticity with suitable examples (price elasticity of de..
Law of diminishing returns-how it impacts cost of production : Explain the Law of Diminishing Returns and how it impacts cost of production. Be very detailed. You're welcome to use graphs or charts in the answer.
Consider the money to be spending money : A busy attorney regularly works out with the help of a trainer at the local gym. She pays $400 per month directly to the trainer for this service. Over time, the two fell in love and got married.

Reviews

Write a Review

Microeconomics Questions & Answers

  Why dont firms continue to get infinitely larger

Externalities are third party consequence of some other action. They can be positive or negative externalities and they impose a benefit or cost to a third party.

  For what values of f can a profit-maximizing firm charging

Suppose a monopolist producing Q units of output faces the demand curve P = 20 - Q. Its total cost when producing Q units of output is TC = F + Q2, where F is a fixed cost. The marginal cost is MC = 2Q.

  If inflation pushes price level up by 10 percent find the

suppose you have 500 in savings when the price level index is at 100.a if inflation pushes the price level up by 10

  Short-run cost functions model

Write a small research paper (critique) about 3 pages double spaces where the main focus is Cost Functions (Model of Short-Run Cost Functions) in the paper include some examples

  What must the annual revenue for years 2

A machine is purchased for $150,000. Revenue for the first year was $50,000. Over the total estimated life of 8 years, what must the annual revenue for years 2 through 8 equal to recover the investment, if costs are constant at $42,000 and a ret..

  Dividing the total amount produced in the market

In a perfectly competitive industry if each firm is identical then we can calculate the number of firms in the industry by

  Select a nation that has a low per capita income and

select a nation that has a low per capita income and discuss how the catch-up effect would work for that country.

  1assume that a firm has a total product curve given by q

1. assume that a firm has a total product curve given by q 2kl.a graph the total marginal and average product curves

  Consider the cournot duopoly model in which two firms

Cournot Revisited: Consider the Cournot duopoly model in which two firms

  How is the life-cycle pattern of income

Question 1. How is the life-cycle pattern of income related to the measurement of income equality at a point in time? What are the differences between social insurance programs and income assistance programs?

  1 in john stossels article in praise of price gouging

1. in john stossels article in praise of price gouging stossel argues that a law banning price gouging would result in

  To increase revenue and profits of a firm

In attempt to increase revenue and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd