Question

The elasticity of supply for a good equals 1.0. The buyer pays the whole tax burden when the elasticity of demand equals

	A.	0.5
	B.	None of the above answers is correct because when the elasticity of supply equals 1.0, the suppliers pay all of the tax.
	C.	0
	D.	0.5
	E.	1.0

The occurrence of a deadweight loss indicates that the market is efficient.

T / F

Production Possibilities Schedule

Country X

Country Y

Choice	Coffee	Sugar	Coffee	Sugar
A	200	0	100	0
B	160	40	80	30
C	120	80	60	60
D	80	120	40	90
E	40	160	20	120
F	0	200	0	150

In the table above, if trade were to occur, what is the most that country X is willing to pay for 1 unit of sugar?

	A.	1/2 unit of coffee
	B.	2/3 unit of coffee
	C.	1 unit of coffee
	D.	3/2 units of coffee

In theory, an increase in minimum wages will decrease employment and the decrease in employment depends on both elasticities of demand and supply.

T. / F

Answer 1

1) The buyer will bear the whole tax burden when demand is perfectly elastic = 0

option(C)

2) Deadweight loss indicates that the market is inefficient

the statement is False

3) opportunity cost of the sugar = 200/200 =1 coffee

option(C)

4) The statement is True as the elasticity would determine the employment level.