Suppose there is a bill to increase the tax on cigarettes
QUESTION 1
Suppose there is a bill to increase the tax on cigarettes by $1 per pack coupled with an income tax cut of $500. Suppose a person smokes an average of 500 packs of
cigarettes per year—and would thus face a tax increase of about $500 per year from the cigarette tax at the person’s current level of consumption. The income tax
measure would increase the person’s after-tax income by $500.
Would the combined measures be likely to have any effect on the person’s consumption of cigarettes? Why or why not?
ANSWER IN 4 OR MORE WELL CONSTRUCTED PARAGRAPHS AND INCLUDE APA CITATION.
QUESTION 2
Suppose a firm finds that the marginal product of capital is 60 and the marginal product of labor is 20. If the price of capital is $6 and the price of labor is $2.50,
describe how the firm should adjust its mix of capital and labor? What will be the result?
ANSWER IN 4 OR MORE WELL CONSTRUCTED PARAGRAPHS AND INCLUDE APA CITATION
QUESTION 3
Please explain why the law of diminishing returns applies only in the short-term period.
ANSWER IN 4 OR MORE WELL CONSTRUCTED PARAGRAPHS AND INCLUDE APA CITATION
