HELP PLEASE!!! I). According to the Ramsey Rule, excise taxes should be ________

Question

HELP PLEASE!!!

I). According to the Ramsey Rule, excise taxes should be __________ on those goods with __________

a. Higher ; less elastic demand

b. Lower ; more elastic demand

c. Both (a) and (b) are true

d. Neither (a) nor (b) is true.

II). A franchise faces the following marginal product of labor schedule for players:

                                                            MPL = 25 – L2

Which of the following is (are) true?

a. This franchise will face increasing marginal costs of production.

b. This franchise will have a downward-sloping labor demand curve for players

c. Both (a) and (b) are true.

d. Neither (a) nor (b) is true.

III). If a franchise can sell game tickets to two different types of consumers and can prevent resale of tickets between them (so-called “third degree price discrimination”), it should charge a _________ price to that group with the ________ demand.

d. Neither (a) nor (b) is true.

IV). Suppose you live in a society where married couples and unmarried couples face the same income tax rates. Suppose this same society taxes wealthier people more than poor people. Economists would classify these components of the society’s tax system as:

d. Both vertically and horizontally inequitable.

V). Suppose a franchise faces supply curves for white and non-white players that are both perfectly elastic and that the two types of players are perfectly substitutable in the production process (for games or matches or whatever the output unit happens to be). The market wage for white players is $150 / player, while the market wage for non-white players is $100 / player. Which of the following is (are) true?

VI).

Consider Wins Produced (WP) in the NBA, Wins Above Replacement and the sabermetrics revolution in MLB, Passer Ratings in the NFL.

Each statistic is an attempt to estimate better the ___________ .

a. MPL of the player in the respective sport.

d. Strength of the reserve clause in the player’s respective sport.

VII).

In the wake of the death of the reserve clause in MLB, then head of the MLBPA Marvin Miller convinced the players to put limitations on the number free agents each year. This action was an example of the union’s flexing its ___________ power and resulted in a ___________ in MLB relative to the other major professional sports in the U.S. over the past three decades.

d. Monopoly ; leveling off of salaries

VIII).

The typical Buffalo Bills fan has a demand curve for tickets to home games that be expressed by the following inverse demand curve:

                        P = 120 – 10Q                                   P:   $ / ticket

                                                                                    Q: tickets

The Bills can maximize the revenue received from the typical fan by charging a price of _________ for each of the eight (8) home games played each year and charging ________ for the seat license to enable the typical fan to buy single game tickets.

a. Higher ; less elastic demand

Explanation / Answer

I) Option (c) is correct. Ramsey rule is based on inverse elasticity rule. It means more the elasticity of demand, less should be the tax rate and vice versa. A tax leads to distortion in prices by deviating it from competitive equilibrium. This further leads to deadweight loss. So if the elasticity of demand is more there will be more deadweight loss and so the tax rate should be lowered. Similarly, if the demand is less responsive to the changes in prices, it will generate smaller deadweight loss It is based on the principle of minimizing deadweight loss.

II) Only (b) seems correct. A downward sloping MPL curve will have downward sloping labour demand curve. Demand curve for labour = MPL * Marginal Revenue.

We cannot say anything about MArginal Cost curve if we do not know about total cost.

III) Option (d) is correct. In price discrimination, the price is higher in the market where demand is relatively less elastic and lower where demand is relatively more elastic.

IV) Option (c) is correct. Horizontal equity means individuals with same assets and wealth should pay the same amount of tax regardless of sex, social status, ethnicity or cultural background.

Vertical equity means the taxes increases with the increase in income. Higher income should be levied more taxes. Clearly, the question states horizontal equity in which the wealthier are taxed more.

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