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Author Question: Which of the following taxes does NOT lead to a deadweight loss? A) A proportional income tax B) ... (Read 58 times)

Mr.Thesaxman

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on: Jun 29, 2018
Which of the following taxes does NOT lead to a deadweight loss?
 
  A) A proportional income tax
  B) A lump-sum tax
  C) A progressive income tax
  D) A proportional tax on property

Question 2

What is the dilemma faced by firms in oligopoly?
 
  What will be an ideal response?


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josephsuarez

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

Because there are just a few large firms in an oligopoly, output and pricing decisions made by one firm affect the demand for other firms' goods. To maximize the total joint profit, the firms must cooperate, act like a monopoly so as to restrict output and earn monopoly profits. But each firm has an incentive to cheat on an agreement to restrict output because if it increases production it can (temporarily, at least) earn higher profits. But if all firms increase production, total profits will fall and the market will move toward the competitive equilibrium.


Mr.Thesaxman

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

zacnyjessica

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Reply 3 on: Yesterday
Excellent

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