Suppose that the demand for apples in Washington is elastic and the supply is inelastic. If the government of Washington passes a law prohibiting the use of synthetic pesticides that increases the marginal and average costs of producing apples, then:
a. the price of Washington State apples will decline.
b. Washington will stop producing apples, and New York apple growers will benefit.
c. apple growers will pass most of the increased costs on to consumers in the form of higher apple prices.
d. apple growers will keep prices constant but reduce costs by advertising less.
e. apple growers will bear most of the increased costs of regulation, and prices will increase only slightly.
Question 2
Which of the following statements about transfer payments is true?
a. Transfer payments are not included in total government expenditures.
b. Transfer payments involve the international remittance of funds.
c. Transfer payments refer to the transfer of money by the commercial banks to the people.
d. Transfer payments are made by the government to taxpayers.
e. Transfer payments are made when governments purchase goods and services.
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