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Math Help - Eco MC questions

  1. #1
    Junior Member
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    Eco MC questions

    DD.pdfC1.pdf

    I've attached the questions above,
    For the first one my answer was B cause the price level is rising as inflation is positive.
    The answer turned out to be D, I don't understand why

    The second question should be something to do with the difference in the supply curve with tax and the supply curve without tax, I could draw each curve but there must be a faster way. Answer is C.
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  2. #2
    Grand Panjandrum
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    Quote Originally Posted by elieh View Post
    DD.pdfC1.pdf

    I've attached the questions above,
    For the first one my answer was B cause the price level is rising as inflation is positive.
    The answer turned out to be D, I don't understand why
    You are right, unless there is some technicality that I am unaware of the buying power of a unit of currency fell as prices rose (as presumably did wages).

    CB
    Last edited by CaptainBlack; May 26th 2011 at 07:24 PM. Reason: spelling
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  3. #3
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    With respect to the second Q, you're on the right track that it has to do with the noted change in the supply curve.

    No graph needed; a quick comparison of the last two columns shows that the S curve shifted north by exactly $3, at least for the relevant range we're given. For example, 230 units were supplied to the market at a price of 14; following the imposition of the tax a selling price of 17 is required to induce that same level of supply. 290 was the willing supply at 15; post-tax it takes a price of 18 to coax that much production. Ditto right up the chart.
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