Total sales revenue will increase total tax revenue

Reference no: EM13715636

Discuss whether each statement below is true, false or uncertain. Be sure to completely explain why, making use of appropriate equations, diagrams and so on.

(a) A fall in the marginal cost of production of a monopolized good on which is levied a tax at the rate of 10% of total sales revenue will increase total tax revenue.

(b) Under the two-period intertemporal consumption framework, assume that in an original lifetime plan, a person is initially a saver at the original lifetime interest rate of r(a). Then, if the interest rate is revised to a higher value, r(b) (i.e. r(a) < r(b)), the person will definitely increase the amount he saves under his new lifetime savings and consumption plan.

(c) In the two-goods, i.e. leisure and "all other goods (denoting them as G)", labor-supply framework, a rise in the price (denoting this as p) of G will definitely lead to an increase in the optimal hours of work chosen by a consumer.

Reference no: EM13715636

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