Question

Answer True/False for each part with a 1 sentence response to prove your answer:

a. In a perfectly competitive market, the consumer bears all the taxation burden.

b. Voluntary exchange must be mutually beneficial to take place.

c. Even if we all had magic black boxes that could generate any physical item we could ever want, there would still be scarcity.

d. Social security taxes are paid equally by employee and employer.

e. If you hire a teenager to do something for you at a low hourly price (like clean your house), then you’re taking a job away from a higher-paid professional and exploiting the teenager.

f. The longer a price change stays in effect, the greater will be the elasticity for the good.

g. Employee wage contracts are part of an employer’s short-term variable costs.

h. In the long run, all production inputs are fixed.

Answer 1

a. False. In a perfectly competitive market, the producer bear all the taxation because demand curve faced by the producer or firm is perfectly elastic. Consumer bear all tax burden only if supply is perfectly elastic
b. True. Voluntary exchange is process where customers and sellers can freely engage in market transaction or exchange without any obstacle. Both buyer and seller are better off than they were before. So voluntary exchange makes mutual benefit.
c. True. Because even we get all the items that we want, still there will be more wants. Because human wants are unlimited
d. True. Social security taxes are paid equally by employee and employer. In U. S. A, employers and employees each pay 6.2% of wages up to the taxable amount of $137, 700
e. True. Because he might be eligible for some other worker as he is an educated person. Then if we hire a teenager for house cleaning, it might be an exploitation of teenager
f. True. The longer a price change stays in effect, the greater will be the elasticity for the good. Because individual can adjust the purchasing of a good according to its prices in long run
g. False.Employee wage contracts are part of an employers short -term variable cost. Because contract is for long run period.so wage contract is a long run cost
h. False. In long run all production inputs are variable. Because there are no diminishing retrurns in the long run