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# 20 Suppose that the price is increased by the government from a market equilibrium value of \$10 to a higher value of \$12:

20 Suppose that the price is increased by the government from a market equilibrium value of \$10 to a higher value of \$12:

a there will be lost surplus, as both producer surplus and consumer surplus decrease.

b consumer surplus will decrease and there will be some lost surplus.

c producer surplus will decrease and there will be some lost surplus.

d both producer surplus and consumer surplus will increase.

22.

Suppose that Mexico was deciding between taxing either beer or soda to reduce the consumption of those goods, but they only have resources to tax one good. Suppose that Mexico decided to tax soda. If Mexico's goal is to get the largest health gains or reductions in consumption possible from a single tax, then we can assume with a high probability that the Mexican Government is assuming that soda consumption's:

a price elasticity of demand is perfectly elastic when compared to beer

b price elasticity of demand is inelastic and is more inelastic than beer

c price elasticity of demand is elastic and is more elastic than beer

d price elasticity of supply is perfectly inelastic relative to beer

24

Budweiser brand beer tends to be much more price-elastic than Heineken brand beer. This information about the beers' elasticities is telling us that:

a Budweiser and Heineken are close substitutes.

b Heineken beer is a luxury good, whereas the Budweiser beer is an inferior good.

c Heineken customers are not as responsive to price changes as are the customers of Budwesier.

d Heineken and Budweiser are poor substitutes

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