1. Explain why excise taxes are more effective at raising tax revenues when applied to products with price inelastic demand versus ones with price elastic demand. Under what conditions would it be possible for tax revenues to decline with higher excise taxes?
2. Discuss each of the pricing strategies below. What conditions are necessary to make each strategy successful in terms of increasing profits? Explain your answer.
a. A local restaurant/bar offers discounted drinks during "happy hour," from 5 to 6 PM on weeknights.
b. The price Company X charges for its ink cartridges is nearly as much as it charges for a printer.
c. Packs of 5 T-shirts cost $10 while an individual T-shirt costs $4.
d. Coupons for specials at a local grocery store can be downloaded from an online site.
e. Computer and appliance manufacturers promote service contracts.
f. Microsoft Office includes several programs in one package
3. If an auction house is selling products to risk neutral buyers, which of the types of auction would you recommend? If you are a potential buyer, what might your strategy be? Support your answers using economic analysis learned in this course.
4. Explain how incomplete information can cause market failure. Give at least one example of this type of market failure and explain how government intervention has been used to correct the problem. How effective has this form of intervention been? Use the material from this course to support your answer