1. Suppose that the average household in a state consumes 800 gallons of gasoline per year. A 20-cent gasoline tax is introduced, coupled with a $160 annual tax rebate per household. Will the household be better or worse off under the new program?
2. Which of the following three groups is likely to have the most, and which the least, price-elastic demand for membership in the Association of Business Economists?
a. students
b. junior executives
c. senior executives
3. Explain which of the following items in each pair is more price elastic.
a. The demand for a specific brand of toothpaste and the demand for toothpaste in general.
b. The demand for gasoline in the short run and the demand for gasoline in the long run.
4. Explain the difference between a positive and a negative network externality, and give an example of each.