Question 1: Explain the relationship between average fixed cost and marginal cost.
Question 2: Can you think of an example of a good whose demand could be perfectly inelastic?
Question 3: Your boss, the mayor of a city, thought that she'd come up with a great way to raise city revenue: increase the tax on gasoline in the city! However, she discovered that the city was actually receiving less tax revenue after the gas tax increase than before. Incensed, she declared that the economic policy prescription of taxing goods with inelastic demand must be flawed.