The excess burden of a tax is also a deadweight loss.
In the United States, corporate profits are taxed at the corporate level and then are taxed
again as personal income in the form of dividend payments.
A profit-maximizing monopolistically competitive firm produces and sells an
allocatively efficient quantity of output.
An increase in liabilities will reduce a firm’s net worth.
If the opportunity cost of producing more of one good increases as more of that good is
produced, then the production method is inefficient.
The relationship between GDP and the money supply has gotten stronger since the
1980s.
Issuing marketable emission allowance permits to polluting firms will result in those
firms polluting more than is socially desirable.
One result of a tax is an increase in economic efficiency.
The substitution effect explains why there is a direct relationship between the price of a
product and the quantity of the product demanded.
Unlike a perfect competitor, a monopolist faces the market demand curve.
The Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association were established by Congress in order to regulate banks that buy and sell
mortgage-backed securities.
Marginal benefit is the total benefit to a consumer from consuming one more unit of a
good or service.
Figure 23-4
Potential GDP equals $100 billion. The economy is currently producing GDP1 which is
equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending
change for the economy to move to potential GDP?
A) -$18 billion
B) -$2 billion
C) $2 billion
D) $18 billion
Article Summary. A growing number of U.S. citizens are going to other countries
for elective surgery procedures. Improved quality and significant cost savings
abroad have attracted an increasing number of what are being referred to as
American medical tourists, especially those who either do not have insurance or
whose insurance does not cover the desired procedure. As few as five years ago,
Americans tended to travel to countries such as Thailand or Mexico for the
procedures, but many are now choosing to go to Europe, where governments and
hospitals are now publicizing these services. Many of the procedures being done
overseas are joint replacement, and partly in response to the number of patients
going abroad for these procedures, programs are being developed to reduce the
cost of these surgeries in the United States. Source: Elizabeth Rosenthal, “The
Growing Popularity of Having Surgery Overseas,” New York Times, August 6,
2013.
If European governments and hospitals continue to publicize their existing services to
American medical tourists and more Americans consider joint-replacement surgery to
improve their quality of life, what will happen in the market for joint-replacement
surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.
Suppose the government launches a successful advertising campaign that convinces
workers with high school degrees to quit their jobs and become full time college
students. This would cause
A) the unemployment rate to decrease.
B) the labor force participation rate to decrease.
C) the number of discouraged workers to increase.
D) no change in the unemployment rate.
Table 13-1
What is the marginal revenue of the 3rd unit?
A) $6.50
B) $5.50
C) $1.83
D) $0.50
Which of the following will shift the aggregate demand curve to the right, ceteris
paribus?
A) an increase in interest rates
B) a decrease in disposable income
C) a decrease in expected profits for firms
D) an increase in net exports
By drawing a demand curve with ________ on the vertical axis and ________ on the
horizontal axis, economists assume that the most important determinant of the demand
for a good is the ________ of the good.
A) quantity; price; quantity
B) price; quantity; quantity
C) price; quantity; price
D) quantity; price; price
Which of the following would not be considered an automatic stabilizer?
A) legislation increasing funding for job retraining passed during a recession
B) decreasing unemployment insurance payments due to decreased jobless during an
expansion
C) rising income tax collections due to rising incomes during an expansion
D) declining food stamp payments due to more persons finding jobs during an
expansion
Both individual buyers and sellers in perfect competition
A) can influence the market price by their own individual actions.
B) can influence the market price by joining with a few of their competitors.
C) have to take the market price as a given.
D) have the market price dictated to them by government.
The Congressional Budget Office estimates that ________ of the increase in federal
spending on Medicare and Medicaid over the next 75 years will be due to increases in
the cost of providing health care.
A) very little
B) less than half
C) most
D) all
At the profit-maximizing level of output for a perfectly competitive firm,
A) price equals marginal cost.
B) average revenue equals average variable cost and price equals marginal cost.
C) marginal revenue equals marginal cost and average total cost equals average fixed
cost.
D) price equals average revenue and marginal cost equals average variable cost.
For certain public projects such as building a dam on a river or a bridge to an island,
what procedure is a government likely to use to determine what quantity of a public
good should be supplied?
A) It conducts public surveys to determine if consumers want the product.
B) It hires economists to estimate the market demand for the product.
C) It takes a vote in Congress.
D) It evaluates the costs and benefits of producing the good.
All of the following actions were taken by the Thai government to help Thailand
maintain its peg against the dollar in the 1990s except
A) borrowing dollars from the International Monetary Fund in exchange for baht.
B) buying baht on the foreign exchange market to support higher demand for the baht.
C) increasing domestic interest rates to attract more foreign investors.
D) imposing restrictions on exports to the United States to prevent too many dollars
from entering the economy.
Which of the following is an example of positive technological change?
A) A firm offers workers a higher wage to work on weekends and at night. As a result,
the firm is able to increase its weekly production of surf boards.
B) A firm buys an additional machine that it uses to make surf boards. As a result, the
firm is able to increase its weekly production of surf boards.
C) A firm conducts a new advertising campaign. As a result, the demand for the firm’s
surf boards increases.
D) A firm’s workers participate in a training program designed to increase the number
of surf boards they can produce per day.
Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in
long-run macroeconomic equilibrium. For Year 2, graph aggregate demand, long-run
aggregate supply, and short-run aggregate supply such that the condition of the
economy will induce the Federal Reserve to conduct an expansionary monetary policy.
Briefly explain the condition of the economy and what the Federal Reserve is
attempting to do.
What is economic surplus? When is economic surplus at a maximum?
If your income is $92,000 and you pay taxes of $19,475, what is your average tax rate?
Show your work.
In a simple circular flow diagram, who supplies factors of production in markets and
who buys these factors of production? Who supplies goods and services in markets and
who buys these goods and services?
What is “tax incidence”? What determines tax incidence in a competitive market?