Why does government provide educational opportunities in the form of vouchers, subsidies, and public provision?
What will be an ideal response?
Education generates external benefits. With a better educated population, everyone is better off. The more educated the population, the more productive it is. Educated individuals need less social services than uneducated individuals. Crime rates are lower the more educated the population. And a more educated population makes it more likely to provide other goods with external benefits, such as high quality newspapers. But because part of the social benefit from education is an external benefit, an unregulated market will create less than the efficient amount of education. Hence government policies such as vouchers, subsidies, and public provision are attempts to overcome inefficiency and move the market to the efficient amount of education.
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In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Short-run equilibrium output in this economy equals:
A. 1,280. B. 1,000. C. 1,160. D. 1,440.
A bank's reserves
A) can be held as deposits with the Federal Reserve. B) are the sum of its excess and required reserves. C) can be held as cash in its vault. D) all of the above.
Which will be TRUE for a monopolistic competitor experiencing short-run losses?
A) P > ATC B) P = ATC C) P < ATC D) P < MC
A proponent of supply-side economics would advocate
A. reducing income taxes on saving. B. reducing tax credits for research and development. C. eliminating the depreciation allowance. D. increasing the corporate income tax.