Suppose initially there is no customs union and that the $100 tariff is imposed by the United States. Now, Mexico invests in productive technology and it shifts the Mexican supply curve to SMex. The United States now forms a customs union with Mexico. This will result in a price of _______ and imports of _______.
a. $250; 500
b. $250; 400
c. $150; 600
d. $150; 500
Ans: c. $150; 600
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The U.S. producer Boeing, and the European Airbus are contemplating the next generation mid-sized fuel efficient generation of air carrier
If both produce their respective models, then each would lose $50 million (because the world market is just not large enough to enable either to capture potential scale economies if they had to share the world market). If neither produce, then each one's net gain would of course be zero. If either one produces while the other does not, then the producer will gain $500 million. (a) What is the correct strategy for either company? (b) What is the correct strategy for a government seeking to maximize national economic welfare? (c) If a national government decides to subsidize its aircraft producer, how high should be the subsidy?
The so-called "death tax" might
A) aim to alter endowments so as to attain an inefficient outcome. B) aim to alter endowments consistent with the First Theorem of Welfare Economics. C) aim to alter endowments consistent with the Second Theorem of Welfare Economics. D) aim to alter prices consistent with the First Theorem of Welfare Economics.
The model of aggregate demand and aggregate supply can NOT be used to:
A. discuss the pros and cons of income tax cuts. B. evaluate a tax cut's effect on short run economic fluctuations. C. assess a tax cut's effect on longer run issues such as the national debt. D. to discuss income distribution.
Suppose the inflation rate has risen 0.5 percent a year for the past three years. Using this experience an individual forecasts a 0.5 percent rise in the coming year's inflation rate. This is an example of:
a. traditional expectations. b. rational expectations. c. adaptive expectations. d. reflective expectations. e. deductive expectations.