Caroline earns more than John. Under a new tax system, some of the taxes paid by Caroline would go to John. A libertarian would
a. support the system because an extra dollar earned by Caroline would be worth less to her than an extra dollar given to John.
b. oppose the system if it redistributed income in the presence of equal opportunity.
c. oppose the system because an extra dollar earned by Caroline would be worth more to her than an extra dollar given to John.
d. support the system if it maximized the well-being of the poorest member of society.
b
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A Phillips curve shows the short-run relationship between
A) potential GDP and real GDP. B) the nominal interest rate and the real interest rate. C) tax rates and tax revenues. D) the unemployment rate and the inflation rate.
The price of a new textbook is $60 in one year and $75 two years later, while the price of a used copy of the textbook increased from $25 to $37.50. The relative price of a new textbook
A) increased by 25 percent. B) increased from 2.4 to 3. C) decreased from 2.4 to 2.0. D) decreased from 1.4 to 1.25
If real extraction costs do not change, the relative price of a finite resource would be expected to
a. fall over time. b. remain constant over time. c. rise at a rate given by the nominal rate of interest. d. rise at a rate given by the real rate of interest.
The effect of a government subsidy in a market where a positive externality is present is:
A. to increase surplus. B. to increase efficiency. C. to make consumers internalize the external benefit. D. All of these statements are true.