Assume that the supply curve is horizontal because marginal cost is constant at $10. John, Robert, and Jimmy each value one compact disc at $20 but only Jimmy and John value a second compact disc (Jimmy at $5 and John at $15). It follows that the optimal number of compact discs sold in this market is
a. two.
b. three.
c. four.
d. five.
c. four.
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Charging prices closer to what consumers are willing to pay for a good
a. Reduces consumers surplus b. Increases producer surplus c. Both a and b d. None of the above
A comprehensive income tax with few loopholes is efficient because labor
a. supply is very little affected by taxation. b. demand is very little affected by taxation. c. supply is highly responsive to taxation. d. demand is highly responsive to taxation.
If an economy is closed and if it has no government, then
a. national saving = private saving. b. total income = consumption + investment. c. saving = total income - consumption. d. All of the above are correct.
Assume the price level is flexible both upward and downward but the Fed desires to keep the price level stable. If the level of aggregate supply decreases, the Fed must
A. Increase the money supply. B. Reduce the reserve requirement. C. Decrease the money supply. D. Reduce interest rates.