Explain why greater equality is inevitably gained at the expense of efficiency
Achieving greater equality requires reducing the reward of being a high-income earner and increasing the reward of being a low-income earner. But this will reduce the incentive to be a high-income earner and increase the incentive to be a low-income earner. There is a loss in efficiency as there is less reason to invest in human capital and to work hard. At the same time, there is less reason to work hard if low earners will get subsidized.
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In the classical model, and increase in tax on firms that hired labor would
a. decrease labor demand and the real wage and increase output. b. decrease labor supply, increase the real wage, and decrease output. c. decrease labor demand, decrease the real wage, and decrease output. d. reduce real wages and increase output.
The experience of the Teamsters in the late 1970s and early 1980s suggests that
a. there are few restraints on the ability of a strong union to increase the wages of its members. b. product market competition with goods made from (or services provided by) nonunion labor significantly limits the ability of a union to get increased wages for its members. c. higher wages tend to stimulate aggregate demand, which makes it easier for a union to gain still higher wages. d. wages are established by the relative skill of union and management negotiators, independent of market conditions.
The tragedy of the commons is a widely used model often referred to in discussions about
a. space and ocean exploration. b. lack of scientific research. c. air and water pollution. d. shared natural resources.
An increase in taxes will cause
A) a reduction in investment. B) an increase in investment. C) no change in investment. D) no change in autonomous spending.