According to most estimates, the size of the "underground" economy in the United States could be as large as
A. 10% of GDP.
B. the "above-ground" economy.
C. the state of Rhode Island.
D. the economy of China.
Answer: A
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The Coase Theorem works best in places that transaction costs for contracts among people is low. Often in the world of torts and externalities both parties can claim that they have rights to impose on others. One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train. What does the
Coase say would happen? a. The train should have property right to be safe from wandering cattle, and the rancher should be liable for train damage of rampaging cattle. b. The rancher should have the property right to be safe from noisy trains, and the railroad should be liable for weight loss of cattle from train whistles and rumbling noise. c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right.
Which statement best describes the challenge in determining whether a trade surplus is good or bad?
a. The challenge in determining whether a trade surplus is good or bad is to understand how the international flows of goods and services are connected with international flows of financial capital. b. The challenge in determining whether a trade surplus is good or bad is to understand how the international flows of goods are connected with international flows of financial capital. c. The challenge in determining whether a trade surplus is good or bad is to understand how the international flows of services are connected with international flows of financial capital. d. The challenge in determining whether a trade surplus is good or bad is to understand how the international flows of investments are connected with international flows of financial capital.
The shortened work week coupled with rising hourly wages in the U.S. economy shows that
a. the income effect has been dominant. b. the substitution effect does not exist at all. c. the U.S. worker is no longer productive. d. workers have become increasingly lazy.
If a price floor is not binding, then
a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. there will be a surplus in the market. d. there will be a shortage in the market.