What is meant by tax incidence? Is the entire burden of the tax always borne by those on whom it is imposed?
What will be an ideal response?
Tax incidence refers to how the burden of the tax is distributed across various agents in the economy. The tax burden is not necessarily borne by those who are legally obligated to pay the tax. The tax burden falls more heavily on the side of the market that is less elastic. When supply is more elastic than demand, the tax burden falls more heavily on buyers. When demand is more elastic than supply, the tax burden falls more heavily on sellers.
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Mary decides to buy a bond from Joe for $100. The money supply will
A) neither increase nor decrease. B) increase by more than $100. C) decrease by $100. D) increase by $100.
Refer to the table above. For trade to occur along the lines of comparative advantage, wages in A relative to wages in B (measured in the same currency)
A) must be at least twice but less than 3 times as great. B) must be less than three times as small. C) must be greater than $2 but less than $3. D) Need more information to answer.
DeBeers was able to profit the most from the diamond market by selling a:
A. lot of diamonds at high prices. B. lot of diamonds at low prices. C. few diamonds at low prices. D. few diamonds at high prices.
Which of the following assumptions is required for two-stage least squares estimation method?
A. There are perfect linear relationships among the instrumental variables. B. There is strong correlation between each instrumental variable and the error term. C. The conditional variance of the error term depends on an exogenous explanatory variable. D. The error term has zero mean.