Which of the following illustrates the principle of second best?
A. The government decides to impose taxes on all automobiles rather than imposing a tax only on luxury automobiles.
B. The government imposes a tax on a meat processing plant that equals the cost of cleaning the lake damaged by the waste discharged into the lake by the meat processor.
C. A tax imposed on land, because this tax distorts economic decisions less than taxes on other factors of production.
D. The government imposes taxes on cigarettes and the tax revenue collected is used to pay for health care.
Answer: B
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What will be an ideal response?
Why are indifference curves convex to the origin?
What will be an ideal response?
The LM curve is the combinations of
A) the output gap and the real interest rate for which the money market is in equilibrium. B) the inflation rate and nominal interest rate for which the money market is in equilibrium. C) the inflation rate and real interest rate for which the money market is in equilibrium. D) the inflation rate and real interest rate for which the goods market is in equilibrium.
For almost all goods, the:
A. lower the price goes, the higher the quantity demanded. B. higher the price goes, the more luxurious it is. C. lower the price goes, the higher demand is. D. higher the price goes, the higher the quantity demanded.