If actual income is $300 billion, potential income is $350 billion, the total deficit is $20 billion, and tax revenue increases with income, then the structural deficit can be any of the following except:
A. $10 billion.
B. $1 billion.
C. $20 billion.
D. zero.
Answer: C
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A candidate in the 1992 presidential election argued that our current federal income-tax system should be replaced with a flat-tax. That is, every individual should pay the same percentage of income in federal taxes regardless of his or her income
Evaluate the merits of this policy. In your answer, be sure to include a discussion of both the equity and efficiency considerations of such a tax proposal.
In the Stackelberg model, suppose the first-mover has MR = 15 - Q1, the second firm has reaction function Q2 = 15 - Q1/2, and production occurs at zero marginal cost
Why doesn't the first-mover announce that its production is Q1 = 30 in order to exclude the second firm from the market (i.e., Q2 = 0 in this case)? A) In this case, MR is negative and is less than MC, so the first-mover would be producing less than the optimal quantity. B) In this case, MR is negative and is less than MC, so the first-mover would be producing too much output. C) This is a possible outcome from the Stackelberg duopoly under these conditions. D) We do not have enough information to determine if this is an optimal outcome for this case.
The assumption under perfect competition of a "homogeneous product" means that
A. that no firm can charge more than another for its product. B. the good one firm produces is very different than the good another produces. C. the good one firm produces is exactly the same as the good another firm produces. D. that no buyer will pay more for one firm's good than another's.
In the circular flow model with the government sector, taxes
A) on households flow in the same direction as do the goods and services. B) on firms flow in the same direction as do factors of production. C) flow in the same direction as do transfers. D) flow from the goods market to the factor markets. E) flow in the opposite direction as do transfers.