When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is TRUE?
A) Voluntary agreements usually do not work since the owner has no incentive to negotiate.
B) Transactions costs must be low relative to the expected benefits of reaching an agreement.
C) Voluntary agreements are difficult to negotiate because they usually involve government intervention.
D) Voluntary agreements always leave the owner worse off.
Answer: B
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The correct expression for cost plus pricing is
A) Price = Cost (1 + profit margin). B) Price = Cost + profit margin. C) Price = Cost (1 + mark-up). D) Price = Cost + (1 + mark-up).
A price floor above the market clearing price typically results in I. an excess quantity supplied II. a shortage III. an excess quantity demand
A) I only B) II only C) III only D) II and III only
Which of the following is a basic assumption of the Ricardian equivalence theorem?
A) Consumers pay no attention to government budget deficits. B) Consumers think only in terms of the present. C) If current tax cuts result in budget deficit increases, aggregate supply falls. D) Consumers consider future tax payments when deciding how much to spend and save today.
A decrease in price causes:
A. a quantity effect, which is an increase in revenue that results from selling fewer units of the good. B. a price effect, which is an increase in revenue that results from receiving a lower price for each unit sold. C. both a price effect and quantity effect. D. a decrease in quantity demanded.