Explain why greater equality is inevitably gained at the expense of efficiency.
What will be an ideal response?
Achieving greater equality requires reducing the reward of being a high-income earner and increasing the reward of being a low-income earner. But this will reduce the incentive to be a high-income earner and increase the incentive to be a low-income earner. There is a loss in efficiency as there is less reason to invest in human capital and to work hard. At the same time, there is less reason to work hard if low earners will get subsidized.
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In the long run, most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending
A) complete B) partial C) no D) more than complete
Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.
One reason stagflation is difficult to recover from is because:
A. less output requires less inputs to be hired. B. prices tend to adjust more quickly downward than upward. C. wages are sticky downward. D. input prices increase with output prices.
Suppose the market in Figure 9.4 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will
A) fall by $50. B) fall by $350. C) remain the same. D) rise by $50. E) rise by $350.