Your upstairs neighbor has the right to practice his clog dancing at night. But you find the best time to study is at night, and the noise from the clog dancing makes it hard for you to concentrate. You tell your neighbor that you will wash his car every week if he does not practice his clog dancing at night and he agrees to this. This is an example of the
A. drop-in-the-bucket problem.
B. fallacy of composition.
C. free-rider problem.
D. Coase theorem.
Answer: D
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The addition of government to the circular-flow model illustrates that government
A. purchases goods in the product market. B. provides services to businesses and households. C. purchases resources in the resource market. D. does all of these.
A policy maker who is concerned with the rate of inflation may not choose to reduce it because ________.
A. the government can only affect unemployment, not the rate of inflation B. reducing the rate of inflation means that the unemployment rate will increase C. reducing the rate of inflation means reducing taxes D. reducing the rate of inflation requires an increase in government spending
The government wants to increase its tax revenue and plans to implement an additional sales tax. The government will raise more tax revenue if it taxes a good with an ________ rather than a good with an ________
A) inelastic demand; elastic demand B) elastic demand; inelastic demand C) elastic supply; inelastic supply D) None of the above answers is correct.
Under a fixed exchange rate system, if the government decides to devalue its currency, net exports will ________ and the IS curve will shift to the ________
A) increase; left B) increase; right C) decrease; left D) decrease; right