The government is running a budget deficit if:
A. government spending is greater than tax revenue.
B. tax revenue is greater than government spending.
C. tax revenue is greater than consumption spending.
D. tax revenue is greater than investment spending.
Ans: A. government spending is greater than tax revenue.
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Which of the following best describes the substitution effect caused by a price increase?
a. A change in consumption due to the fact that you will not buy goods whose marginal value is below the new price. b. A change in consumption due to the fact that you cannot afford your original market basket. c. A smaller percentage change in quantity than in price. d. A larger percentage change in quantity than in price.
In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.
Answer the following statement true (T) or false (F)
The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to
A) regulate prices. B) decrease the monopoly market power by eliminating a natural monopoly. C) decrease the monopoly market power by increasing competition. D) None of the above.
Rational choices: a. are based on a comparison of total benefits and total costs
b. can only be made by those who are economists. c. are made based on expectations of the additional benefits and additional costs involved. d. measure benefits based on the past.