George purchased a $10,000 bond that pays a nominal interest rate of 8 percent per year. George's marginal income tax rate is 28 percent. Over the last year, inflation was 3 percent
Find George's before-tax real interest rate and his after-tax real interest rate.
The before-tax interest rate equals the nominal interest rate minus the inflation rate, or . For the after-tax real interest rate, note that George must pay tax on the entire 8 percent (nominal) interest. Hence George pays (8 percent interest rate × 28 percent tax rate) = 2.24 percent as taxes. Therefore his after-tax real interest rate equals his before-tax real interest rate, 5 percent, minus what he pays in taxes, or 5 percent - 2.24 percent = 2.76 percent as his after-tax real interest rate.
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The two main characteristics of the production function are
A) it slopes downward from left to right, and the slope becomes flatter as the input increases. B) it slopes upward from left to right, and the slope becomes steeper as the input increases. C) it slopes upward from left to right, and the slope becomes flatter as the input increases. D) it slopes downward from left to right, and the slope becomes steeper as the input increases.
Consider two perfectly competitive labor markets for jobs that require different skills but are otherwise equivalent. One job currently pays a higher wage than the other job. This wage differential
a. cannot persist in the long run b. can persist only if there are significant differences in the nonmonetary characteristics of the two jobs c. can persist if workers in the lower-wage job lack the ability to gain the skills needed for the higher-wage job d. will be eliminated as labor supply to the higher-wage job increases e. is likely unrelated to different workers' endowments of talent and intelligence
Competition between oligopolists drives:
A. collusion to happen frequently. B. some firms out until the market becomes a monopoly. C. price and profits down to the perfect competition level. D. price and profits down to below the monopoly level.
Even if two competitive firms in the same market have different production technologies, they will each earn long-run zero profits. Why?
What will be an ideal response?