Graphically show how transfer payments affect labor supply and production possibilities.
What will be an ideal response?
See Figure 34.3 in your text. Transfer payments shift the labor supply curve leftward and the production possibilities curve toward the origin.
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Which of the following is reflected in the gross domestic product (GDP)?
a. The value of leisure time b. The value of illegal goods and services c. The value of final goods produced by firms d. The cost of depletion of natural resources e. The value of house maintenance performed by homeowners
Which of the following factors led to the housing bubble in the U.S. in 2006?
a. Increased amount of lending to subprime borrowers b. Decreased money supply by Federal Reserve c. Future expectation about downward movement of prices of the houses d. Federal Reserve raised the market rate of interest e. Increase in the supply of houses
Econville opens up trade with its neighboring countries. This causes the number of sellers of science fiction novels to increase. What happens to the equilibrium price and quantity?
a. Price and quantity both increase. b. Price decreases, and quantity increases. c. Price increases, and quantity decreases. d. Price and quantity both decrease.
Macaroni and cheese are considered to be
a. normal goods b. complementary goods c. substitute goods d. equilibrium goods e. market-day goods