Greater equality in income is supported by the argument that it
A. Increases incentives to work for low-income earners.
B. Increases horizontal equity.
C. Strengthens the link between effort and reward.
D. Stimulates consumption.
Answer: A
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A competitive equilibrium
A) is always economically efficient. B) is efficient only if there is an externality. C) is economically efficient only given some special conditions. D) does not exist without government taxation.
In the absence of trade between the two countries, the price of rice in China in terms of radios would be
A. 1/2.
B. 2.
C. 150.
D. 300.
All externalities:
A. create either a cost or benefit to a person other than the person who caused it. B. are harmful to society and create costs external to the decision maker. C. are addressed by the government through taxation. D. are beneficial to society and create benefits external to the decision maker.
Which of the following is an example of an external cost?
A. Automobile exhaust fumes. B. Eating a sandwich at a local deli C. Unfair pricing behavior by a monopoly. D. Unemployment.