Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
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The level of an economic activity should be increased to the point where the ____ is zero
a. marginal cost b. average cost c. net marginal cost d. net marginal benefit e. none of the above
Suppose a lawyer leaves his $50,000-a-year job and starts his own firm breeding pit bulls. In the first year, his accounting profit is $70,000 . The lawyer finances his new business with $100,000 from his savings account, which had earned 10 percent interest. His economic profit is
a. $10,000 b. $60,000 c. $70,000 d. -$80,000 e. -$90,000
A minimum wage that is set below the equilibrium wage will:
a. cause increased unemployment. b. have no effect on employment. c. cause the overall wage to increase. d. cause the overall wage to decrease. e. create more jobs.
Miriam owns a small shop selling custom headbands and accessories, Last month, she sold 335 headbands for $10 each. According to the law of demand, what quantity might expect to If she drops the price to $6?
A. 415 B. 1.300 C. 290 D. 335