Consider the parallel demand curves in the following graph to answer the question.
Which curve is relatively more elastic at P1?
A. AA
B. BB
C. It cannot be determined.
D. Both have the same slope; therefore both have the same elasticity.
Answer: B
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A student wrote: "A subsidy raises marginal social benefit above marginal social cost and eliminates the deadweight loss from underproduction." If you were the instructor, how would you correct this statement?
What will be an ideal response?
How does a tax on labor income influence the equilibrium quantity of employment?
What will be an ideal response?
Keynesian economists argue that
A. prices and wages depend on minimum wage law. B. prices and wages are flexible. C. prices and wages are subject to downward "stickiness." D. prices and wages must be set by government.
The utility from a specific product is:
A. Determined by a consumer's income B. Determined by the price of the product C. A measure of one's preference or taste for it D. Constant as one consumes more units of it