Suppose that the total number of hours (T) is 720 and the wage rate is $10. Suppose further that all income is spent on consumption, so that the vertical axis is also total consumption.
(A) Sketch this graph.
(B) Sketch the graph if a 5% consumption tax is imposed.
(C) Can you say conclusively that a consumption tax will lower hours worked?
(C) We cannot say, because of different preferences.
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If the demand curve for an inferior good is drawn,
A. the curve will generally have a positive slope. B. the curve cannot be drawn; demand curves only exist for normal goods. C. the curve will generally have a negative slope. D. the curve will shift when the price of the good changes.
For a common resource, the marginal private benefit of the resource is greater than the marginal social benefit
Indicate whether the statement is true or false
When there is a divergence between social costs and private costs in a market, _____
a. the market will always provide an efficient allocation of resources b. there will be too much or too little production and consumption in the market c. there will be an acute shortage of goods and services in the market d. there will be an excess supply of goods and services in the market e. all resources are being used in their highest-valued activity
The problem of limited and bundled choice in the political process tends to
1. The problem of limited and bundled choice in the political process tends to a. increase economic efficiency, because politicians choose programs with positive and negative net benefits. b. reduce economic efficiency, because politicians choose programs with positive and negative net benefits. c. increase economic efficiency, because politicians choose programs with average net benefits. d. reduce economic efficiency, because politicians choose programs with average net benefits. 2. Public bureaucracies are possibly less efficient than business firms because a. the private market is driven by profit, but this competitive force does not operate in public bureaucracies. b. the private market has more resources than public bureaucracies. c. the private market has access to better technologies than public bureaucracies. d. workers in public bureaucracies have less supervision and shirk their responsibilities.