Suppose that all workers place a value on their leisure of 75 goods per day. The production function relating output per day Y to the number of people working per day N is
Y = 500N - 0.4 N2,
and the marginal product of labor is
MPN = 500 - 0.8 N.
A 25% tax is levied on wages.
(a) How much is output per day?
(b) In terms of lost output, what is the cost of the distortion introduced by this tax?
(a) 150,000
(b) 2734
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A rational decision is one that
A. satisfies all desires. B. avoids the intentional allocation of resources. C. assigns available resources in the manner most preferred by decision makers. D. assigns available resources to the uses with the lowest opportunity costs.
Refer to the figure above. What is the producer surplus before Lithasia opens up to free trade?
A) $6 B) $12 C) $18 D) $24
Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects
A) work in the same direction to increase quantity demanded. B) work in the same direction to decrease quantity demanded. C) work in opposite directions and quantity demanded increases. D) work in opposite directions and quantity demanded decreases.
The law that created the high level of tariffs in United States in the 1930s is
A) the GATT Act. B) the World Trade Act. C) the Smoot-Hawley Act. D) the Tariffs Agreement Act.