The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $30 million. In response, consumption falls by $8 million. If GDP and government spending remains the same and Alpetra is a closed economy, what is the change in investment?
a. Investment increases by $8 million.
b. Investment decreases by $8 million.
c. Investment increases by $38 million.
d. Investment decreases by $22 million.
a
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Suppose the government imposes a price support that is above the equilibrium price. As a result,
A) total revenue increases. B) consumer surplus increases. C) the marginal cost of the last unit produced decreases. D) the government has effectively imposed a price ceiling. E) the subsidy the government pays decreases.
Refer to Figure 11-2. Short run output is maximized at
A) L1. B) L2. C) L3. D) insufficient information to determine
Consider a market with a price floor. If the price floor is lowered, which of the following would happen?
a. The consumer surplus would increase, the producer surplus would decrease and the dead weight loss would decrease b. The consumer surplus would decrease, the producer surplus would decrease and the dead weight loss would increase c. The consumer surplus, the producer surplus and the dead weight loss would all decrease d. The consumer surplus, the producer surplus and the dead weight loss would all increase e. The consumer surplus would decrease, the producer surplus would increase and the dead weight loss would increase
Which of the following algebraic forms of a demand curve yields an isoelastic demand curve (i.e. a demand with constant elasticity)?
A. Q = a - bP + cI B. log(Q) = a - b log(P) + c log(I) C. Q = a - b log(P) + c log(I) D. log(Q) = bP + cI