Can you imagine graphically a case where the efficiency loss from a tax would equal zero? Explain
What will be an ideal response?
Virtually any tax produces an efficiency loss. This fact is apparent as soon as one looks at the supply and demand for a particular good or service that is being taxed (see for example, Figure 5 in this chapter). However, one could imagine a case where either the supply or the demand curve is perfectly inelastic (vertical). In this case the tax would not result in a changed production level. (Here the burden would actually be shifted to a reduction in the quantity of some other good as a result of the decline in after-tax income which results from paying the tax on the good with the inelastic supply or demand.)
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The signaling aspect of the market system refer to
A) legal requirements for contracts and exchanges. B) the price of the good to the consumer and producer. C) the voluntary character of the exchange. D) transaction costs of carrying out exchanges.
When studying the market for resources, it is important to understand that:
a. resources are wanted not for themselves, but for what they produce. b. demand for resources is generally inelastic in nature. c. derived demand does not apply to the resource market. d. resource markets do not conform to the laws of supply and demand as other markets do. e. supply is much more important than demand in determining the price of a resource.
If the government budget is balanced, and saving is greater than investment, then the
a. current account must be in surplus. b. current account must be in deficit. c. current account balance must be zero. d. capital account must be in surplus.
What effect does a depreciation of the dollar have on real GDP in the United States in the short run?
A) Real GDP will fall. B) Real GDP will rise. C) Real GDP will be unaffected by the depreciation of the dollar. D) Real GDP will be unchanged, but nominal GDP will rise.