Explain the principle of neutrality with respect to taxes
What will be an ideal response?
All else equal, taxes that are neutral with respect to economic decisions (that is, taxes that do not distort economic decisions) are generally preferable to taxes that distort economic decisions. Taxes that are not neutral impose excess burdens.
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Explain the distinction between investment and capital
Based on the quantity equation, if M = 8,000 . P = 3, and Y = 12,000 . then V =
a. 0.33. b. 2.0. c. 4.5. d. 0.5.
Which of the following best illustrates the concept of a store of value?
a. You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an ounce of gold. b. You sell items on eBay, and your prices are stated in terms of dollars. c. You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies. d. None of the above is correct.
A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?
A. Raise price and lower output. B. Lower price and lower output. C. Raise price and raise output. D. Lower price and raise output.