Direct controls are considered inefficient because all firms are forced to pay the same costs.
Answer the following statement true (T) or false (F)
True
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Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are measured in dollars. For any given volume, D, your neighbor's benefit is B = 0.63D - 0.002D2 and your cost is C = 0.06D + 0.001D2. With an efficient Pigouvian tax, what noise level will your neighbor choose?
A. 90 decibels B. 95 decibels C. 115 decibels D. 345 decibels
Current thinking on the Phillips curve suggests that it would be best for policy makers to: a. focus on controlling unemployment. b. stimulate permanent shifts in aggregate supply
c. focus on controlling inflation. d. stimulate permanent shifts in aggregate demand. e. develop a two-pronged policy to control both unemployment and inflation.
Which of the following is the most sensitive to interest rate changes?
a. The demand for non-durable goods. b. The demand for inexpensive goods. c. The demand for durable goods. d. The demand for necessities. e. The demand for services.
Figure (a) represents the domestic demand and supply of televisions. Suppose free trade is allowed and the current world price of televisions is P1 as shown in Figure (b). Now suppose the domestic government imposes a tariff increasing the domestic price to P2 in Figure (b). This tariff will cause
a. imports to fall from Q2 minus Q1 to Q4 minus Q3.
b. domestic producers to increase their production from Q1 to Q3.
c. domestic consumers to reduce their consumption from Q2 to Q4.
d. All of the above.