Economists often refer to taxes, subsidies, legal rules, and public auctions as methods of indirect regulation. Explain what this means and what are its limitations
What will be an ideal response?
They are all designed to induce firms and households to weigh the social costs of their actions against their benefits. The actual size of the external cost/benefit depends on the reaction of households and firms to the incentives provided by the taxes, subsidies, and rules. That is the principle limitation.
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Labor productivity depends on the
a. quality of the labor b. the amount of capital c. the amount of natural resources d. the amount of other inputs, such as technology e. All of the answers are correct
Foreign trade will have no impact on real GDP when
a. exports exceed imports. b. exports equal imports. c. imports exceed exports. d. exports equal zero.
Tariffs tend to reduce the volume of imports by
A. Reducing prices of domestically produced goods. B. Making them more expensive to domestic consumers. C. Placing severe quality restrictions on imported goods. D. Setting maximum allowable import limits.
Which of the following has occurred when government directives do not produce better economic outcomes?
A. Government failure. B. Macroeconomic failure. C. Market failure. D. Scarcity.