Assume that the supply curve is horizontal because marginal cost is constant at $10. John, Robert, and Jimmy each value one compact disc at $20 but only Jimmy and John value a second compact disc (Jimmy at $5 and John at $15). If a social planner dictates that two compact discs be produced and distributed to John, Robert, and Jimmy, then even if the compact discs are allocated based on demand, this market will lose out on $___ of value.
a. $5.
b. $10.
c. $15.
d. There will be no lost value as five compact discs is the efficient level.
c. $15.
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In the equation of exchange, velocity of money increases when
a. Y increases without any changes in P and M. b. Y falls without any changes in P. c. M increases without any changes in P and Y. d. P falls without any changes in Y and M.
According to the ability-to-pay principle, it is fair for people to pay taxes based on the amount of government services that they receive
a. True b. False Indicate whether the statement is true or false
Use the following graph to answer the next question.
In the above graph it is assumed that investment, net exports, and government expenditures
A. vary inversely with real GDP. B. are all increasing. C. vary directly with real GDP. D. are independent of real GDP.
At the beginning of 1960 the CPI was 29.6. At the beginning of 2000 it was approximately 170.8. Which of the following most closely approximates the forty-year rate of inflation?
A. 141 percent B. 282 percent C. 350 percent D. 477 percent E. 550 percent