Suppose the government spends $10 billion subsidizing firms producing electricity with wind turbines because these firms are high cost producers. Will the subsidies lead to economic growth and higher income levels?
a. Yes, because more people will be employed by the firms producing electricity with wind turbines.
b. No, the turbines are an inefficient form of producing electricity and therefore the subsidies will increase the opportunity cost of supplying it.
c. Yes, because the government will be able to finance the subsidies without reducing private sector output.
d. Uncertain, higher income levels will be achieved if the employment of the firms producing electricity with the wind turbines expands; if not, incomes will fall.
b. No, the turbines are an inefficient form of producing electricity and therefore the subsidies will increase the opportunity cost of supplying it.
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How will the exchange rate (foreign currency per dollar) respond to a decrease in the relative rate of productivity growth in the United States in the long run?
A) Exchange rates will fall. B) Exchange rates will be unaffected by changes in the relative rate of productivity growth in the United States, both in the short run and in the long run. C) Exchange rates will rise. D) The exchange rate will be affected in the short run, but not in the long run.
Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?
a. 7,000 pounds b. 3,500 pounds c. 3,000 pounds d. 1,000 pounds
Economists call a game that is played more than once:
A. cooperative price play. B. a repeated game. C. collusion. D. a commitment strategy.
Economists generally believe that increases in the minimum wage will
A. have a dramatic impact on the poverty rate. B. have a dramatic impact on the taxes paid by the working poor. C. decrease teen unemployment. D. increase teen unemployment.