The price effect is equal to the
A) substitution effect.
B) substitution effect plus the income effect.
C) marginal rate of substitution minus relative prices.
D) substitution effect minus the income effect.
B
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Suppose the measured unemployment rate is 3.9% and the natural rate of unemployment is 5.1%. In this situation, policymakers should
A) attempt to stimulate the economy. B) attempt to slow the economy. C) not intervene in the economy. D) The actions of policymakers will depend on how much of the natural rate is frictional unemployment and how much is structural unemployment.
A defendant believes there is a 70 percent chance that the plaintiff will win $800,000 and a 30 percent chance that the plaintiff will lose and be awarded nothing (zero). The plaintiff believes that there is a 90 percent chance that they will win $800,000 and a 10 percent chance that they will be awarded nothing (zero). The plaintiff's litigation cost is $300,000 and the defendant's litigation
cost is $200,000. The defendant would be willing to pay any amount up to ________ to settle. A) $760,000 B) $700,000 C) $420,000 D) $500,000
When new farmers enter the wheat industry, the equilibrium price of wheat
A. always falls. B. falls only if existing firms gang up on the entrant. C. falls only if existing firms are earning no economic profit. D. falls only if the new firm is more efficient than existing firms.