Which of the following is an example of an automatic stabilizer?
A. Congress legislates lower tax rates to increase consumption and investment.
B. Tax rates are increased during a recession to maintain a balanced budget.
C. A regressive income tax system reduces tax revenues (as a share of income) as income expands.
D. Revenues from the corporate income tax increase sharply during a business boom but decline substantially during a recession, even though no new tax legislation has been enacted.
Answer: D
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Refer to Figure 12-1. If the firm is producing 500 units, what is the amount of its profit or loss?
A) profit equivalent to the area A B) loss equivalent to the area A C) profit of $280 D) There is insufficient information to answer the question.
Game theory is a tool to analyze
a. the pricing strategy in perfect competition. b. the price set by a monopoly. c. independence among firms. d. mutual interdependence among firms.
The free rider problem suggests that a producer will tend to:
a. produce more than the optimal quantity of a public good b. produce less than the optimal quantity of a public good. c. produce the optimal quantity of a public good if it is funded out of tax revenue. d. do none of the above.
The main input into the production of Starbuck's coffee is imported coffee beans. If the dollar depreciates, how will this affect the U.S. retail coffee market?
a. Input prices will fall and supply will decrease. b. Input prices will fall and supply will increase. c. Input prices will rise and supply will decrease. d. Input prices will rise and supply will increase.