When would a tax be efficient?
What will be an ideal response?
A tax is efficient, that is, creates no deadweight loss, when demand is perfectly inelastic or supply is perfectly inelastic. In both these cases a tax does not change the quantity produced and so creates no deadweight loss.
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If a decrease in the price of gasoline increases the demand for large cars, then
A) gasoline and large cars are substitutes in consumption. B) gasoline and large cars are complements in consumption. C) gasoline is an inferior good. D) large cars are an inferior good.
A firm is holding excess labor. This will
A. decrease the productivity of capital. B. reduce labor productivity. C. increase the amount of capital employed. D. increase labor productivity.
Suppose that the U.S. government gives foreign aid to Turkey. This transaction would directly
A) increase the U.S. current account. B) decrease the U.S. current account. C) increase the U.S. capital and financial account. D) decrease the U.S. capital and financial account.
________ in the domestic interest rate causes the demand for domestic assets to increase and the domestic currency to ________, everything else held constant
A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate