Which would a taxpayer in the 35% tax bracket prefer: a $2,000 tax exemption or a $700 tax credit? What if the taxpayer were in the 25% tax bracket?
What will be an ideal response?
For 35% taxpayer: exemption $2,000(0.35) = $700; tax credit = $700 so the taxpayer should
be indifferent between tax credit and exemption. For 25% taxpayer: exemption $2,000(0.25) =
$500; tax credit = $700. Choose tax credit.
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If you exhibit endowment effect, then you
A) decide rationally when making decisions about selling but not when making decisions about buying. B) have a strong attachment to things you already own. C) buy something you cannot afford. D) decide rationally when making decisions about buying but not when making decisions about selling.
The Phillips curve tradeoff implies
A. that if the curve is stable, society must accept increases in inflation in exchange for decreases in unemployment. B. that if the curve is unstable, society must accept increases in inflation in exchange for decreases in unemployment. C. that if the curve is stable, society must accept increases in inflation in exchange for increases in unemployment. D. that if the curve is unstable, society must accept falling unemployment when inflation falls.
The entry of new firms into an industry will very likely
a. shift the industry supply curve to the right. b. cause the market price to fall. c. reduce the profits of existing firms in the industry. d. All of the above are correct.
Which of the following is an implication of the law of comparative advantage?
a. Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. b. Since workers in high-income countries utilize larger amounts of capital than workers in less developed nations, trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. c. Countries that are high cost producers of agricultural products should trade those products for goods they can produce only at a low opportunity cost. d. Countries that are low opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost.