Leugers Custom Cabinetmakers is currently operating at a profit while producing four custom cabinets per week. At that output level, marginal cost exceeds marginal revenue. In order to maximize profit, Leugers should
a. decrease output
b. increase output
c. leave output at four cabinets per week
d. either increase or decrease output, depending on its level of fixed costs
e. either increase or decrease output, depending on its level of variable costs
A
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The __________ the price of the underlying stock, the __________ the call option premium will be
A) higher; lower B) lower; higher C) lower; lower D) None of the above.
To calculate the J-statistic you regress the
A) squared values of the TSLS residuals on all exogenous variables and the instruments. The statistic is then the number of observations times the regression R2. B) TSLS residuals on all exogenous variables and the instruments. You then multiply the homoskedasticity-only F-statistic from that regression by the number of instruments. C) OLS residuals from the reduced form on the instruments. The F-statistic from this regression is the J-statistic. D) TSLS residuals on all exogenous variables and the instruments. You then multiply the heteroskedasticity-robust F-statistic from that regression by the number of instruments.
Edgar Browning and William Johnson, in a paper published in the Journal of Political Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent of income distribution costs the top 60 percent nine dollars. If correct, this finding proves
a. the tax system is generating significant excess burdens. b. these transfers are not worth the cost. c. loopholes have to be closed. d. the burden of the tax system is too great.
Answer the following statements true (T) or false (F)
1. The income and substitution effects will both induce the consumer to buy more of a normal good when its price decreases. 2. Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility. 3. If consumers are convinced by ads that Brand X has a lot more value than they originally thought, then the MU/P of X will decrease. 4. The budget line shows all the combinations of two products which the consumer can buy, given money income and product prices. 5. If the quantity of X is measured on the horizontal axis and the quantity of Y on the vertical, then the slope of the budget line is equal to the price of X divided by the price of Y.