What is the total revenue test?
What will be an ideal response?
The total revenue test is a method of estimating the price elasticity of demand by observing the change in total revenue, given a change in price, holding all other things constant. The total revenue test shows that a price cut increases total revenue if demand is elastic, decreases total revenue if demand is inelastic, and does not change total revenue if demand is unit elastic.
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Refer to the scenario above. Suppose a new legislative policy decreases the fine for speeding to $50. A reduction in the fine to $50:
A) makes it profitable for you to bribe. B) makes it profitable for Joe to bribe. C) changes the outcome of the game. D) will not change your dominant strategy.
Some cities have a relatively high residential property tax, while others have a low residential property tax. Give an explanation for this.
What will be an ideal response?
On the Lorenz curve, a perfectly equal distribution of income would be represented by:
A. an upward-shaped curve. B. a vertical line. C. a line with a slope of 1. D. a horizontal line.
The most likely way the public debt burdens future generations, if at all, is by:
A. reducing the current level of investment. B. causing future unemployment. C. causing deflation. D. reducing real interest rates.