Figure 3.5 illustrates the supply of tacos. An increase in the supply of tacos is represented by a movement from:
A. point a to point b.
B. point c to point b.
C. S2 to S1.
D. S0 to S1.
Answer: D
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If the MPC is 0.6 and if government purchases and net taxes both increase by $20 billion, by how much will equilibrium output change?
a. It will increase by $80 billion. b. It will increase by $20 billion. c. It will not change because the changes in government purchases and net taxes will cancel each other out. d. It will decrease by $20 billion. e. It will decrease by $80 billion.
Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below.
If the government provides a subsidy of $500 per ton, then relative to before the subsidy, total economic surplus will ________ by ________ per day.
A. increase; $1,000 B. decrease; $6,500 C. decrease; $1,000 D. increase; $6,500
A tax cut of $5 billion will have a greater effect on the economy than an increase in government purchases of $5 billion.
Answer the following statement true (T) or false (F)
Use the following graph for a perfectly competitive firm generating a loss in the short run to answer the next question.
Which of the following market changes would allow the firm to earn an economic profit?
A. an increase in the number of firms entering the industry B. a decrease in market demand C. a decrease in the price of the industry's product D. an increase in market demand