A production quota set below the equilibrium quantity creates
A) a decrease in supply
B) a decrease in marginal cost
C) a rise in price
D) inefficient underproduction
E) all of the above
E
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
After the Arab oil embargoes, there was concern about the impact of higher gas prices on the low-income worker. The government imposed price controls on oil to protect the poor from this situation. Explain the inefficiency of this price ceiling and how taxes, rather than prices, could be used to solve the problem.
What will be an ideal response?
A cartel
a. has one firm that acts as the price leader b. is a group of firms engaged in price discrimination c. acts like a monopoly d. involves competition between rival firms e. prices its output equal to marginal cost
According to the research of Christina Romer and David Romer, tax increases implemented to reduce an inherited budget deficit:
A. reduce real output by the same amount as any other tax increase. B. reduce real output by more than other tax increases. C. reduce real output by less than other tax increases. D. increase real output, contrary to what occurs with other tax increases.