Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher
B. expansionary; higher; potential
C. recessionary; higher; potential
D. recessionary; lower; lower
Answer: B
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The above figure shows the marginal social benefit and marginal social cost curves of coffee in the nation of Kaffenia. What is the efficient quantity of coffee to produce each day?
A) one hundred pounds B) two hundred pounds C) three hundred pounds D) four hundred pounds
Some economists argue that corporate income taxes are typically not paid by firms, but by
A) stockholders, employees, and consumers. B) the government. C) bond holders. D) the board of directors of the firm.
Tom and Jerry have two tasks to do all day: make dishes and build fences. If Tom spends all day making dishes, he will have make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day making dishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. For Jerry, the opportunity cost of building a fence is ________ dishes made.
A. 7 B. 4 C. 14 D. 2
Firms that emit toxins into the air:
A. underproduce because the private cost of production exceeds the social cost. B. overproduce because the social cost of production exceeds the private cost. C. produce the same as nonpolluting firms. D. produce at the socially optimal amount.