A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to
a. spend more on sugar.
b. spend less on sugar.
c. spend the same on sugar.
d. consume more goods like coffee and tea that are complements of sugar.
A
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Discuss the difference between first-best and second-best price regulation. In your answer, you should address why governments regulate markets and the difficulties faced when doing so.
What will be an ideal response?
If a wealthy nation such as the United States trades with a poorer, less developed nation like Cambodia, then it is likely true that:
A. the United States is taking advantage of Cambodia and is the only beneficiary to the trade. B. Cambodia is pressured to enter trade and not benefiting at all. C. both the United States and Cambodia can benefit from trading. D. the United States is being charitable and not benefiting from the trade at all.
Most economists who have studied it believe that the Great Depression was caused by:
A. the stock market crash. B. illegal immigration. C. poor economic policymaking. D. a sharp decline in average labor productivity.
According to Okun's law, when the output gap is positive, cyclical unemployment:
A. equals frictional unemployment. B. equals structural unemployment. C. equals zero. D. is negative.