Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016. It also raises taxes by $1 billion to keep the deficit from growing. If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?
A) GDP increases by $900,000. B) GDP increases by $10 billion.
C) GDP increases by $1 billion. D) GDP does not change.
C
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A free-rider problem exists if
A) those consuming the good pay more than the cost of providing the good so that the producer's profits increase ("free ride") as a result of the overpayment. B) those consuming the good pay nothing for it. C) two consumers can jointly consume a good, which lowers the price per person. D) a firm can obtain technology at a fair price.
Describe the characteristics of an efficient contract between a principal and an agent
What will be an ideal response?
The reason that antitrust laws exist and are enforced is because most economists and politicians believe that
a. every industry should be perfectly competitive b. monopolies do not maximize shareholder value in the long run c. the price and quantity combinations delivered in a perfectly competitive market are both socially desirable and most efficient d. monopolies use their market power to create economies of scale e. small firms are the backbone of American society
Figure 6.3 shows the cost structure of a firm in a perfectly competitive market. If the market price is $6, then the firm will:
A. be better off producing 150 units than shutting down. B. be better off exiting the market and using the resources for other production activities. C. be better off shutting down in the short run and waiting until the market price rises above $10. D. None of these