The host at a party offers Justin a sixth beer. Justin says, “No thanks, man. The marginal utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be minus 10 cents.” If Justin consumes the sixth beer, his total utility will
A. rise by 10 cents.
B. reach a plateau and remain constant.
C. fall by 10 cents.
D. fall below his marginal utility.
Answer: C
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The deadweight loss of a specific tax will be a small share of the tax revenue collected if:
A) supply is more inelastic than demand. B) demand is more inelastic than supply. C) supply and demand are both elastic. D) supply and demand are both inelastic.
Over 90 percent of the U.S. government’s tax revenues come from:
A. two sources. B. one single source. C. three sources. D. None of these is true.
Susan buys automobile insurance from Provident Insurance Company. If Susan avoids having an accident for three years, Provident will reduce the premiums she has to pay for her insurance. Nevertheless, she routinely drives while eating or texting and speeds up to try to make it through yellow lights
a. This is an adverse selection problem which should be corrected with government intervention. b. Susan is a principal and Provident is an agent in this principal-agent problem. c. This is a moral hazard problem. d. There is no way for Provident to determine whether Susan is a cautious or risky driver.
An important role of central banks during a financial crisis is:
A. eliminating bank reserves. B. passing new bank regulations. C. acting as the lender of last resort. D. closing banks.