What is a circular flow diagram and what does it demonstrate?
What will be an ideal response?
A circular flow diagram is a model that illustrates how participants in markets are linked. It shows who supplies and purchases factors of production and who supplies and purchases goods and services.
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The cost savings associated with the cost-effective solution relative to a uniform standard equals
Suppose that two firms, X and Y, face the following abatement costs: MACX = 1.2AX, MACY = 0.3AY TACX = 0.6AX2 TACY = 0.15AY2 Further assume that the combined abatement standard is 40 units for both firms. a. $300 b. $108 c. $10.8 d. $9.60
A tax on productive activity tends to
a. increase formal market activity because it decreases prices b. decrease formal market activity because it increases work incentives c. decrease formal market activity because it lowers the return on such activity d. decrease activity in the underground economy because people are afraid of being connected with tax fraud e. increase activity in the underground economy because people are afraid of being connected with tax fraud
Total taxes paid divided by total income is called the
a. lump-sum tax liability. b. marginal tax rate. c. average tax rate. d. average consumption tax liability.
The quantity of good Y is measured along the vertical axis, and the quantity of good X is measured along the horizontal axis. If the prices of both good Y and good X rise, the budget line
A) shifts outward to the right and the vertical and horizontal intercepts will both rise. B) shifts inward to the left and both intercepts will decline. C) rotates, rising along the vertical axis but falling along the horizontal axis. D) none of the above.