When a per-unit tax is levied on a goods market in which supply is not perfectly inelastic but such a tax nevertheless does not give rise to any deadweight loss, consumers are made no worse off by the imposition of the tax.
Answer the following statement true (T) or false (F)
False
Rationale: The absence of a deadweight loss implies the absence of substitution effects. With supply not perfectly inelastic, we know that the price consumers pay increases -- which means consumers are made worse off. But they are worse off because of an income effect, not because of a substitution effect, and income effects do not give rise to deadweight losses.
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A. a declining federal budget deficit. B. a declining unemployment rate. C. the spread of computerization. D. a rising rate of inflation.
An identity is an equation that
a. describes an equilibrium. b. pertains to macroeconomics, not to microeconomics. c. must be true because of how the variables in the equation are defined. d. involves final goods, not intermediate goods.
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A. velocity varies indirectly with the rate of growth of the money supply. B. a given proportionate increase in the money supply leads to an equal proportionate increase in the price level. C. a proportionate increase in the money supply leads to a less than proportionate increase in real Gross Domestic Product (GDP), at least in the long run. D. real Gross Domestic Product (GDP) is directly related to changes in the money supply in the long run.
The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is
A. the aggregate demand curve. B. the production possibilities frontier. C. the aggregate production function. D. the aggregate supply curve.