Describe the difference between positive and negative incentives. Give an example of each.
What will be an ideal response?
A sample answer follows: Positive incentives increase benefits or reduce costs, motivating an increase in a given activity or behavior. An example of a positive incentive is a raise for superior productivity. Negative incentives decrease benefits or increase costs, motivating a decrease in the activity or behavior. An example of a negative incentive is a high tax on an item such as cigarettes that the government wants people to buy less of because of its harmful effects.
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In the above figure, the Lorenz curve for income is shown. If the data used are from the United States, and the U.S. Lorenz curve for wealth was added to the diagram, it would be
A) further from the line of equality than the Lorenz curve for income. B) closer to the line of equality than the Lorenz curve for income. C) above the line of equality. D) the same as the Lorenz curve for income.
The Stolper-Samuelson Theorem predicts
A) the level of productivity in export industries. B) which factors are abundant. C) the income distribution effects of trade. D) which goods will be exported. E) the importance of intraindustry trade.
Higher prices for scarcer resources can improve the efficiency of an economy.
Answer the following statement true (T) or false (F)
The assumption that labor markets clear makes it very easy for the classical model to explain recessions
a. True b. False