Why is it better to protect an infant industry with monopoly power with a tariff than a quota?
a. A tariff causes domestic production to increase, whereas a quota causes production to decrease.
b. A tariff causes domestic production to decrease, whereas a quota causes domestic production to increase.
c. A tariff will raise the domestic price above the world price, whereas a quota will not.
d. A quota will raise the domestic price above the world price, whereas a tariff will not.
Answer: a. A tariff causes domestic production to increase, whereas a quota causes production to decrease.
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Assuming the economy represented in the graph shown is currently at point B, if the government does nothing, then eventually:
A. SRAS will shift to the right, and the economy will have Y3 output with lower prices.
B. SRAS will shift left, and the economy will experience stagflation.
C. LRAS will shift left, until lower equilibrium output is reached with lower prices.
D. the entire economy will collapse.
The kinked-demand curve model helps to explain price rigidity because:
A. there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. B. demand is inelastic above and elastic below the going price. C. the model assumes firms are engaging in some form of collusion. D. the associated marginal revenue curve is perfectly elastic at the going price.
You enter a classroom, which is littered with newspapers. This is because
A. students do not pay for littering. B. it is a way to protest against the tuition rates. C. students are too lazy to clean up. D. maintenance people only clean once a day.
Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $50 per day, how many workers should Winnie employ to maximize his profit?
A) 1 B) 2 C) 3 D) 4