Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, society can only choose to produce at a point that lies
below or on PPF1.
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A situation in which each firm chooses the best strategy given the strategies chosen by other firms is called a
A) payoff matrix. B) collusion. C) dominant strategy. D) Nash equilibrium.
The interest rate falls when either the demand for bonds ________ or the supply of bonds ________
A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases
Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:
A. raise revenue for peak hours but lower revenue for off-peak hours. B. raise revenues for both, but more for peak hours. C. lower revenues for both, but more for peak hours. D. lower revenue for peak hours but raise revenue for off-peak hours.
Explain the following statement: "People hate taxes primarily because of income effects while economists hate taxes primarily because of substitution effects."
What will be an ideal response?