If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers, then positive analysis would have us consider:
A. whether the surplus transferred from consumers to producers is larger than the consumer surplus lost to deadweight loss.
B. whether the producer surplus lost due to lower prices is greater than the producer surplus lost due to fewer transactions taking place.
C. whether the producer surplus lost to deadweight loss is greater than the producer surplus gained from a higher price.
D. whether the surplus transferred from producers to consumers is larger than the consumer surplus lost to deadweight loss.
Answer: C
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Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy?
a. The equilibrium quantity is greater than the socially optimal quantity. b. The equilibrium quantity is less than the socially optimal quantity. c. They are equal. d. There is not enough information to answer the question.
The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per MonthTotal Monthly Benefit from Car Washes0$01$202$363$484$565$60 What is the marginal cost of the 5th car wash each month?
A. $15 B. $12 C. $14 D. $4
Why wasn't the stimulus passed in 2009 effective in reducing unemployment during the recession of 2009-10?
A) Congress cut the size of the final package, it was skewed toward tax cuts, and it was only 25% of the amount needed to restore GDP to full employment. B) The administration mismanaged it—and it was much too large. C) Fiscal policy is ineffective in a liquidity trap. D) Tax cuts and interest rate cuts would have been effective, but they were politically undesirable.
The opportunity cost of receiving $10 in the future as opposed to getting that $10 today is:
A. the taxes paid on any earnings. B. the foregone interest that could be earned if you had the money today. C. the value of $10 relative to the total income of that person. D. the value of $10 relative to the total income of all persons.