Suppose the government imposes a $2 per-unit tax on an item whose production creates a negative externality. Suppose the $2 is exactly the value of the external cost. If the government uses the tax revenue to clean up pollution created by this production,
a. an optimal allocation of resources has been achieved
b. the market's equilibrium price is an efficient one
c. no externalities exist
d. there is no market failure
e. it is clear that obligatory controls have worked
A
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When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:
a. economies of scale. b. diseconomies of scale. c. constant returns to scale. d. diminishing returns. e. some fixed factors of production.
A university cafeteria changes from offering all-you-can-eat meals for one low price to selling each food item separately. After this change, one would expect that the marginal utility of the last food item consumed in the cafeteria by the typical student would: a. decrease since less food is now likely to be consumed by students who eat a meal in the cafeteria. b. increase since less food is
now likely to be consumed by students who eat a meal in the cafeteria. c. not change since the same quantity of food is now likely to be consumed at each meal. d. decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.
The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains have not kept pace with the 3 percent rate of inflation. The Secretary's statement is a (n) ____ economic statement, and the labor head's statement is a (n) ____ economic statement.
A. normative; normative B. normative; positive C. positive; normative D. positive; positive
The deficit that showed the biggest increase after the events of 2001 through 2004 (the first and second Bush tax cuts, the recession of 2001 and the war of terrorism) was the
A. far side. B. off-budget side. C. on-budget side. D. must-budget side.