A decrease in expected returns on investment will most likely shift the AD curve to the ________.
A. right because Ig will increase
B. left because C will decrease
C. left because Ig will decrease
D. right because C will increase
Answer: C
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Deadweight loss is minimized when a tax is levied on something for which people:
A. are not likely to change their behavior much in response to a price change. B. are very likely to change their behavior in response to a price change. C. have a large income elasticity of demand. D. have a small income elasticity of demand.
One reads in the newspaper: "Today the president and Congress enacted a law which adds new requirements that child care providers must meet before they can offer their services for sale." As a result, an economist would predict that
A) the supply of child care services will increase, thus lowering the price of child care services. B) the supply of child care services will be unaffected by the stiffer requirements and therefore the price of child care services will not change. C) the demand for child care services will fall because people who buy child care services do not want stiffer requirements placed on child care providers. D) the supply of child care services will decrease, thus raising the price of child care services. E) none of the above
Suppose that for Alicia the marginal benefit (MB) of producing is $75 and that the marginal cost (MC) of producing is $5. Suppose also that her marginal benefit of stealing is $85 and the marginal cost of stealing is $5. Is Alicia currently maximizing utility in terms of producing and stealing? If not, should she produce more and steal less, or produce less and steal more to move toward utility
maximization? A) Yes, Alicia is maximizing utility. B) No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Alicia should produce more and steal less. C) No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Alicia should produce more and steal less. D) No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Alicia should steal more and produce less.
When economists say that the supply for a product has decreased, they mean that the