Adding up all of the consumer and producer surpluses determines ______.
a. minimum alternative tax
b. total welfare gains
c. maximum deadweight loss
d. optimal subsidy levels
b. total welfare gains
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Most goods and service that we enjoy are bought and sold in the market. However, leisure is something that we value but we do not buy it explicitly
What is the price of leisure? Explain what would happen to the amount of leisure that we would enjoy if the wage rate went up. Make sure to use the substitution and income effect to explain your answer and postulate whether leisure is a normal or inferior good. Why is the ultimate net effect not determinable by appealing to logic alone?
In the short run, if price is below AC, maximizing profits really means minimizing total losses.
Answer the following statement true (T) or false (F)
As a result of legislation to establish a floor price for milk, most dairy farmers will
a. end up earning a normal rate of return in the long run b. end up earning a zero rate of return in the long run c. end up earning a negative rate of return in the long run d. benefit from the increased cost of specialized resources used in dairy farming e. suffer if they own specialized resources at the time the legislation is passed
In the Keynesian cross diagram, the 45-degree line represents the short-run equilibrium condition that:
A. I ? I p. B. Y = PAE. C. Y* = Y. D. PAE = C + I p + G + NX.