The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain
A tax on energy drinks would have a larger deadweight loss than a tax on milk. A tax on energy drinks would raise their price. Because their demand is more elastic, quantity would respond more, thus increasing deadweight loss.
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Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?
What will be an ideal response?
Which of the following would cause the short-run aggregate supply curve to shift to the right?
A) an increase in the price level B) a technological advance C) a decrease in inflation expectations D) an increase in interest rates
A necessary condition for a separating equilibrium when workers can use education as a signal of their ability is
A) the high-ability wage is larger than the sum of the degree cost plus the low-ability wage. B) the cost of a degree is larger than the low-skill wage. C) the high-ability wage is smaller than the low-ability wage. D) the high-skill wage is equal to the cost of a degree.
Production inefficiency is most likely to occur when the principal has more information about work performance than the agent does
Indicate whether the statement is true or false