Economic losses caused several firms to leave the car wash business in Portland, Oregon. Though prices have risen, firms are still leaving the industry. Apparently:
a. economic profits exist but they are not as high as in other industries
b. economic profits are zero and firms won't stay in the industry if they are not earning an economic profit.
c. firms are still generating economic losses.
d. economic profits have decreased because of the exit of existing firms.
c
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Refer to Figure 7.1. Suppose that instead of $350, Angus earns only $250 by playing the bagpipes, but all other earnings remain the same. If there is no ordinance against loud music, the Coase theorem predicts that
A) Dudley will pay Angus to not play the bagpipes. B) Angus will pay Dudley so Angus can play the bagpipes. C) Dudley will do nothing and Angus will mop floors. D) no bargain can be reached between Angus and Dudley.
When tax revenues minus outlays is
i. positive, the government has a budget surplus. ii. negative, the government has a budget deficit. iii. zero, the government has a balanced budget. A) iii only B) ii and iii only C) i and ii only D) i only E) i, ii, and iii
Happy Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $5 and a 50 percent chance of a low demand of $4. Free Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $6 and a 50 percent chance of a low demand of $3. Which of the following statements is true?
A) All else equal, neither Free Cows nor Happy Cows can benefit from an accurate forecast. B) All else equal, an accurate forecast is more valuable to Happy Cows than Free Cows. C) All else equal, an accurate forecast has the same value to both Free Cows and Happy Cows. D) All else equal, an accurate forecast is more valuable to Free Cows than Happy Cows.
A tax cut designed to encourage investment and stimulate economic growth
a. must be matched by a cut in government spending in order to be effective b. must be matched with tax increases in other areas, or with a cut in government spending, if crowding out is to be avoided c. will only work if it decreases the size of the budget deficit d. can only be effective if the tax burden is redistributed or government spending is cut e. will only work if it is a cut in the capital gains tax