The magnification of small changes in spending into larger changes in output and income is produced by:
a. The average propensity to consume
b. The multiplier effect
c. The average propensity to save
d. Saving
b. The multiplier effect
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The annual insurance premiums for Michael’s Machine Shop have permanently risen because of a recent series of thefts by employees, but there is no change in the premiums paid by Michael's competitors. If machine shops are a competitive constant-cost industry, then in the long run
a. Michael's profit will fall to zero. b. Michael's Machine Shop will be driven out of business. c. the higher fixed costs will have no effect on Michael's pricing and production decisions. d. the demand for service from Michael’s Machine Shop will fall.
Consider voter preferences over a public good y that is being funded by a proportional income tax. a. Illustrate how this might lead to single peaked voter preferences. b. Suppose there exists a privately available good x that is substitute for y. How does this introduce non-single peakedness? c. Now suppose x is relatively complementary to y. What would you expect to happen to voter preferences as this complementarity gets stronger?
What will be an ideal response?
Public choice theory suggests that political candidates try to get elected by
a. appealing to conservatives b. appealing to liberals c. appealing to senior citizens d. appealing to the median voter e. raising taxes
The monopolist is able to enjoy profits in the long run because:
A. the firm can charge a price higher than its average total costs in the long run. B. there is no threat of competition. C. the firm's price is set above its marginal costs. D. All of these statements are true.