If the Fed wants to increase the federal funds rate through open market operations, it ________
A) decreases tax rates B) buys bonds C) sells bonds D) increases tax rates
C
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The external benefit of a good
A) equals its consumer surplus. B) equals its producer surplus. C) equals its total surplus. D) is a benefit from the good falling on people who are not the consumers of the good.
Suppose the U.S. government imposes a maximum price of $5 per gallon of gasoline, and the current equilibrium price is $3.50 per gallon. This policy represents a:
A) binding price floor. B) non-binding price floor. C) binding price ceiling. D) non-binding price ceiling.
When the price of a good changes, the substitution effect occurs because:
a. the consumers' real income measured in terms of that good changes. b. the relative price of that good changes compared to other goods in the consumption bundle. c. the total utility of that good decreases. d. the marginal utility of that good decreases. e. consumers have an incentive to substitute irrational behavior for rational behavior.
Which of the following statements best summarizes the essence of public choice analysis? a. Public choice analysis applies economic principles to political science issues
b. Public choice analysis applies political science principles to traditionally economic issues. c. Public choice analysis assumes that government leaders are primarily motivated by what is best for the community, unlike private interest groups. d. none of the above