If muffins and bagels are substitutes, a higher price for bagels would result in a(n)
a. increase in the demand for bagels.
b. decrease in the demand for bagels.
c. increase in the demand for muffins.
d. decrease in the demand for muffins.
c
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Reducing the marginal tax rate on income will
A) raise the return to entrepreneurship and encourage the opening of new businesses. B) increase the after-tax return on saving, and encourage saving. C) reduce the tax wedge faced by workers and increase labor supplied. D) All of the above are correct.
To maximize expected profit, a perfectly competitive firm with a random marginal cost and random demand should produce at the level that sets ________ equal to ________.
A) price; expected marginal cost B) price; marginal cost C) expected price; marginal cost D) expected price; expected marginal cost
If a firm in a monopolistically competitive market has a demand curve that is shifting to the right, it will only stop shifting when:
A. the firm is earning zero economic profits. B. the firm's price is equal to its average total costs. C. other firms have no incentive to leave the market. D. All of these statements are true.
Recently, there has been talk about reforming the tax system. Some advocate replacing the current income tax with a consumption tax. The income tax taxes interest earned on savings directly, while a consumption tax doesn't. Assuming the demand curve for loanable funds is unchanged, which of the following would most likely occur?
a. a decline in the interest rate and an increase in the quantity of loanable funds demanded and supplied b. an increase in the interest rate and a decrease in the quantity of loanable funds demanded and supplied c. no effect on the interest rate, but a decline in the quantity of loanable funds demanded and supplied d. an increase in both the interest rate and quantity of loanable funds demanded and supplied e. an increase in the interest rate but no effect on the quantity of loanable funds demanded and supplied