Explain the main difference between the pay-as-you-go system employed by Social Security and a private pension plan
What will be an ideal response?
Superficially, the two systems look the same. Individuals pay money now in order to receive benefits in the future. The pay-as-you-go system, however, merely takes the contributions from current contributors and uses them to pay current retirees. In that way, the Social Security system is unfunded because without new contributions from current and future workers, benefits could not be paid today and into the future. A private pension plan, on the other hand, takes contributions from individuals, invests them, and pays the individual's retirement benefits out of the individual's contribution. Thus a private pension plan should be fully funded in that the pension plan will have a fund of past contributions and interest out of which current benefits are paid.
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In order to sell an additional unit of its product, a monopolist must decrease price on all units
a. True b. False
Figure 11-6
At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to
a.
zero.
b.
(P2? P3)Q.
c.
P > Q.
d.
(P5? P6 )Q.
Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is a favorable supply shock that increases potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then there is initially ________ gap and the short-run aggregate supply curve will ________.
A. an expansionary; eventually shift to SRAS" B. a recessionary; eventually shift to SRAS" C. an expansionary; eventually shift to SRAS' D. a recessionary; eventually shift to SRAS'
Utility is the set of numerical values that
A) yields an absolute level of pleasure from a bundle of goods. B) reflects the relative ranking of various bundles of goods. C) describes how much more a consumer prefers one bundle to another. D) yields a cardinal ranking of bundles.