The law of one price fails as a result of:
A. similar technical specifications.
B. insignificant transportation costs.
C. low tariffs.
D. goods that cannot be traded.
Answer: D
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A model is used to explain economic behavior. Therefore
A) the assumptions must be complex while the model itself is simple. B) the model must be complex. C) the model must be simple. D) the model can be either simple or complex so long as it explains economic behavior.
Many environmentalists have advocated a substantial increase in the gasoline tax to cut down the federal deficit and to reduce pollution due to auto emissions. Such a tax increase would be devastating to people who commute significant distances to work. In fact, it would provide an incentive to relocate closer to work or change jobs. Economists refer to such effects of taxes as the
A. burden of a tax. B. regressive incidence of a tax. C. incidence of a tax. D. excess burden of a tax.
Producers were accused of price gouging as the price of bottled water soared after Hurricane Andrew. Consumers clamored for price controls to keep bottled water at pre-Andrew levels. Use supply and demand analysis to graphically show the effect of
setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane equilibrium price. Use your graph to assist in explaining the likely unintended effects of such a price control. Be sure that your graph is completely and correctly labeled.
According to economists who support passive policymaking
A. workers always consider a change in nominal wages to be a change in real wages. B. policies that attempt to exploit the Phillips curve trade-off will eventually become ineffective for reducing unemployment. C. there is no difference between the effect of an anticipated change in aggregate demand and the effect of an unanticipated change in aggregate demand of an identical amount. D. expansionary policies can reduce unemployment without increasing the price level.