A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other
What will be an ideal response?
The government should use dynamic tax analysis. When estimating the expected revenue generated by the sales tax, it is important to remember that the tax base could be influenced. If the tax base decreases sufficiently in response to a tax-rate increase, total revenues may be reduced even though there has been an increase in the sales tax rate.
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What is a cartel? Can cartels generate long-term profits without the existence of barriers to entry?
What will be an ideal response?
Which of the following is true about a monopoly?
a. A monopoly charges a higher price and produces a lower output level than if the market were competitive. b. A monopoly is guaranteed an economic profit. c. A monopoly charges the highest possible price. d. A monopoly will shut down whenever losses are incurred. e. All of these.
Which of the following is true regarding bonds? a. Other things equal, bondholders have greater financial security than stockholders. b. The possibility of a bond's value increasing greatly is limited compared to stocks. c. The legal obligation to bondholders is of higher priority than that of stockholders. d. Higher market interest rates represent a risk to bondholders
e. all of the above
The water and diamond paradox can be explained with the law of diminishing marginal utility and the comparative availability of water and diamonds
Indicate whether the statement is true or false