Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will:
A. increase the incentive to work.
B. have no effect on the incentive to work.
C. have an ambiguous effect on the incentive to work.
D. reduce the incentive to work.
Answer: C
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Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes?
a. Price will increase and quantity decrease. b. Price will increase and quantity increase. c. Price will decrease and quantity increase. d. Price will decrease and quantity decrease. e. No change in equilibrium price and quantity will occur.
If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?
a. quantity demanded will increase proportionately b. quantity demanded will fall to zero c. quantity demanded will register a disproportionately high increase d. quantity demanded will decrease proportionately
Choose the incorrect statement.
A) When the quality of a good improves over time and as a result the price rises, the CPI counts the entire price rise as inflation and so overstates inflation. B) The outlet substitution bias injects an upward bias into the CPI. C) The CPI basket is constantly updated to allow for the introduction of new goods. D) When relative prices change and people substitute to the lower priced good, the CPI ignores the substitution and the CPI overstates inflation. E) All of the above statements are incorrect. C) The CPI basket is constantly updated to allow for the introduction of new goods.
A shift of a demand curve to the right, all other things unchanged, will:
A) increase equilibrium price and quantity. B) decrease equilibrium price and quantity. C) decrease quantity and increase price. D) increase quantity and decrease price.