When a Democrat is elected as president, business leaders expect that the corporate profits tax will be increased. Most likely, this will cause business firms, ceteris paribus, to
A. increase investment because the higher corporate profits tax will increase the return on any investment.
B. decrease investment because they would expect lower benefits from investment.
C. not change their investment plans because higher corporate profit taxes will not change the demand for their product.
D. plan to increase investment in the future to compensate for the higher tax rate.
Answer: B
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An opportunity cost is
A) an opportunity lost. B) only the explicit costs of an action. C) only the costs a person can consciously articulate at the moment of deciding. D) none of the above.
Unlike a perfectly competitive firm, a monopolistically competitive firm
A. faces a perfectly inelastic demand curve. B. can earn positive economic profit in the short run and in the long run. C. cannot earn positive economic profit even in the short run. D. has a negatively sloped demand curve.
Moral hazard occurs when:
a. Individuals and institutions do not bear the full cost of their own mistakes. b.Individuals and institutions make immoral decisions based on greed. c. General social decay leads to unethical business decisions. d. Warning lights for potential economic hazards are ignored. e. All of the above are examples of moral hazard.
Which of the following is NOT mentioned in the textbook as one of its three goals?
A. Presenting the basic tools of economics B. Teaching how to successfully invest money in the stock market C. Promoting an understanding of markets D. Showing the ways in which the possibilities of today's economy are expanding