Higher wage rates allow a person to reduce the hours worked without losing income. This is known as the
A. Law of diminishing marginal utility.
B. Law of diminishing marginal leisure.
C. Income effect.
D. Substitution effect.
Answer: C
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Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per day
If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 24 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks. A) Pacifica; Atlantis B) Atlantis; Atlantis C) Atlantis; Pacifica D) No trade will occur.
If the graph shown represents Celia's budget constraint, which of the following must be true?
A. Celia will spend twice as much on earrings as she does hairbands.
B. Celia could consume either four pairs of earrings or eight hairbands.
C. Celia gets twice as much utility from earrings as she does from hairbands.
D. All of these are true.
As tax laws become more complex,
a. the administrative burden of taxes will increase. b. compliance costs are likely to decrease. c. the government will collect more in tax revenue. d. the amount of tax revenue lost to tax evasion will decrease.
Disposable income is defined to be:
A. total income plus taxes. B. total income minus depreciation. C. total income minus taxes. D. All of these are true.