This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.The outcome of the game in the figure shown will be:
A. Joe and Sarah both put forth low effort.
B. Joe puts forth high effort and Sarah puts forth low effort.
C. Joe and Sarah both put forth high effort.
D. Joe puts forth low effort and Sarah puts forth high effort.
Answer: A
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Compared to perfectly competitive markets, monopoly produces
a. higher output and lower price. b. lower output and higher price. c. lower output and lower price. d. higher output and higher price.
The deadweight loss of an income tax is determined by the
a. amount of total tax revenue to the government. b. marginal tax rate. c. average tax rate. d. ability-to-pay principle.
Which of the following would cause the level of income to change by the greatest amount, ceteris paribus?
A. A reduction in personal income taxes of $10 billion. B. An increase in Social Security payments of $10 billion. C. An increase in defense spending of $10 billion. D. All of the other choices have equal impacts on the level of income.
An example of a public good that the government has made excludable is:
A. national defense. B. city buses. C. sewer systems. D. police protection.