Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000 . How much would a family that earned $75,000 owe?
$13,000
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Suppose that a firm maximizes its profits by producing a quantity of 20 units. The market price is $5. The firm's variable costs are $70 and its fixed costs are $40. What should the firm do in the short run? In the long run?
What will be an ideal response?
Mr. Burns buys only lobster and chicken. Lobster is a normal good, while chicken is an inferior good. When the price of lobster rises, Mr. Burns buys
a. less of both goods. b. more lobster and less chicken. c. less lobster and more chicken. d. less lobster, but the impact on chicken is ambiguous.
Insurance companies are not permitted to require AIDS tests as a precondition for coverage, so they do not know whether or not the people they insure have already contracted HIV (the virus that causes AIDS). This situation is an example of
a. signaling. b. adverse selection. c. the principal-agent problem. d. moral hazard.
The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. If Scott offers two swim tours per week, he incurs a marginal cost of
A) more than $30. B) $30. C) $20. D) $10. E) $2.