Which of the following is evidence of a shortage of walnuts?
A) Firms lower the price of walnuts.
B) The price of cashews is lowered in order to make up for the walnut shortage.
C) The equilibrium price of walnuts falls due to a decrease in demand.
D) The quantity of walnuts demanded is greater than the quantity supplied.
Answer: D
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What will be an ideal response?
In the presence of a negative externality, a specific tax can achieve the social optimum because
A) output is reduced to zero as a result. B) it internalizes the external cost. C) it directly charges the producer for polluting. D) the price of the good rises by the full amount of the tax.
The efficient quantity of a public good occurs when the marginal cost of providing that good equals the sum of the marginal benefits to all individuals
Indicate whether the statement is true or false
If the marginal propensity to consume is 0.5, the income tax rate is 10%, and income rises by $20,000 . by how much will consumption spending increase?
a. $15,000 b. $10,000 c. $5,000 d. $9,000 e. $1,000