What is a Pigouvian tax?
What will be an ideal response?
A Pigouvian tax, or a corrective tax, is a tax designed to induce producers of a negative externality to reduce production to the socially optimal level.
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The marginal product of capital indicates ________. Therefore the MPK curve is also ________
A) the quantity of capital supplied for a given rental price; the equilibrium price of capital B) the quantity of capital demanded for a given rental price; the demand curve of capital C) the quantity of capital demanded for a given rental price; the equilibrium price of capital D) the quantity of capital supplied for a given rental price; the supply curve of capital E) none of the above
If money demand falls on its own (i.e., not in response to a spending shock), what must the Fed do to stabilize GDP?
a. Increase the money supply b. Decrease the money supply c. Leave the money supply and money demand unchanged d. Increase money demand e. Decrease money demand
Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?
a. People respond to incentives b. Rational people think at the margin c. Trade can make everyone better off d. Markets are usually a good way to organize economic activity
The major effects of a change in monetary policy on growth in the overall production of goods and services usually are felt within ______.
a. one month to six months b. two month to one year c. three months to two years d. one year to three years