Tax Incidence
What will be an ideal response?
The division of the burden of a tax between buyers and sellers
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Free riding is not a problem in the market for a private good because
A) people who do not pay for the good can be excluded from consumption. B) the good is a rival good. C) the market eliminates the problem of externalities. D) The question errs because free riding is a problem in providing private goods.
Sometimes unions can raise wages above what productivity increases would permit. When this happens, we can be sure that
A) the employment of union workers is increasing. B) some union workers end up losing their jobs. C) there is a redistribution of income from union workers to nonunion workers. D) featherbedding will occur.
A 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a service. This service is a(n) __________ good and demand is __________
a. normal; elastic
b. normal; inelastic
c. normal; unit elastic
d. inferior; elastic
e. inferior; inelastic