How is the market for gasoline affected if the excise tax on gasoline is reduced?
A) The supply of gasoline decreases.
B) The supply of gasoline increases.
C) The equilibrium quantity of gasoline decreases.
D) The equilibrium price of gasoline increases.
Answer: B
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An income tax provides an incentive to _____
a. work for large companies b. increase investment c. substitute away from being self-employed d. consume more and save less
Refer to Scenario 17.3. Moral hazard arises in this situation because once the firm
A) pays the premium that is based on the 0.001 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.001. B) pays the premium that is based on the 0.01 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.01. C) puts the fire protection program in place, it has less incentive to spend $300 for a premium, leaving the firm underinsured. D) puts the fire protection program in place, it has less incentive to spend $6,000 for a premium, leaving the firm underinsured. E) puts the fire protection program in place, it will consider that a substitute for insurance and not be able to deal with the loss from a fire should it occur.
Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in
a. a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles. b. a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles. c. an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles. d. an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
Recall the Application about the decrease in the price of wool in the 1990s to answer the following question(s). In the 1990s, the world price of wool decreased by about 30 percent and prices have remained relatively low since then. In 2012, an organization in New Zealand proposed that sheep shearing be added to the Commonwealth Games and the Olympics as a spectator sport in an effort to increase the awareness and the demand for wool.Recall the Application. The decrease in the price of wool would be reflected by a movement ________ on the market supply curve for wool.
A. down and to the right B. down and to the left C. up and to the right D. up and to the left