Explain the big tradeoff. What idea of fairness has been developed to deal with it?
What will be an ideal response?
The big tradeoff is the tradeoff between efficiency and fairness. Redistributing incomes changes the incentives facing producers and consumers. Taxing income decreases producer surplus and taxing purchases decreases consumer surplus. Producers produce less and consumers consume less, and total economic activity declines, such that the size of the economic pie decreases. The big tradeoff has led to the idea that the fairest distribution is that which makes the poorest person as well off as possible.
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Refer to Table 13-2. What is likely to happen to the product's price in the long run?
A) It will fall. B) It will remain constant. C) It will increase. D) This cannot be determined without information on its long-run demand curve.
The comment that "the minimum wage should be raised to give working people in this country a fair wage" is an example of:
a. A normative economic statement b. The fallacy of composition c. A positive economic statement d. The after this, therefore because of this, fallacy
Kris wants to purchase a house. She buys newspapers to read the classified advertisements and spends her evenings with realtors looking at houses. Kris has incurred the ________ costs of making a purchase
A) transactions B) market C) buying D) scale
His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure, planned investment spending, government spending, and net exports
A) John Maynard Keynes B) Sir John Hicks C) Milton Friedman D) Paul A. Samuelson