Taxes create deadweight losses because they
a. reduce costs for firms.
b. distort incentives.
c. cause prices to decrease.
d. create revenue for the government.
b
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If Ben becomes less likely to buy smoke detectors after he has fire insurance, he is illustrating
A) moral hazard. B) adverse selection. C) the lemon problem. D) the free rider problem.
The value of bonds outstanding
A) increases when the government runs a budget deficit and decreases when the government runs a budget surplus. B) decreases when the government runs a budget deficit and increases when the government runs a budget surplus. C) is independent of the government running either a budget deficit or a budget surplus. D) changes only when the government runs a budget deficit or surplus if the federal debt is zero.
The argument for passive policymaking will be stronger if
A. wage flexibility is common. B. price flexibility is common. C. pure competition is widespread. D. all of these.
The number of firms in a monopolistically competitive market means that
A. each firm has a relatively small share of the total market since there are many firms in the industry. B. the firms will be likely to collude since there are only a few firms in the industry. C. all firms will have substantial monopoly power since there are so few firms in the industry. D. firms will have a hard time earning non-negative profits since there are many firms in the industry.