Refer to Figure 6.8. If your city imposes a tax of $100 per apartment:
A. consumers take the entire burden of the tax.
B. landlords take the entire burden of the tax.
C. consumers pay $60 and landlords pay $40 tax per apartment.
D. consumers pay $40 and landlords pay $60 tax per apartment.
Answer: C
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Suppose a large firm allows its employees to choose whether to participate in its health insurance plan
The firm is trying to decide between two plans: Plan I has a low monthly premium but a high deductible, and Plan II has a high monthly premium but a low deductible. Under which plan is adverse selection likely to be a bigger problem? A) Plan II because it is likely to draw participants who expect high medical costs. Healthy individuals who do not expect to consume much health care services will not be willing to pay the high premiums. B) Plan II because it is likely to draw employees who tend to over-consume health care services because of the low deductible. Insurance companies are likely to end up paying out more claims than the premiums they collect. C) Plan I because it is likely to draw the relatively healthy employees who do not expect to spend much on health care. Because the monthly premiums are low, the insurance company has to bear a bigger financial burden in the event of serious illnesses. D) Plan I because it is likely to draw participants who expect high medical costs. This group expects to consume much health care services and therefore prefer low deductibles.
Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator
Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?
A. Perfectly competition. B. Monopoly. C. Monopolistic competition. D. Oligopoly.
Which statement is FALSE?
A. Rent control is a price ceiling. B. Usury laws can lead to a surplus of loanable funds. C. The government, to encourage family farms to stay in business, created price supports for corn and wheat. D. Price ceilings prevent prices from rising.