The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means
A. the tax is less than the external cost associated with the product.
B. the tax is more than the external cost associated with the product.
C. the company should increase the production of the product.
D. the company should advertise the product more.
Answer: A
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Cost-push inflation might initially result from
A) the use of new technology. B) a decrease in the quantity of money. C) an increase in the cost of resources. D) an increase in the quantity of money. E) an increase in government expenditure.
Explain the ways in which the government can persuade private businesses to invest more in order to speed up the process of capital formation?
If the cross-elasticity of goods X and Y is positive, then the sales of X move:
A. in the opposite direction as the price of Y, and X and Y are substitute goods. B. in the opposite direction as the price of Y, and X and Y are complementary goods. C. in the same direction as the price of Y, and X and Y are substitute goods. D. in the same direction as the price of Y, and X and Y are complementary goods.
Consider the following equation for household consumption expenditure:
Consmptn= 
0+ 1Inc + 2Consmptn-1+ u
where ‘Consmptn' measures the monthly consumption expenditure of a household, ‘Inc' measures household income and ‘Consmptn-1' is the consumption expenditure in the previous month. Consmptn-1 is a _____ variable.
A. exogenous
B. binary variable
C. lagged dependent
D. proxy variable