Assume that each day ten thousand children watch Sesame Street on public television and that watching Sesame Street generates a benefit of $100 per child per year. Once a year, public television hold a pledge drive asking viewers to make voluntary contributions in order to keep the programming available to everyone. If public television stations collect less than $100 per child during the pledge drive, then this is evidence:
A. that parents do not care about their children.
B. that head taxes are regressive.
C. that the government should not subsidize public television.
D. of the free-rider problem.
Answer: D
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In a two-period model, holding everything else constant, an increase in future taxes
A) unambiguously increases the current account surplus. B) unambiguously decreases the current account surplus. C) has an uncertain effect on the current account surplus. D) has no effect on the current account surplus, as long as Ricardian equivalence holds.
One form of economic stimulus that state governments can use is to exempt certain types of purchases from state sales tax
For example, a law that permanently exempts business equipment from state sales tax may stimulate purchases of these goods because the law effectively reduces the price of the equipment. Business equipment such as computers or vehicles are durable goods, so should we expect the tax exemption program to have more impact on equipment demand in the short run or long run? A) More impact in the long run because business equipment demand becomes more income elastic in the long run B) More impact in the long run because business equipment demand becomes more price elastic in the long run C) More impact in the short run because business equipment demand becomes more income elastic in the long run D) More impact in the short run because business equipment demand becomes more price inelastic in the long run
When the Federal Reserve uses open-market operations to raise the Federal funds rate several times over a year, it is pursuing:
a. A Taylor rule policy b. An expansionary money policy c. A prime interest rate policy d. A restrictive money policy
Demand and marginal revenue curves are downward sloping for monopolistically competitive firms because:
A. product differentiation allows each firm some degree of monopoly power. B. there is free entry and exit. C. there are a few large firms in the industry and each acts as a monopolist. D. mutual interdependence among all firms in the industry leads to collusion.