All charitable donations in Richland are tax-deductible. However, it was found that the volume of charitable contributions declined significantly when the income tax rate in Richland was lowered
What is the reason behind such an outcome? Explain with an example.
People often donate less when it is costlier to give. The opportunity cost of charitable giving increases when the income tax rate falls because the donator can enjoy a larger amount of money if he does not donate. For example, a person contributing $100 to charity and facing an income tax rate of 20% will have only $80 if he does not contribute. However, if the income tax rate falls to 15%, he will have $85 if he does not contribute. This is exactly what happened in Richland.
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The utilities commission in a city is currently examining pay telephone service in the city. The commission has been asked to evaluate a proposal by a city council member to place a $0.10 price ceiling on local pay phone service
The staff economist at the utilities commission estimates the demand and supply curves for pay telephone service as follows: QD = 1600 - 2400P QS = 200 + 3200P, where P = price of a pay telephone call, and Q = number of pay telephone calls per month. a. Determine the equilibrium price and quantity that will prevail without the price ceiling. b. Analyze the quantity that will be available with the price ceiling (in the long-run). c. The city council realizes that the telephone company could curtail pay phone service in response to the ceiling. To prevent this, the council plans to impose a requirement that the telephone company must maintain the current number of pay phones. In light of this additional restriction, what will be the likely impact of the price ceiling?
In the open-economy macroeconomic model, the market for loanable funds identity can be written as
a. S = NCO - I b. S = NCO c. S = I - NCO d. S = I + NCO
After the imposition of the quota, the quantity demanded of TVs is ________.
A. 100,000 B. 80,000 C. 40,000 D. 20,000
Which of the following phenomena shows that risk aversion is the characteristic of many people?
A. Gambling B. Investing in one stock rather than a portfolio C. Auto insurance D. Looting