Most governments subsidize basic education because
A) there are external costs associated with well educated citizens.
B) the marginal social benefit of education is greater than the marginal private benefit.
C) of the existence of private schools.
D) None of the above answers are correct.
Ques. 2Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from
A) point E to point F.
B) point G to point A.
C) point G to point F.
D) point A to point F.
Ques. 3With a proportional tax
A) a poor household pays a larger percentage of its income in taxes than a rich one.
B) a rich household pays a larger percentage of its income in taxes than a poor one.
C) all households pay the same total amount of tax.
D) all households pay the same percentage of their income as taxes.
Ques. 4Higher ethanol production definitely and directly raises the price of corn, said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?
A) Existing corn farmers will exit the market and decrease the market price.
B) New corn farmers will enter the market and increase the market price.
C) Existing corn farmers will exit the market and increase the market price.
D) New corn farmers will enter the market and decrease the market price.
Ques. 5The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. The long-run average cost curve goes through points
A) C, D, G.
B) A, C, E.
C) A, B, D, G.
D) A, B, D, E, F.
Ques. 6In the figure above, a single-price unregulated monopoly will produce an amount of output equal to
A) h.
B) j.
C) k.
D) none of the above.
Ques. 7A minimum wage might increase employment by a monopsony if it makes the supply of labor curve to that firm
A) steeper, that is, makes supply more elastic.
B) steeper, that is, makes supply less elastic.
C) flatter, that is, makes supply more elastic.
D) flatter, that is, makes supply less elastic.
Ques. 8A flat-rate income tax is also called ________.
A) an excise tax
B) a property tax
C) a proportional income tax
D) a constant rate tax
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