What is one of the biggest differences between a sole proprietorship and a corporation? A) Sole proprietorships offer stock. B) Corporation shareholders elect the managers of the firm. C) Sole proprietorships have limited liability. D) Corporations are the only profitable firms. ANSWER B
A tax cut will unambiguously lower income-tax revenue. Indicate whether the statement is true or false ANSWER False. It depends on how the quantity of labor supplied responds to the increase in the after-tax wage rate. If the income effect dominates, the quantity of labor supplied falls and so will tax revenue. If the […]
Firms maximize profit when A) the additional benefit from producing a good equals the additional cost of producing that good. B) MR = MC. C) the derivative of the profit function with respect to output is zero. D) All of the above. ANSWER D
An organization that converts inputs (like Labor, Capital etc.) into output can be a A) firm. B) sole proprietorship. C) corporation. D) All of the above. ANSWER D
Technological efficiency is A) a necessary and sufficient condition for profit maximization. B) a sufficient but not necessary condition for profit maximization. C) a necessary but not sufficient condition for profit maximization. D) a theoretical construct with little connection to the real world. ANSWER C
Efficient production occurs if a firm A) cannot produce its current level of output with fewer inputs. B) given the quantity of inputs, cannot produce more output. C) maximizes profit. D) All of the above. ANSWER D
Suppose a person’s utility for leisure (L) and consumption (Y) can be expressed as U = Y L and this person has no non-labor income. Assuming a wage rate of $10 per hour, show what happens to the person’s labor supply when the person wins a lottery prize of $100 per day. What will […]
The belief that a cut in the income tax rate must raise government income tax revenue has the implicit assumption that A) higher income tax reduces the number of hours worked. B) higher income tax increases the number of hours worked. C) leisure is always an inferior good. D) None of the above. ANSWER […]
Limited liability is a benefit to A) sole proprietorships. B) partnerships. C) corporations. D) All of the above. ANSWER C
Leisure is an inferior good for Assel. In response to an increase in the wage rate, she will A) supply fewer hours of labor. B) supply more hours of labor. C) enjoy more hours of leisure. D) None of the above. ANSWER B