On any given day, a salesman can earn $0 with a 20% probability, $100 with a 40% probability, or $300 with a 20% probability. His expected earnings equal A) $0. B) $100 because that is the most likely outcome. C) $100 because that is what he will earn on average. D) $200 because that is […]
Transforming the tax base of an income tax by subtracting savings has the advantage that _____. a. a progressive rate structure can be applied to a consumption tax b. all income can be taxed at a flat rate c. it double taxes income d. it guarantees progressivity ANSWER a
One way the Canadian system lowers costs is by rationing expensive procedures. a. True b. False ANSWER a
Expected value represents A) the actual payment one expects to receive. B) the average of all payments one would receive if one undertook the risky event many times. C) the payment one receives if he or she makes the correct decision. D) the payment that is most likely to occur. ANSWER B
In economic models of the public sector, the median voter model presents an extreme view of the way that the public sector allocates resources. a. True b. False ANSWER a
“Pay or play” reduces the health care cost of hiring low-wage employees relative to an employer mandate. a. True b. False ANSWER a
A comprehensive retail sales tax is equivalent to a tax on income when _____. a. there is no deadweight loss from taxation b. there is at least some investment in the economy c. there is zero saving in the economy d. the economy is at full employment ANSWER c
Which of the following is a tax on consumption? a. A comprehensive general sales tax. b. A comprehensive value-added tax c. An income tax in a world without saving. d. All of the above. e. a and b ANSWER d
A gasoline tax to finance highways is a fairly good example of democratic decision-making resulting in the efficient level of output. a. True b. False ANSWER a
Any competitive equilibrium is Pareto-efficient because, with a competitive equilibrium, A) the marginal rates of substitution are equal for all consumers. B) the price line is the contract curve. C) mutual gains from trade exist. D) the slope of the price line equals the ratio of the MRS for all consumers. ANSWER A