The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means
A) the tax is more than the external cost associated with the product.
B) the tax is less than the external cost associated with the product.
C) the company should advertise the product more.
D) the company should increase the production of the product.
B
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Which of the following will happen if consumption in an economy falls?
A) Firms' revenue fall. B) Labor supply falls. C) Mortgage defaults fall. D) Asset prices rise.
Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________
A) remains unchanged; increases B) rises; increases C) might rise, fall, or remain unchanged; increases D) falls; increases E) might rise, fall, or remain unchanged; decreases