When a country pursues its comparative advantage:
A. World output is minimized.
B. Potential gains from trade are minimized.
C. Potential gains from trade are maximized.
D. Imports and exports are equal.
C. Potential gains from trade are maximized.
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What is the significance of the multiplier? What causes the multiplier to be larger or smaller?
What will be an ideal response?
Refer to Figure 4-11. Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax?
A) The consumer will bear a greater share of the tax burden if the demand curve is D2. B) The consumer will bear a greater share of the tax burden if the demand curve is D1. C) The consumer will bear the entire burden of the tax if the demand curve is D1 and the producer will bear the entire burden of the tax if the demand curve is D2. D) The consumer's share of the tax burden is the same whether the demand curve is D1 or D2.