If the demand for pizza falls, pizza suppliers will suffer economic losses, and some firms will leave the industry. Why is this considered good? Shouldn't we feel sorry for these business owners?
As humans, we can certainly feel sorry for individuals forced out of business, but the process is efficient from an economic standpoint and desirable from society's standpoint. When demand falls, resources are then overallocated to the pizza industry. The losses reflect this overallocation. They show that the firms are taking resources and reducing their value. To achieve the new resource allocation desired by consumers, resources will have to leave the industry and relocate in an industry where consumers value them more.
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Refer to the above figures. A unit tax of $2 has been levied on a good. Which of the panels depict the effect of the taxes?
A) Panel 1 B) Panel 2 C) Panel 3 D) None of the diagrams reflect the effect of the tax.
B. excluded when calculating GDP because they do not reflect current production
A. added to exports when calculating GDP because imports reflect spending by Americans. B. subtracted from exports when calculating GDP because imports do not constitute spending by Americans. C. subtracted from exports when calculating GDP because imports do not constitute production in the United States. D. added when calculating GDP because imports do not constitute production in the United States.