Government programs such as Medicare substantially subsidize health care purchases by some consumers in the U.S. economy. Who benefits from these subsidies? How do they affect the price of health care? If you are not a recipient of this program, are you made better or worse off by the subsidy? Explain
The subsidy will increase the price of health care. The benefit will be split between consumers and producers depending on the elasticities of supply and demand. If you do not receive the subsidy, you are worse off because of the higher prices for health care.
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A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which
A) must be positive. B) must be either zero or positive. C) can be positive, negative, or zero. D) exist at the point at which price equals total cost.
An expected reduction in the money supply will tend to cause
A) an increase in stock prices. B) a reduction in stock prices. C) no change in stock prices. D) an ambiguous effect on stock prices.