If the moral hazard problem in automobile driving were to be eliminated, the marginal cost of driving would be
A) lowered enough to pull the amount of driving back down to the efficient level.
B) lowered enough to raise the amount of driving back up to the efficient level.
C) raised enough to pull the amount of driving back down to the efficient level.
D) raised enough to raise the amount of driving back up to the efficient level.
E) lowered back down to the efficient level, relieving the stress on market forces.
C
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If the level of investment spending increases by $100 and the MPC in the economy is 0.8, then the cumulative spending increase after three rounds of spending is
A. $280. B. $260. C. $244. D. $220.
A subsidy is similar to a reverse tax—instead of taking money away from buyers (or sellers), the government gives money back to buyers (or sellers).
a. true b. false