You have just been elected President of the United States, based on your campaign promise to buy everyone a new sport utility vehicle. What are your funding options for this spending program, and what are the implications of each option?
You can (1) commandeer resources, (2) raise taxes, (3) cut spending in other areas, or (4) sell bonds and
incur government debt. You will alienate the owners of the resources you commandeer if you choose
option #1, taxpayers if you choose option #2, and beneficiaries of the programs you cut if you choose #3 .
Choosing option #4 may lead to a redistribution of income from the poor to the wealthy, or from taxpayers
to foreigners. Option #4 may also crowd out private investment, or may create inflation.
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A cost-benefit analysis of a highway is difficult to conduct because analysts
a. cannot estimate the explicit cost of a project that has not been completed. b. are unlikely to have access to costs on similar projects. c. are not able to consider the opportunity cost of resources. d. will have difficulty estimating the value of the highway.
Which of the following statements is true about monopolistically competitive firms?
A) Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. B) Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. C) Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. D) Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves.