Richard receives government transfer payments and currently consumes 5 guns and 6 goose livers. Assume the price of guns decreases by 10% and the price of goose liver increases by 20%
The government raises Richard's transfer payments so he can still afford 5 guns and 6 goose livers. Does this constitute a true cost-of-living adjustment (COLA)? A) No. Richard is overcompensated.
B) No. Richard is undercompensated.
C) Yes. The payment just achieves the right level of compensation.
D) Not enough information.
A
You might also like to view...
Is cutting down a tree in two hours with an ax more efficient than cutting it down in ten minutes with a gasoline-powered chain saw?
A) No, because time is valuable. B) Yes, because hand tools conserve nonrenewable energy resources. C) It could be, if the person cutting down the tree places a high enough value on the exercise. D) There is no way to answer the question.
Refer to Figure 7-2. The increase in domestic producer surplus as a result of the tariff is equal to
A) $11.25 million. B) $18 million. C) $32.5 million. D) $45 million.