If a local government eliminates the tax exemption on municipal bonds, we'd expect to see:
A. municipal bonds will become more attractive to investors.
B. an increase in the yield on taxable bonds.
C. a decrease in the gap in yields on taxable and tax-exempt bonds.
D. a decrease in the yield on municipal bonds.
Answer: C
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Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 - QA, and the inverse demand curve for group B is PB = 18 - QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2, and the monopolist has no fixed costs. If the monopolist
practices group price discrimination, the profit-maximizing prices charged to each type of customer are A) PA = 6, and PB = 10. B) PA = 4 and PB = 8. C) PA = 10, and PB = 6. D) PA = 8, and PB = 4.
Which strategy was the most successful in the prisoners' dilemma tournament?