If Hermione pays $10.00 in taxes on $100 of income and $10.25 on $101 of income, which of the following is not true?
A. Her marginal tax rate at $100 is 25 percent.
B. Her average tax rate at $100 is 10 percent.
C. She faces a progressive tax.
D. Her marginal tax rate at $100 is 10.25 percent.
Answer: D
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Refer to the table above, which gives five points on a nation's PPF. As we increase the production of X,
A) the output of Y increases. B) unemployment increases. C) the opportunity cost of each new unit of X increases. D) the opportunity cost of each new unit of X decreases.
Which of the following correctly identifies a limitation of logarithmic transformation of variables?
A. Taking log of variables make OLS estimates more sensitive to extreme values in comparison to variables taken in level. B. Logarithmic transformations cannot be used if a variable takes on zero or negative values. C. Logarithmic transformations of variables are likely to lead to heteroskedasticity. D. Taking log of a variable often expands its range which can cause inefficient estimates.