Which of the following statements is false?
A) A government with the power to tax can solve the free rider problem.
B) A government with the power to tax can set a tax greater than the MEC when trying to change the market outcome into the efficient outcome.
C) A government with the power to subsidize can set a subsidy greater than the MEB when trying to change the market outcome into the efficient outcome.
D) Government can remove individuals from a prisoner's dilemma setting by changing the payoffs in the payoff matrix.
E) none of the above
E
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The figure above shows the demand for fruit snacks. Which movement reflects an increase in income if fruit snacks are a normal good?
A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d
The tax multiplier
A) is negative. B) is larger in absolute value as compared to the government spending multiplier. C) is a measure of how much taxes will fall when income is falling. D) is always less than one.