Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik
a. hold different normative views about the tax system.
b. disagree about the validity of a positive theory.
c. have a fundamental misunderstanding of the tax system.
d. More than one of the above is correct.
d
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If the marginal factor cost of hiring an additional worker is $10 while the marginal revenue product is $15, then the firm should
A) hire more workers. B) stop hiring more workers. C) fire some workers. D) none of the above: insufficient information to answer the question.
Answer the following questions true (T) or false (F)
1. Assume that Finland and Latvia produce only two goods. If Finland has an absolute advantage in the production of these two goods compared to Latvia, Finland can still benefit from trade with Latvia. 2. If a country has a comparative advantage in producing a product, it must also have an absolute advantage in producing that product. 3. If a country has an absolute advantage in producing a product, it may not have a comparative advantage in producing that product.