The problem of a complex tax code filled with loopholes may be overcome by proposing a complete overhaul of the entire system that lowers taxes for everyone because it _____
a. represents a Pareto superior move
b. takes advantage of rational ignorance
c. benefits all special interests
d. a and b
a
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A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will
a. fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. b. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. c. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. d. not fall in the short run because firms will exit to maintain the price.
If a Proposer and a Responder are asked to split $100 in the ultimatum bargaining game, standard economic theory would predict that the Proposer should offer the Responder:
A. the smallest dollar amount possible. B. exactly $25. C. exactly $50. D. the largest dollar amount possible.