Which of the following is true?
a. Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized.
b. The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated.
c. Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic.
d. All of the above are true.
Question 2
Rational expectations theory suggests that government or central bank policies designed to change aggregate demand will be effective.
a. True
b. False
Indicate whether the statement is true or false
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