Suppose the Personal Income in a Nation Equals $5 Billion

question 105

Multiple Choice

Suppose the personal income in a nation equals $5 billion, and personal income taxes equal
$1 billion. The disposable personal income equals:

• A) $4 billion.
• B) $5 billion.
• C) $6 billion.
• D) $1 billion.

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Definitions:

MC

An abbreviation commonly used for "Marginal Cost," which refers to the additional cost incurred by producing one more unit of a good or service.

Liability Rule

A legal principle that allocates the economic burden of damages to the party responsible for causing harm.

Coase Theorem

A principle stating that if trade in an externality is possible and there are no transaction costs, parties will negotiate to produce an efficient outcome.

Free-Rider Problem

A situation in which individuals benefit from resources or services without paying for them, leading to underprovision of those goods.