Econ Chapter 4 & 5 class quiz

Refer to Figure 4-8. The supply curve S1 and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S1 to S2. Which of the following states the actual burden of the tax? .

$10 for buyers and $30 for sellers

. Given the demand and supply conditions shown in Figure 4-4, if the government imposes a price ceiling of a, which of the following would be true? A. Producers would wish to sell r units. B. Producers would wish to sell s units. C. Consumers would want to buy r units.

A. Producers would wish to sell r units.

Which of the following correctly describes the external benefit resulting from an individual's purchase of a winter flu shot? A. The flu shot reduces the likelihood others will catch the flu. B. The flu shot is cheaper than the cost of treatment when you get the flu. C. The flu shot reduces the likelihood you will miss work as the result of sickness; therefore, you will earn more income.

A. The flu shot reduces the likelihood others will catch the flu.

The Laffer curve indicates that A. when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues. B. tax revenue will always increase when tax rates are increased. C. tax revenue will always decrease when tax rates are lowered.

A. when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.

A payment the government makes to either the buyer or seller, usually on a per-unit basis, when a good or service is purchased or sold is called a A. black market. B. subsidy. C. interest rate. D. tax

B. subsidy.

. The supply curve S1 and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S1 to S2. Imposing the tax increases the equilibrium price of soft coal from A. $20 to $50 per ton. B. $20 to $60 per ton. C. $50 to $60 per ton.

C. $50 to $60 per ton.

Economic efficiency requires that A. only long-lasting, high-quality products be produced without regard to cost. B. income be distributed equally among consumers. C. all economic activity generating more benefits than costs be undertaken.

C. all economic activity generating more benefits than costs be undertaken.

. Refer to Figure 4-11. On the Laffer curve shown, tax revenue could be increased by A. increasing the marginal tax rates if we were currently at point B. B. increasing the marginal tax rates if we were currently at point C. Correct Answer C. decreasing the marginal tax rates if we were currently at point C.

C. decreasing the marginal tax rates if we were currently at point C.

Competitive markets generally give consumers and producers correct incentives when a. there is a substantial lack of information on the part of either buyers or sellers. b. the good being produced and consumed is a pure public good. c. property rights are well-defined and enforced.

C. property rights are well-defined and enforced.

. Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a? A. Over time, the quality of the product offered by suppliers will increase. B. Supply will increase. C. Demand for the product will decline. D. There will be a shortage of the product.

D. There will be a shortage of the product.

Which of the following is the most fundamental function of government? A. provision of postal services and garbage collection B. imposing progressive taxes to fund income-transfer programs C. regulating prices and wages D. protection of individuals and their property

D. protection of individuals and their property

When production of a good generates external costs, the A. demand curve for the good will overstate the true social benefits from consumption of the good. B. demand curve for the good will understate the true social benefits from consumption of the good. C. supply curve for the good will overstate the true social cost of producing the good. D. supply curve for the good will understate the true social cost of producing the good.

D. supply curve for the good will understate the true social cost of producing the good.

Kathy works full time during the day as an economist and faces a 60 percent marginal tax rate. If Kathy were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes? a. $4,000 b. $10,000 c. $1,000

a. $4,000

. On the Laffer curve shown, which of the following is true? a. All of the answers are true. b. Tax revenues are maximized at a tax rate corresponding to point B. c. Tax revenue would decrease if marginal tax rates were lowered from point A. d. Tax revenue would increase if marginal tax rates were lowered from point C

a. All of the answers are true.

. Figure 5-2 illustrates the market for a product that generates an external cost. S1 is the private market supply curve, while S2 is the supply curve including the external cost. Which of the following is true? a. Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency. b. Point b illustrates the competitive private market outcome, while point a illustrates the outcome consistent with economic efficiency.

a. Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency.

. Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true? a. Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency. b. Point b illustrates the competitive private market outcome, while point a illustrates the outcome consistent with economic efficiency.

a. Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency.

Which of the following is the best example of a public good? a. national defense b. long-distance telephone service c. the Walt Disney World amusement park

a. national defense

Relative to a competitive situation, if a market lacks competition, economic theory suggests that a. output will be lower and price higher. b. output will be higher and price lower. c. both output and price will be lower. d. both output and price will be higher.

a. output will be lower and price higher.

Use the table below to choose the correct answer. Income Tax (Dollars) (Dollars) 10,000 1,000 20,000 4,000 30,000 9,000 For the income range illustrated, the tax shown here is: a. proportional. b. regressive. c. progressive

a. proportional. b. regressive. **c. progressive. **

Which tax rate measures the percent of your income paid in taxes? a. the average tax rate b. progressive tax coefficient c. the marginal tax rate d. the excise tax rate

a. the average tax rate

. Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true? a. Consumers would wish to purchase 1,000 compact discs. b. All of the answers are true. c. There would be a surplus of 4,000 compact discs. d. Producers would wish to sell 5,000 compact discs.

b. All of the answers are true.

. Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true? a. Relative to economic efficiency, output of the good will be too large and the price too low. b. Relative to economic efficiency, output of the good will be too small and the price too low.

b. Relative to economic efficiency, output of the good will be too small and the price too low.

Suppose paper pulp mills are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency? a. The price will be too low, and the output will be too small. b. The price will be too low, and the output will be too large. c. The price will be too high, and the output will be too large.

b. The price will be too low, and the output will be too large.

The major distinction between private and public goods is that a. unlike private goods, public goods are not nonexcludable b. public goods are non-excludable and nonrival in consumption c. unlike private goods, public goods are not nonrival in consumption d. private goods are goods produced by private firms whereas public goods are goods produced by government--the public sector.

b. public goods are non-excludable and nonrival in consumption

When a supply and demand model is used to analyze the market for labor, a. employment is used on the horizontal axis as the market quantity. b. demand is generally no longer downward sloping. c. The wage rate is on the vertical axis and employment is on the horizontal axis. d. the wage rate is used on the vertical axis as the market price.

c. The wage rate is on the vertical axis and employment is on the horizontal axis.

A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that a. automation is the prime cause of unemployment. b. full employment can only be reached by increasing the minimum wage substantially. c. minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor.

c. minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor.

The "free rider problem" occurs in connection with a. goods that are not scarce. b. both public and private goods. c. public goods. d. private goods.

c. public goods.

Which of the following is a source of information that helps consumers acquire information about the quality of a good or service? a. franchising b. consumer ratings magazines c. brand names d. all of the answers are true.

d. all of the answers are true.

The marginal tax rate is defined as a. the change in tax liability minus the change in taxable income. b. tax liability divided by taxable income. c. tax liability multiplied by taxable income. d. the change in tax liability divided by the change in taxable income

d. the change in tax liability divided by the change in taxable income