ECON101 MDT2 Review

Which of the following is an example of a positive statement? 1. Canada should impose higher carbon tax 2. Increasing the minimum wage results in more unemployment among least skilled 3. Every Canadian should have equal access to healthcare 4. Lowering interest rate is a better policy than cutting taxes to combat recession caused by COVID-19 5. Canada should have higher tax rates for wealthier Canadians

B.

What happens when you produce inside the PPF?

Increased production of both goods with zero opportunity cost

A cap-and-trade scheme with a cap equal to efficient level of pollution

Leads to the price of a permit = MEC and achieves an efficient outcome and minimizes the cost of controlling pollution to the desired (efficient) level

Crude oil is a factor of production of gasoline. If the price of crude oil rises, what can we expect?

The equilibrium quantity of gasoline to fall due to an increase in supply

The more inelastic the demand, less reduction in quantity, hence...?

The higher the tax revenue

Any two individuals can gain from trade, unless..?

They have the same opportunity costs for producing all goods

Farm land can be used to produce either cattle or corn. If the demand for cattle increases, what happens?

When demand for cattle increases, you produce more cattle and less corn. Supply of corn decreases (shifts up/left)