Exam 2 Macro

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Which of the following statements regarding a Laffer curve is the most plausible?

Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.

When a country allows trade and becomes an exporter of silk, which of the following is not a consequence?

The price paid by domestic consumers of silk decreases.

When a country allows trade and becomes an importer of silk, which of the following is not a consequence?

The price received by domestic producers of silk increases.

If an allocation of resources is efficient, then

all potential gains from trade among buyers are sellers are being realized.

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

decreases, and producer surplus decreases

The imposition of a binding price ceiling on a market causes

quantity demanded to be greater than quantity supplied.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good.


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