Microeconomics Exam 2

According to the Coase theorem, private parties can solve the problem of externalities if a. property rights are clearly defined b. the cost of bargaining is large c. the number of parties involved is sufficiently large

A

As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus b. new buyers enter the market, decreasing consumer surplus c. existing buyers exit market, increasing consumer surplus d. existing buyers exit the market, decreasing consumer surplus

A

Refer to Figure 10-4. Which graph represents a market with a negative externality? a. Graph b only b. Graph c only c. Graph a d. Graph b and c

A

Refer to Figure 8-2. Producer surplus without the tax is a. $4, and producer surplus with the tax is $1 b. $1, and producer surplus with the tax is $4 c. $6, and producer surplus with the tax is $1.5 d. $1.5, and producer surplus with the tax is $6

A

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because a. maximizes both the total revenue for firms and the quantity supplied of the product b. maximizes the combined welfare of buyers and sellers c. minimizes costs and maximizes output d. minimizes the level of welfare payments

B

Assume, for India, that the domestic price of copper without international trade is lower than the world price of copper. This suggests that, in the production of copper, a. India has a comparative advantage over other countries and India will import copper b. India has a comparative advantage over other countries and India will export copper c. other countries have a comparative advantage over India and India will import copper d. other countries have a comparative advantage over India and India will export copper

B

Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? a. $0 b. $10 c. $40 d. $50

B

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is a. $150 b. $425 c. $500 d. $850

C

When a country allows trade and becomes an exporter of silk, which of the following is not a consequence? a. the price paid by domestic consumers of silk increases b. the price received by domestic producers of silk increases c. the price paid by domestic consumers of silk decreases d. the gains of domestic producers of silk exceed the losses of domestic consumers of silk

C

Employing a lawyer to draft and enforce a private contract between parties wising to solve an externality problem is an example of a. an opportunity cost b. an implicit cost c. a sunk cost d. a transaction cost

D

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is a. $24 b. $36 c. $42 d. $48

D

Refer to table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is a. $1,150 b. $1,400 c. $700 d. $950

D

When a tax is levied on a good, the buyers and sellers of the good share the burden, a. provided the tax is levied on the sellers b. provided the tax is levied on the buyers c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers d. regardless of how the tax is levies

D

Which of the following is Not a way of internalizing technology spillovers? a. subsidies b. patent protection c. industrial policy d. taxes

D

If the government levies a $800 tax per motorcycles, then the price paid by buyers of motorcycles would a. Increase by less than $800 b. Increase by more than $800 c. Increase by exactly $800 d. Decrease by an indeterminate amount

A

In which of the following cases is the Coase theorem most liekly to sovle the externailtiy? a. Ed is allergic to his roommates cat chemical from manufatctuing plants in the Midwest are causing acid rain inCanda

A

Refer to Figure 10-4. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point a. Q2 b. Q3 c. Q4 d. Q5

A

Refer to Figure 6-13. How is the burden of the tax shared between buyers and sellers? Buyers bear a. 3/4th of the burden, and sellers bear 1/4th of the burden b. 2/3rd of the burden, and sellers bear 1/3rd of the burden c. ½ of the burden, and sellers bear ½ of the burden d. 1/4th of the burden, and sellers bear 3/4th of the burden

A

Refer to Figure 6-13. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in a. Buyers bearing a larger share of the tax burden b. Sellers bearing a smaller share of the tax burden c. The same amount of tax revenue for the government And increase in the amount of tax revenue for the government

A

Refer to Figure 7-4. Which area represents producer surplus when the price is P2? a. ACH b. BCG c. ABGD d. DGH

A

Refer to Figure 8-2. Consumer surplus without the tax is a. $6, and consumer surplus with the tax is $1.5 b. $1.5, and consumer surplus with the tax is $6 c. $4, and consumer surplus with the tax is $1 d. $1, and consumer surplus with the tax is $4

A

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is a. $2.50 b. $6 c. $4 d. $5

A

Refer to Figure 8-5. Graph (a) and Graph (b) each illustrate a $4 tax placed on a market. In comparison to Graph (a), Graph (b) illustrates which of the following statements? a. when demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic b. when demand is relatively elastic, the dead weight loss of a tax is larger than when demand is relatively inelastic

A

Refer to Figure 9-3. With trade and without a tariff, a. the domestic price is equal to the world price b. roses are sold at $4 in this market c. there is a shortage of 400 roses in this market d. this country imports 200 roses

A

Refer to Figure 9-3. Without trade, the equilibrium price of roses is a. $4 and the equilibrium quantity is 300 roses b. $3 and the equilibrium quantity is 200 roses c. $3 and the equilibrium quantity is 400 roses d. $2 and the equilibrium quantity is 500 roses

A

Refer to Figure 9-6. Government revenue raised by the tariff is represented by the area a. E b. B+E c. D+E+F d. B+D+E+F

A

Refer to Scenario 9-1. Suppose the world price of cardboard is $139 and international trade is allowed. Then Boxland's consumers demand a. 102 tons of cardboard and Boxland's procurers supply 357 tons of cardboard b. 102 tons of cardboard and Boxland's producer supply 204 tons of cardboard c. 204 tons of cardboard and Boxland's producer supply 357 tons of cardboard

A

Refer to Table 10-3. The market equilibrium quantity of output is a. 3 units b. 4 units c. 5 units d. 6 units

A

Suppose that in a particular market, the supply curve is highly inelastic, and the demand curve is highly elastic. If a tax is imposed in this market, then the a. Sellers will bear a greater burden of the tax than the buyers b. Buyers will bear a greater burden of the tax than the sellers c. Buyers and sellers are likely to share the burden of the tax equally d. Buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more info

A

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began a. importing televisions and the price of a television in Paraguay decreased to $300 b. importing television and the price of a television in Paraguay remained at $350 c. exporting television and the price of a television in Paraguay decreased to $300

A

The size of a tax and the deadweight loss that results from the tax are a. positively related b. negatively related c. independent of each other d. equal to each other

A

Which of the following is not correct? a. Taxes levied on sellers and taxes levied on buyers are not equivalent b. A tax places a wedge between the price that buyers pay and the price that sellers receive c. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or seller d. In the new after-tax equilibrium, buyers and sellers share the burden of the tax

A

In the market for apartments, rent control causes the quantity supplied a. and quantity demanded to fall b. to fall and quantity demanded to rise c. to rise and quantity demanded to fall d. and quantity demanded to rise

B

Refer to Figure 10-2. If all external costs were internalized, then the market's output would be a. Q1 b. Q2 c. Q3 d. Q4

B

Refer to Figure 10-2. The socially optimal quantity would be a. Q1 b. Q2 c. Q3 d. Q4

B

Refer to Figure 10-4. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, a government policy that internalized the externality would move the quantity of antibiotics used from point a. Q2 to point Q3 b. Q3 to point Q2 c. Q4 to point Q5 d. Q5 to point Q4

B

Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus a. decreases by an amount equal to C b. decreases by an amount equal to A+B c. decreases by an amount equal to A+C d. increases by an amount equal to A+B

B

Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area a. A b. A+B+C c. D+H+F d. A+B+C+D+H+F

B

Refer to Figure 8-2. The per-unit burden of the tax on buyers is a. $1 b. $3 c. $4 d. $6

B

Refer to Figure 8-2. Total surplus without the tax is a. $7.5, and total surplus with the tax is $10 b. $10, and total surplus with the tax is $7.5 c. $6, and total surplus with the tax is $1.5 d. $1.5, and total surplus with the tax is $6

B

Refer to Figure 9-3. When a tariff is imposed in the market, domestic producers a. gain $200 of producer surplus b. gain $150 of producer surplus c. gain $50 of producer surplus d. gain $100 of producer surplus

B

Refer to Figure 9-3. When the tariff is imposed, domestic consumers a. lose surplus of $400 b. lose surplus of $450 c. gain surplus of $50 d. gain surplus of $800

B

Refer to Figure 9-4. Total surplus in this market fore trade is a. A+B b. A+B+C c. A+B+C+D d. B+C+D

B

Refer to Figure 9-6. The DWL created by the tariff is represented by the area a. B b. D+F c. D+E+F d. B+D+E+F

B

Refer to Figure 9-6. The tariff a. decreases producer surplus by the area C, decreases consumer surplus by the area C+D+E, and decreases total surplus by the area D+F b. increase producer surplus by the area C, decreases consumer surplus by thee area C+D+E+F, and decreases total surplus by thee area D+F c. creates government revenue represented by the area B+E and decreases total surplus by the area D+E+F

B

Refer to Scenario 10-1. From the given information, it is apparent that a. the production of gasoline involves a negative externality, so the market will produce a smaller quantity of gasoline than is socially desirable b. the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable

B

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be a. $16 b. $18 c. $24 d. $26

B

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the a. first year after it is imposed than in the eight year after it is imposed because demand and supply will by more elastic in the first year than in the eighth year b. eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year

B

The deadweight loss from a tax per unit of good will be smallest in a market with a. inelastic supply and elastic demand b. inelastic supply and inelastic demand c. elastic supply and elastic demand d. elastic supply and inelastic demand

B

The social security tax is a tax on a. capital b. labor c. land d. savings

B

When positive externalities are present in a market a. private benefits will be greater than social benefits b. social benefits will be greater than private benefits c. only government regulation will solve the problem d. the market will not be able to generate an equilibrium

B

Which is the following is an example of positive externality? a. a college student buyers a new car when she graduates b. your neighbor plants a nice garden in front of his house c. a person liters in a public park d. your friend pays to get her hair cut and colored at the salon

B

Which of the following is correct a. rent control and the minimum wage are both examples of price ceilings b. Rent control is an example of a price ceiling and the minimum wage is an example of a price floor c. rent control is an example of a price floor at the minimum wage is an example of a price ceiling d. rent control and the minimum wage are both examples of price floors

B

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? a. Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke b. Zaria pays Hannah $16 so that Zaria can smoke c. Zaria pays Hannah $14 so that Zaria can smoke

B

if a non binding price floor is imposed on the market, then the a. quantity sold in the market will decrease b. quantity sold in the market will stay the same c. price in the market will increase d. price in the market will decrease

B

price ceilings and price floors that are binding a. are desirable because they make markets more efficient and more fair b. cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price c. Can have the effect of restoring a market to equilibrium d. are imposed because they can make the poor and the economy better off without causing adverse effects

B

refer to figure 6-9. In this market a minimum wage of $6 is a. binding an creates a labor shortage b. binding an creates unemployment c. non binding and creates a labor shortage d. non binding increase neither a labor shortage nor unemployment

B

An externality is the uncompensated impact of a. society's decisions on the well-being of society b. a person's actions on that person's well-being c. one person's actions on the well-being of a bystander d. society's decisions on the poorest person in the society

C

Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the wall calendar? a. $9 b. $5 c. $10 d. $8

C

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as a. T/Q b. T+Q c. TxQ d. (TxQ)/Q

C

In the 1970s, long lines at gas stations in the US were primarily a result of the fact that a. OPEC raised the price of crude oil in world markets b. US gasoline produces raised the price of gasoline c. The US government maintained a price ceiling on gasoline d. Americans typically commuted long distances

C

Refer to 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market? a. $0 b. $300 c. $400 d. $700

C

Refer to Figure 10-2. This market is characterized by a. government intervention b. positive externality c. negative externality d. price control

C

Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by a. $800 b. $200 c. $600 d. $400

C

Refer to Figure 8-2. The amount of the tax on each unit of the good is a. $1 b. $3 c. $5 d. $2

C

Refer to Figure 8-3. As a result of the tax a. Consumer surplus from $200 to $80 b. producer surplus decreases from $200 to $145 c. the market experiences a deadweight loss of $80 d. total surplus from $180 and $200

C

Refer to Figure 9-4. Total surplus in this market after trade is a. A+B b. A+B+C c. A+B+C+D d. B+C+D

C

Refer to Table 10-3. The socially optimal quantity of output is a. 3 units b. 4 units c. 5 units d. 6 units

C

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Sasha

C

Which of the following is not an advantage of a multilateral approach to free trade over unilateral approach? a. a multilateral approach can reduce trade restrictions abroad as well as at home b. a multilateral approach has potential to result in freer trade c. a multilateral approach requires the agreement of 2 or more nations d. a multilateral approach may have political advantages

C

Which of the following is not an advantage of corrective taxes? a. they raise revenue for the government b. they enhance economic efficiency c. they subsidize the production of goods with positive externalities d. they move the allocation of resources closer to social optimum

C

a shortage results when a a. non binding price ceiling is imposed on the market b. non binding price ceiling is removed from a market c. binding price ceiling is imposed on the market d. finding price ceiling is removed from the market

C

refer to figure 6- 5. A government imposed price of $12 in this market is an example of a a. Binding price ceiling that creates shortage b. non binding price ceiling that creates a shortage c. binding price floor that creates a Surplus d. non binding price floor that creates a surplus

C

under rent control landlords could cease to be responsive to tenants' concerns about the quality of the housing because a. with rent control the government guarantees landlords a minimum level profit b. they become resigned to the fact that many of their apartments are going to be vacant at any c. With shortages and waiting list they have no incentive to maintain and improve their property d. with rent control it becomes the government's responsibility to maintain rental housing

C

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that a. both he value of tablets to consumers and the cost of producing tablets has increased b. both he value of tablets to consumers and the cost of producing tablets has decreased c. the value of tablets to consumers has decreased, and the cost of producing tablets has increased d. the value of tablets to consumers has increased, and the cost of producing tablets has decreased

D

If a price ceiling is not binding, then a. there will be a surplus in the market b. there will be a shortage in the market c. the market will be less efficient than it would be without the price ceiling d. there will be no effect on the market price or quantity sold

D

Refer to Figure 6-13. What is the amount of the tax per unit? a. $1 b. $2 c. $3 d. $4

D

Refer to Figure 9-3. The size of the tariff on roses is a. $4 b. $3 c. $2 d. $1

D

Refer to Table 10-3. Taking into account private and external benefits, the total surplus to society at the socially efficient quantity is a. $18 b. $38 c. $43.5 d. $62.5

D

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market a. decreases b. is unchanged c. increases d. may increase, decrease, or remain unchanged

D

The maximum price that a buyer will pay for a good is called a. consumer surplus b. producer surplus c. efficiency d. willingness to pay

D

When a tax is placed on the sellers of cell phones, the size of the cell phone market a. And the effective price received by sellers both increase b. Increases, but the effective price received by sellers decreases c. Decreases, but the effective price received by sellers increases d. And the effective price received by sellers both decrease

D

Which of the following statements is not correct? a. a patent is a way for the government to encourage the production of a good with technology spillovers b. a tax is a way for the government the production of a good with a negative externality c. a tax is accurately reflects external costs produces the socially optimal outcome d. government policies cannot improve upon private market outcomes

D