Microeconomics Final MC ANSWERS
Refer to Figure 7-16. If the price of the good is $600, then producer surplus amounts to Select one: a. $1,000. b. $650. c. $900. d. $800.
a. $1,000.
Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at Select one: a. any price above $3. b. a price between $3 and $4. c. a price between $2 and $3. d. any price below $3.
a. any price above $3.
The largest budgetary expense for a typical state or local government is Select one: a. public order and safety. b. education. c. highways. d. welfare.
b. education.
In conducting their research, economists often substitute historical events and historical episodes for Select one: a. assumptions. b. laboratory experiments. c. models. d. theories and observations.
b. laboratory experiments.
When two variables have a negative correlation, Select one: a. the variables' values are never positive. b. they tend to move in opposite directions. c. they tend to move in the same direction. d. one variable will move while the other remains constant.
b. they tend to move in opposite directions.
Which of the following is not an example of a positive, as opposed to normative, statement? Select one: a. Higher gasoline prices will reduce gasoline consumption. b. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money. c. Equality is more important than efficiency. d. Trade restrictions lower our standard of living.
c. Equality is more important than efficiency.
When demand is inelastic, a decrease in price will cause Select one: a. no change in total revenue but a decrease in quantity demanded. b. an increase in total revenue. c. a decrease in total revenue. d. no change in total revenue but an increase in quantity demanded.
c. a decrease in total revenue.
The French expression used by free-market advocates, which literally translates as "allow them to do," is Select one: a. tête-à-tête. b. je ne sais pas. c. laissez-faire. d. si'l vous plait.
c. laissez-faire.
Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is Select one: a. P2. b. P4. c. P1. d. P3.
d. P3.
Economists disagree because of Select one: a. differences in values d. differences in scientific judgments c. differences in perceptions of reality d. all of the above
d. all of the above
Refer to Figure 6-18. The price that buyers pay after the tax is imposed is Select one: a. $24. b. $16. c. $10. d. $8.
a. $24.
Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be Select one: a. $54. b. $42. c. $60. d. $48.
a. $54.
The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market. (ii) increases a binding price ceiling in that market. (iii) decreases a tax on the good sold in that market. Select one: a. (i) and (ii) only b. (i), (ii), and (iii) c. (ii) only d. (iii) only
a. (i) and (ii) only
Refer to Table 5-6. Using the midpoint method, demand is unit elastic when quantity demanded changes from Select one: a. 400 to 300. b. 300 to 200. c. 500 to 400. d. 200 to 100.
a. 400 to 300.
Assuming transaction costs are small, the Coase theorem would predict that private parties could arrive at an efficient solution for which of the following problems? Select one: a. All of the above are correct. b. One neighbor doesn't paint her house. c. One neighbor doesn't mow his lawn. d. One neighbor comes home on his noisy motorcycle late at night.
a. All of the above are correct.
Refer to Figure 8-5. After the tax is levied, producer surplus is represented by area Select one: a. F. b. D+H+F. c. A+B+C. d. A.
a. F.
Welfare economics explains which of the following in the market for televisions? Select one: a. The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. b. The government sets the price of televisions; firms respond to the price by producing a specific level of output. c. The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. d. The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.
a. The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers.
Which of the following is not an advantage of corrective taxes? Select one: a. They subsidize the production of goods with positive externalities. b. They enhance economic efficiency. c. They raise revenues for the government. d. They move the allocation of resources closer to the social optimum.
a. They subsidize the production of goods with positive externalities.
Suppose that demand is inelastic within a certain price range. For that price range, Select one: a. an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. b. an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. c. a decrease in price would not affect total revenue. d. a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price.
a. an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price.
Which of the following allows you to provide information about the relationship between two variables? Select one: a. coordinate system. b. time-series graph c. pie chart d. bar graph
a. coordinate system.
Using a toll to reduce traffic when congestion is greatest is an example of a Select one: a. corrective tax. b. Coase theorem solution. c. regulation solution. d. command-and-control policy.
a. corrective tax.
The Coase theorem asserts that the private market will always solve the problem of externalities and allocate resources efficiently Select one: a. even if the initial distribution of legal rights is skewed in favor of some private parties over others. b. only when there is a large number of private parties that engage in bargaining. c. even if private parties experience substantial costs of bargaining. d. All of the above are correct.
a. even if the initial distribution of legal rights is skewed in favor of some private parties over others.
When an externality is present, the market equilibrium is Select one: a. inefficient, and the equilibrium does not maximize the total benefit to society as a whole. b. efficient, and the equilibrium maximizes the total benefit to society as a whole. c. efficient, but the equilibrium does not maximize the total benefit to society as a whole. d. inefficient, but the equilibrium maximizes the total benefit to society as a whole.
a. inefficient, and the equilibrium does not maximize the total benefit to society as a whole.
A tradeoff exists between a clean environment and a higher level of income in that Select one: a. laws that reduce pollution raise costs of production and reduce incomes. b. employing individuals to clean up pollution causes increases in employment and income. c. studies show that individuals with higher levels of income pollute less than low-income individuals. d. efforts to reduce pollution typically are not completely successful.
a. laws that reduce pollution raise costs of production and reduce incomes.
Taxes on labor encourage which of the following? Select one: a. mothers to stay at home rather than work in the labor force b. fathers to take on second jobs c. workers to work overtime d. labor demand to be more inelastic
a. mothers to stay at home rather than work in the labor force
Which of the following expressions represents a cross-price elasticity of demand? Select one: a. percentage change in quantity demanded of bread divided by percentage change in price of butter b. percentage change in quantity demanded of bread divided by percentage change in income c. percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread d. percentage change in price of bread divided by percentage change in quantity demanded of bread
a. percentage change in quantity demanded of bread divided by percentage change in price of butter
When a binding price ceiling is imposed on a market, Select one: a. price no longer serves as a rationing device. b. the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling. c. all buyers benefit. d. All of the above are correct.
a. price no longer serves as a rationing device.
If a tax takes a constant fraction of income as income rises, it is Select one: a. proportional. b. progressive. c. based on the ability-to-pay principle. d. regressive.
a. proportional.
Other things equal, when the price of a good falls, the Select one: a. quantity supplied of the good decreases. b. supply decreases. c. quantity supplied of the good increases. d. demand increases.
a. quantity supplied of the good decreases.
Refer to Figure 2-21. Your friend John created the graph above to illustrate that snowstorms are caused by more snowblowers being sold. You inform him that his interpretation is incorrect due to Select one: a. reverse causality. b. omitted variable bias. c. slope mismatch. d. shifting versus moving along a curve.
a. reverse causality.
The two types of taxes that are most important to state and local governments as sources of revenue are Select one: a. sales taxes and property taxes. b. social insurance taxes and property taxes. c. sales taxes and individual income taxes. d. individual income taxes and corporate income taxes.
a. sales taxes and property taxes.
What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have? Select one: a. scarcity b. inequality c. inefficiency d. market failure
a. scarcity
Refer to Figure 4-22. At a price of $12, there is a Select one: a. shortage of 4 units. b. surplus of 4 units. c. shortage of 2 units. d. surplus of 2 units.
a. shortage of 4 units.
An example of a price floor is Select one: a. the minimum wage. b. rent control. c. the regulation of gasoline prices in the U.S. in the 1970s. d. any restriction on price that leads to a shortage.
a. the minimum wage.
Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are Select one: a. $1.80 and 35 units, respectively. b. $1.60 and 42 units, respectively. c. $1.90 and 38 units, respectively. d. $1.35 and 58 units, respectively.
b. $1.60 and 42 units, respectively.
Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. What is the value of the surplus that accrues to all four skiers from their weekend trip? Select one: a. $185. b. $144. c. $41. d. $95.
b. $144.
Leonard, Sheldon, Raj, and Penny each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by Select one: a. $15 and tax revenues increase by $20, so there is no deadweight loss. b. $35 and tax revenues increase by $30, so there is a deadweight loss of $5. c. $20 and tax revenues increase by $20, so there is no deadweight loss. d. $50 and tax revenues increase by $30, so there is a deadweight loss of $20.
b. $35 and tax revenues increase by $30, so there is a deadweight loss of $5.
Refer to Figure 5-3. Which demand curve is perfectly inelastic? Select one: a. C b. A c. D d. B
b. A
Why do some policymakers support a consumption tax rather than an earnings tax? Select one: a. The average tax rate would be lower under a consumption tax. b. A consumption tax would encourage people to save earned income. c. The marginal tax rate would be higher under an earnings tax. d. A consumption tax would raise more revenues than an income tax.
b. A consumption tax would encourage people to save earned income.
Refer to Table 12-23. Which of the three tax systems exhibits vertical equity? Select one: a. Tax System B b. All of the systems exhibit vertical equity. c. Tax System A d. Tax System C
b. All of the systems exhibit vertical equity.
Which of the following statements is correct? Select one: a. Buyers determine both demand and supply. b. Buyers determine demand, and sellers determine supply. c. Buyers determine supply, and sellers determine demand. d. Sellers determine both demand and supply.
b. Buyers determine demand, and sellers determine supply.
Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct? Select one: a. Marshall's average tax rate is higher than his marginal tax rate. b. Lily's average tax rate is higher than Marshall's average tax rate. c. Lily's average tax rate is higher than her marginal tax rate. d. Marshall's marginal tax rate is higher than Lily's marginal tax rate.
b. Lily's average tax rate is higher than Marshall's average tax rate.
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the total surplus is Select one: a. [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. b. [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. c. 1/2 x (P2-P8) x (Q5-Q2). d. (P2-P8) x Q2.
b. [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
Refer to Figure 4-15. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for sail boats? Select one: a. a decrease in the price of America's Cup sailing t-shirts b. a decrease in the price of fiberglass and sail cloth c. a decrease in the number of firms selling sailboats d. an increase in the price of sailboats
b. a decrease in the price of fiberglass and sail cloth
For which of the following individuals would the opportunity cost of going to college be highest? Select one: a. a promising young mathematician who will command a high salary once she earns her college degree b. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree c. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball d. a student with average grades who has never held a job
b. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
A legal maximum on the price at which a good can be sold is called a price Select one: a. support. b. ceiling. c. floor. d. subsidy.
b. ceiling.
If the demand for leather decreases, producer surplus in the leather market Select one: a. may increase, decrease, or remain the same. b. decreases. c. increases. d. remains the same.
b. decreases.
Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except Select one: a. each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost. b. each dish would be both excludable and rival in consumption. c. there is an externality associated with eating the food on the table. d. when one person eats, he may not take into account how his choice affects his friends.
b. each dish would be both excludable and rival in consumption.
Almost all economists agree that local and state governments should Select one: a. copy economic policy from Washington, D.C. b. eliminate subsidies to professional sports franchises. c. increase subsidies to professional sports franchises. d. prevent companies from outsourcing work.
b. eliminate subsidies to professional sports franchises.
The market demand curve Select one: a. is always flatter than an individual demand curve. b. is the sum of all individual demand curves. c. is the demand curve for every product in an industry. d. shows the average quantity demanded by individual demanders at each price.
b. is the sum of all individual demand curves.
A rational decision maker takes an action only if the Select one: a. marginal benefit is less than the marginal cost. b. marginal benefit is greater than the marginal cost. c. marginal benefit is greater than both the average cost and the marginal cost. d. average benefit is greater than the average cost.
b. marginal benefit is greater than the marginal cost.
The field of economics is traditionally divided into two broad subfields, Select one: a. consumer economics and producer economics. b. microeconomics and macroeconomics. c. national economics and international economics. d. private sector economics and public sector economics.
b. microeconomics and macroeconomics.
Because it is Select one: a. rival in consumption but not excludable, a tornado siren is a common resource. b. neither excludable nor rival in consumption, a tornado siren is a public good. c. excludable but not rival in consumption, a tornado siren is produced by a club good. d. neither excludable nor rival in consumption, a tornado siren is a common resource.
b. neither excludable nor rival in consumption, a tornado siren is a public good.
University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. What could the federal government do to equate the equilibrium quantity of university research and the socially optimal quantity of university research produced? Select one: a. tax university researchers b. offer grants to university researchers c. nothing d. eliminate subsidized student loans
b. offer grants to university researchers
Refer to Figure 11-1. The box labeled D represents Select one: a. common resources. b. public goods. c. private goods. d. club goods.
b. public goods.
Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price Select one: a. paid by buyers after the tax is imposed. b. received by sellers after the tax is imposed. c. received by sellers before the tax is imposed. d. paid by buyers before the tax is imposed.
b. received by sellers after the tax is imposed.
Which of the following words and phrases best captures the notion of equality? Select one: a. efficiency b. sameness c. minimum waste d. maximum benefit
b. sameness
Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the Select one: a. demand for flour to decrease. b. supply of flour to increase. c. supply of flour to decrease. d. demand for flour to increase.
b. supply of flour to increase.
You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost? Select one: a. the amount you value the first movie + $9 b. the amount you value the first movie + $3 c. $3 d. $9
b. the amount you value the first movie + $3
From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World War II. The primary reason for the record-large deficits was Select one: a. severe budget tightening by members of Congress. b. the recession experienced during this time. c. the shift in political power from Republicans to Democrats. d. All of the above are correct.
b. the recession experienced during this time.
Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that Select one: a. they should leave the price at $10. b. they would do better charging $15 than $10. c. it does not matter if they charge $10 or $15. d. they should raise the price even more.
b. they would do better charging $15 than $10.
Which of the following is not a way for the government to solve the problem of excessive use of common resources? Select one: a. taxes b. turning the common resource into a public good c. regulation d. turning the common resource into a private good
b. turning the common resource into a public good
Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to Select one: a. $200. b. $400. c. $300. d. $450.
c. $300.
Suppose there is a line with two points on it, given in the from (X, Y). The points are (10, 10) and (2, 6). What is the slope of the line? Select one: a. - 1.0 b. - 0.5 c. + 0.5 d. + 1.0
c. + 0.5
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight. Refer to Table 11-2. Suppose the cost to install each streetlight is $360. How many streetlights should the town install to maximize total surplus from the streetlights? Select one: a. 3 streetlights b. 1 streetlight c. 4 streetlights d. 2 streetlights
c. 4 streetlights
Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to Select one: a. P3ACP1. b. P1DCP2. c. ABC. d. P2ADP3.
c. ABC.
In which of the following situations will total revenue increase? Select one: a. Price elasticity of demand is 1.2, and the price of the good decreases. b. Price elasticity of demand is 0.5, and the price of the good increases. c. All of the above are correct. d. Price elasticity of demand is 3.0, and the price of the good decreases.
c. All of the above are correct.
Which of the following represents a way that a government can help the private market to internalize an externality? Select one: a. The government cannot improve upon the outcomes of private markets. b. taxing goods that have negative externalities c. Both a and b are correct. d. subsidizing goods that have positive externalities
c. Both a and b are correct.
Refer to Figure 8-23. The curve that is shown on the figure is called the Select one: a. deadweight-loss curve. b. Lorenz curve. c. Laffer curve. d. tax-incidence curve.
c. Laffer curve.
Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized? Select one: a. The optimum quantity is zero concerts as long as residents in surrounding neighborhoods are adversely affected by noise and congestion. b. P1, Q1 c. P2, Q0 d. P2, Q1
c. P2, Q0
If the demand for a product decreases, then we would expect equilibrium price Select one: a. and equilibrium quantity to both increase. b. to increase and equilibrium quantity to decrease. c. and equilibrium quantity to both decrease. d. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both decrease.
A perfectly elastic demand implies that Select one: a. buyers will not respond to any change in price. b. price will rise by an infinite amount when there is a change in quantity demanded. c. any rise in price above that represented by the demand curve will result in a quantity demanded of zero. d. quantity demanded and price change by the same percent as we move along the demand curve.
c. any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
For which of the following goods is the income elasticity of demand likely highest? Select one: a. doctor's visits b. natural gas c. boats d. hamburgers
c. boats
The supply curve for stand up paddle boards Select one: a. shifts when the price of stand up paddle boards changes because the quantity supplied of stand up paddle boards is measured on the horizontal axis of the graph. b. shifts when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. c. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. d. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the horizontal axis of the graph.
c. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph.
A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of Select one: a. market power. b. inefficient trade. c. inadequate enforcement of property rights. d. the invisible hand at work.
c. inadequate enforcement of property rights.
Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. Because the cost to build the swimming pool is only $1,000,000, Manager Miller arranges to have the pool built. Everyone in town enjoys the pool, but when Manager Miller asks for donations to pay for the pool, he only collects $250,000. Manager Miller soon realizes that Select one: a. the cost of the pool exceeded the social benefits. b. the pool is a club good. c. most residents of the town are probably free-riders at the pool. d. the survey was conducted improperly.
c. most residents of the town are probably free-riders at the pool.
Refer to Figure 6-16. In this market, a minimum wage of $2.75 is Select one: a. binding and creates a labor shortage. b. binding and creates unemployment. c. nonbinding and creates neither a labor shortage nor unemployment. d. nonbinding and creates a labor shortage.
c. nonbinding and creates neither a labor shortage nor unemployment.
A television broadcast is an example of a good that is Select one: a. private. b. normal. c. not rival in consumption. d. social.
c. not rival in consumption.
The government taxes corporate income on the basis of Select one: a. the number of employees. b. All of the above are correct. c. profit. d. the amount the firm receives for the goods or services it sells.
c. profit.
If one person's use of a good diminishes another person's enjoyment of it, the good is Select one: a. normal. b. excludable. c. rival in consumption. d. inferior.
c. rival in consumption.
You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing Select one: a. the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. b. the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. c. the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs. d. the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs.
c. the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.
When a relevant variable that is not named on either axis changes, Select one: a. the curve will be unaffected since only the variables on the axis affect the curve. b. the curve will rotate clockwise. c. the curve will shift. d. there will be a movement along the curve.
c. the curve will shift.
In a cost-benefit analysis, the value of a human life is sometimes calculated on the basis of Select one: a. the amount of resources required to adequately sustain life. b. the belief that human life is priceless. c. the risks that a person voluntarily exposes herself to in her job and/or recreational choices. d. the value of each individual's assets.
c. the risks that a person voluntarily exposes herself to in her job and/or recreational choices.
For which of the following goods is the income elasticity of demand likely lowest? Select one: a. fresh fruit b. sapphire pendant necklaces c. water d. filet mignon steaks
c. water
Refer to Figure 6-24. In the after-tax equilibrium, government collects Select one: a. $1,440 in tax revenue; of this amount, $720 represents a burden on buyers and $720 represents a burden on sellers. b. $1,440 in tax revenue; of this amount, $960 represents a burden on buyers and $480 represents a burden on sellers. c. $1,680 in tax revenue; of this amount, $840 represents a burden on buyers and $840 represents a burden on sellers. d. $1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers.
d. $1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers.
Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is Select one: a. $500. b. $850. c. $350. d. $150.
d. $150.
Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is Select one: a. $15.00. b. $22.50. c. $7.50. d. $45.00.
d. $45.00.
Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is Select one: a. $15.00. b. $45.00. c. $22.50. d. $7.50.
d. $7.50.
A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. Select one: a. (i) and (iii) only b. (iv) only c. (ii) only d. (ii) and (iv) only
d. (ii) and (iv) only
Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125. Then total surplus is maximized if Select one: a. 4 units of the good are produced and sold. b. 2 units of the good are produced and sold. c. 1 unit of the good is produced and sold. d. 3 units of the good are produced and sold.
d. 3 units of the good are produced and sold.
Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event? Select one: a. Sellers would not be able to produce and sell as much as before at each relevant price. b. The equilibrium price would rise. c. The supply would decrease. d. Buyers would not be willing to buy as much as before at each relevant price.
d. Buyers would not be willing to buy as much as before at each relevant price.
Which of the following statements does not apply to a market economy? Select one: a. Firms decide whom to hire and what to produce. b. Households decide which firms to work for and what to buy with their incomes. c. The "invisible hand" usually maximizes the well-being of society as a whole. d. Government policies are the primary forces that guide the decisions of firms and households.
d. Government policies are the primary forces that guide the decisions of firms and households.
Taxes that are enacted to mitigate the effects of negative externalities are sometimes called Select one: a. Marshallian taxes. b. command levies. c. control taxes. d. Pigovian taxes.
d. Pigovian taxes.
Which of the following is not correct? Select one: a. Some states in the U.S. mandate minimum wages above the federal level. b. Most European nations have minimum-wage laws. c. The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act. d. The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom.
d. The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom.
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of Select one: a. an implicit cost. b. a sunk cost. c. an opportunity cost. d. a transaction cost.
d. a transaction cost.
On a graph, consumer surplus is represented by the area Select one: a. below the price and above the supply curve. b. between the demand and supply curves. c. below the demand curve and to the right of equilibrium price. d. below the demand curve and above price.
d. below the demand curve and above price.
Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to Select one: a. only new customers who enter the market because of the lower prices. b. Consumer surplus does not increase; it decreases. c. only existing customers who now get lower prices on the gowns they were already planning to purchase. d. both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.
d. both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.
Refer to Figure 4-7. If the demand curve for Good X shifts from Db to Da, then Select one: a. people's incomes must have increased. b. firms would be willing to supply more of Good X than before at each possible price. c. the price of Good X has increased. d. people are willing to buy less of Good X than before at each possible price.
d. people are willing to buy less of Good X than before at each possible price.
Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10, Select one: a. quantity demanded changes the same amount proportionately as price. b. quantity demanded changes proportionately less than the price. c. the price elasticity of demand equals 1. d. quantity demanded changes proportionately more than the price.
d. quantity demanded changes proportionately more than the price.
The benefit that government receives from a tax is measured by Select one: a. the change in the equilibrium quantity of the good. b. total surplus. c. the change in the equilibrium price of the good. d. tax revenue.
d. tax revenue.
