Microeconomics Test 2

An efficient tax system results in small

Deadweight losses and administrative burdens

Without a tariff would this country import or export the good. How much?

Import. Q4 - Q1

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by M represents

Producer surplus after the tax.

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by L+M+Y represents

Producer surplus before tax

Without a tariff what is the quantity demanded domestically

Q4

Supply-side economics is a term associated with the views of

Ronald Reagan and Arthur Laffer.

A person who receives the benefit of a good but does not pay for it is

free rider

Which of the following is an example of the tragedy of the commons?

sheep overgraze land that was jointly owned by everyone in a town.

An externality is the impact of

society's decisions on the well-being of society.

Which of the following is a payroll tax?

Tax on wages paid to workers

If an externality is present in a market, economic efficiency may be enhanced by

government intervention.

Refer to Figure 3. If the economy is at point B on the curve, then an increase in the tax size will

increase the deadweight loss of the tax and decrease tax revenue.

The costs other than the money price that are incurred in trading goods or services are called

indirect costs

The three largest sources of tax revenue for the U.S. federal government in order are:

personal income taxes highest, payroll taxes for social insurance and corporate income taxes

The benefit that government receives from a tax is measured by

tax revenue.

A toll is a tax on citizens who use toll roads. This policy can be viewed as an application of

the benefits principle

Cost benefit analysis is difficult because

All the above

The economist Pigou is known for developing the concept of

Corrective taxes

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

Tax revenue

Refer to Figure 2. The size of the tax is represented by the

length of the line segment connecting points A and B.

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents

Consumer surplus after the tax.

Which of the following is a tax on labor?

federal income tax

Which of the following would not be considered a private good?

cable TV service

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

Deadweight loss due to the tax.

With a tariff what is the revenue from a tariff? (It is shown by an area on the graph)

E

Without a tariff what is the quantity supplied domestically?

Q1

With a tariff what is the quantity supplied domestically?

Q2

With a tariff what is the quantity demanded domestically

Q3

The amount that taxes increase from an additional dollar of income is

The marginal tax rate.

Refer to Figure 2 Q1 refers to

The quantity produced after the tax

The proposition that private parties can bargain to solve externalities on their own is

Coase theorem

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+I represents

Consumer surplus before the tax.

With a tariff would this country import or export the good. How much?

Import. Q3 - Q2

Refer to Figure 3. The curve that is shown on the figure is called the

Laffer curve.

Which of the following statements about private goods and public goods is correct?

Private goods are rival in consumption and public goods are not excludable.

A negative externality arises when a person engages in an activity that has

a beneficial effect on a bystander who pays the person who causes the effect.

The term market failure refers to

a market that fails to allocate resources efficiently.

Which of the following goods is both excludable and rival in consumption?

a wristwatch

Taxes are costly to market participants because they

a. transfer resources from market participants to the government. b. alter incentives. c. distort market outcomes. d. All of the above are correct.

Refer to Figure 3. If the economy is at point A on the curve, then a decrease in the tax size will

decrease the deadweight loss of the tax and decrease tax revenue.

Which of the following is an example of a common resource

fish in a public pond

Refer to Figure 3. If the economy is at point A on the curve, then a small increase in the tax size will

increase the deadweight loss of the tax and increase tax revenue

A corrective tax

induces private decision makers to take account of social costs

Altering incentives so that people take account of their actions could be a case of

internalizing externalities

A tax where everyone pays a $1,000 is called

lump sum

When a good is rival in consumption,

one person's use of the good diminishes another person's ability to use it.

A good is excludable if

people can be prevented from using it.

Research into new technologies provides a

positive externality, and too few resources are devoted to research as a result.

Refer to Figure 2. The price labeled as P2 on the vertical axis represents the

price of the good before the tax is imposed.

Refer to Figure 2. The price labeled as P1 on the vertical axis represents the price

received by sellers after the tax is imposed.

A tax for which high income taxpayers pay a smaller fraction of their income than do lower income taxpayers is called

regressive

Welfare economics refers to

the study of how the allocation of resources affects economic well-being.