Test 2- questions from mindtap

Suppose the supply of diamonds is relatively inelastic. A tax on diamonds would generate a a. large deadweight loss and the burden of the tax would fall on the seller of diamonds. b. small deadweight loss and the burden of the tax would fall on the buyer of diamonds. c. small deadweight loss and the burden of the tax would fall on the seller of diamonds. d. large deadweight loss and the burden of the tax would fall on the buyer of diamonds.

C

The reduction of a tax a. will always reduce tax revenue regardless of the prior size of the tax. b. causes a market to become less efficient. c. could increase tax revenue if the tax had been extremely high. d. will have no impact on tax revenue.

C

Which of the following statements about the burden of a tax is correct? a. The tax burden generated from a tax placed on a good consumers perceive to be a necessity will fall most heavily on the sellers of the good. b. The tax burden falls most heavily on the side of the market (buyers or sellers) that is most willing to leave the market when price movements are unfavorable to them. c. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation. d. The burden of a tax lands on the side of the market (buyers or sellers) from which it is collected

C

A negative externality generates a. a social cost curve that is above the supply curve (private cost curve) for a good. b. a social cost curve that is below the supply curve (private cost curve) for a good. c. a social value curve that is above the demand curve (private value curve) for a good.

a

A positive externality (that has not been internalized) causes the a. optimal quantity to exceed the equilibrium quantity. b. equilibrium quantity to be either above or below the optimal quantity. c. equilibrium quantity to exceed the optimal quantity. d. equilibrium quantity to equal the optimal quantity.

a

A tax of $1.00 per gallon on gasoline a. places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive. b. decreases the price the sellers receive by $1.00 per gallon. c. increases the price the buyers pay by $1.00 per gallon. d. increases the price the buyers pay by precisely $0.50 and reduces the price received by sellers by precisely $0.50.

a

A tax on gasoline is likely to a. cause a greater deadweight loss in the long run when compared to the short run. b. cause a greater deadweight loss in the short run when compared to the long run. c. generate a deadweight loss that is unaffected by the time period over which it is measured.

a

According to the Coase theorem, private parties can solve the problem of externalities if a. there are no transaction costs. b. the government requires them to negotiate with each other. c. there are a large number of affected parties.

a

For a price ceiling to be a binding constraint on the market, the government must set it a. below the equilibrium price. b. precisely at the equilibrium price. c. above the equilibrium price. d. at any price because all price ceilings are binding constraints.

a

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good, a. consumers will gain and producers will lose. b. producers will gain and consumers will lose. c. both producers and consumers will gain.

a

The burden of a tax falls more heavily on the buyers in a market when a. demand is inelastic and supply is elastic. b. demand is elastic and supply is inelastic. c. both supply and demand are elastic. d. both supply and demand are inelastic.

a

The surplus caused by a binding price floor will be greatest if a. both supply and demand are elastic. b. both supply and demand are inelastic. c. supply is inelastic and demand is elastic.

a

The surplus caused by a binding price floor will be greatest if a. both supply and demand are elastic. b. both supply and demand are inelastic. c. supply is inelastic and demand is elastic. d. demand is inelastic and supply is elastic.

a

To internalize a negative externality, an appropriate public policy response would be to a. tax the good. b. have the government take over the production of the good causing the externality. c. subsidize the good.

a

To internalize a positive externality, an appropriate public policy response would be to a. subsidize the good. b. ban the good creating the externality. c. tax the good.

a

When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold, the tax has a. caused a deadweight loss. b. reduced the price buyers pay. c. increased efficiency. d. generated no tax revenue.

a

Which of the following would likely cause the greatest deadweight loss? a. a tax on cruise line tickets b. a tax on cigarettes c. a tax on salt

a

A binding price ceiling creates a. an equilibrium. b. a shortage. c. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price. d. a surplus.

b

A positive externality generates a. a social cost curve that is above the supply curve (private cost curve) for a good. b. a social value curve that is above the demand curve (private value curve) for a good. c. a social value curve that is below the demand curve (private value curve) for a good. d. none of the above.

b

Because producers are better able to organize than consumers are, we would expect there to be political pressure to create a. free trade. b. import restrictions. c. export restrictions

b

Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true? a. It is efficient for Bob to stop playing loud music only if Tom has the property right to peace and quiet. b. It is efficient for Bob to stop playing loud music regardless of who has the property right to the level of sound.

b

Deadweight loss is greatest when a. both supply and demand are relatively inelastic. b. both supply and demand are relatively elastic. c. supply is elastic and demand is perfectly inelastic. d. demand is elastic and supply is perfectly inelastic.

b

For which of the following products would the burden of a tax likely fall more heavily on the sellers? a. clothing b. entertainment c. housing

b

If free trade is allowed, a country will export a good if the world price is a. below the before-trade domestic price of the good. b. above the before-trade domestic price of the good. c. equal to the before-trade domestic price of the good.

b

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have a. an absolute advantage in the production of the good. b. a comparative advantage in the production of the good. c. an absolute disadvantage in the production of the good.

b

The burden of a tax falls more heavily on the sellers in a market when a. demand is inelastic and supply is elastic. b. demand is elastic and supply is inelastic. c. both supply and demand are elastic. d. both supply and demand are inelastic.

b

The government engages in an industrial policy a. by allocating tradable technology permits to high technology industry. b. to internalize the positive externality associated with technology-enhancing industries. c. to internalize the negative externality associated with industrial pollution.

b

Which of the following is not employed as an argument in support of trade restrictions? a. Free trade harms the national security if vital products are imported. b. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. c. Free trade destroys domestic jobs.

b

Which of the following statements about a binding price ceiling is true? a. The shortage created by the price ceiling is greater in the short run than in the long run. b. The shortage created by the price ceiling is greater in the long run than in the short run. c. The surplus created by the price ceiling is greater in the long run than in the short run. d. The surplus created by the price ceiling is greater in the short run than in the long run.

b

Which of the following statements about a tariff is true? a. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. b. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. c. A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.

b

Which of the following takes place when a tax is placed on a good? a. an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold b. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold c. a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold

b

A negative externality (that has not been internalized) causes the a. equilibrium quantity to be either above or below the optimal quantity. b. equilibrium quantity to equal the optimal quantity. c. equilibrium quantity to exceed the optimal quantity. d. optimal quantity to exceed the equilibrium quantity.

c

An externality is a. the benefit that accrues to the buyer in a market. b. the cost that accrues to the seller in a market. c. the uncompensated impact of one person's actions on the well-being of a bystander. d. the compensation paid to a firm's external consultants. e. none of the above.

c

If a tax on a good is doubled, the deadweight loss from the tax a. doubles. b. stays the same. c. increases by a factor of four. d. could rise or fall.

c

The graph that shows the relationship between the size of a tax and the tax revenue collected by the government is known as a a. deadweight curve. b. tax revenue curve. c. Laffer curve. d. Reagan curve.

c

The most efficient pollution control system would ensure that a. no pollution of the environment is tolerated. b. each polluter reduce its pollution an equal amount. c. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount.

c

When a country allows trade and exports a good, a. domestic consumers are better off, domestic producers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners. b. domestic consumers are better off, domestic producers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers. c. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers. d. domestic producers are better off, domestic consumers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners.

c

When a tax is collected from the buyers in a market, a. the sellers bear the burden of the tax. b. the buyers bear the burden of the tax. c. the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers. d. the tax burden falls most heavily on the buyers.

c

When a tax on a good starts small and is gradually increased, tax revenue will a. rise. b. fall. c. first rise and then fall. d. first fall and then rise.

c

When an individual buys a car in a congested urban area, it generates a. a technology spillover. b. an efficient market outcome. c. a negative externality.

c

Which of the following is an example of a price floor? a. rent controls b. restricting gasoline prices to $2.00 per gallon when the equilibrium price is $3.00 per gallon c. the minimum wage

c

Which of the following statements about import quotas is true? a. Import quotas are preferred to tariffs because they raise more revenue for the imposing government. b. Voluntary quotas established by the exporting country generate no deadweight loss for the importing country. c. For every tariff, there is an import quota that could have generated a similar result.

c

Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon? a. There will be a shortage of gasoline. b. A significant increase in the supply of gasoline could cause the price ceiling to become a binding constraint. c. A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint. d. There will be a surplus of gasoline.

c

Which side of the market is more likely to lobby government for a price floor? a. Neither buyers nor sellers desire a price floor. b. Both buyers and sellers desire a price floor. c. the sellers d. the buyers

c

Within the supply-and-demand model, a tax collected from the buyers of a good shifts the a. demand curve upward by the size of the tax per unit. b. supply curve downward by the size of the tax per unit. c. demand curve downward by the size of the tax per unit. d. supply curve upward by the size of the tax per unit

c

A price floor a. sets a legal maximum on the price at which a good can be sold. b. is not a binding constraint if it is set above the equilibrium price. c. always determines the price at which a good must be sold. d. sets a legal minimum on the price at which a good can be sold

d

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that a. falls more heavily on sellers. b. is evenly distributed between buyers and sellers. c. falls entirely on sellers. d. falls more heavily on buyers.

d

When politicians argue that outsourcing or offshoring of technical support to India by Dell Computer Corporation is harmful to the U.S. economy, they are employing which of the following arguments for restricting trade? a. the national-security argument b. the deadweight-loss argument c. the infant-industry argument d. the jobs argument

d

Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality? a. costs incurred due to a large number of parties affected by the externality b. costs incurred to enforce the agreement c. costs incurred due to lawyers' fees d. costs incurred to reduce the pollution

d

Within the supply-and-demand model, a tax collected from the sellers of a good shifts the a. supply curve downward by the size of the tax per unit. b. demand curve downward by the size of the tax per unit. c. demand curve upward by the size of the tax per unit. d. supply curve upward by the size of the tax per unit.

d

Taxes on labor income tend to encourage a. workers to work fewer hours. b. second earners to stay home. c. the elderly to retire early. d. the unscrupulous to enter the underground economy. e. all of the above

e

Check out quiz 8 on mindtap for graph questions

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