Anthropology Exam 2

the distinction between efficiency and equity can be described as

- efficiency refers to maximizing the size of the pie - equity refers to distributing the pie fairly among members of society

tariffs and quotas are different because...

- tariffs raise revenue for the government - quotas do not raise revenue for the government

what represents a way that a government can help the private markets to internalize an externality

- taxing goods that have negative externalities - subsidizing goods that have positive externalities

Suppose a country abandons a no trade policy in favor of a free trade policy. If as a result, the domestic price of beans INCREASES to equal the world price of beans, then

- that country becomes an exporter of beans - that country has a comparable advantage in producing beans - at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in the country

the amount of deadweight loss from a tax depends on

- the price of elasticity of demand - the price of elasticity of supply - the amount of the tax per unit

Suppose the equilibrium quantity in the markets for widgets is 200 per month when there is no tax. Then a tax of $5 is imposed. As a result the government is able to raise $750 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by how much?

50 per month (because you divide the 750 by 5 to see what the new quantity os after the tax. then subtract that number by the original 200)

The before trade price of fish in Greece is $3, the world price is $5. Greece is a price taker in the fish market. If Greece allows trade in fish, then Greece will become

an exporter of fish and the price of fish in Greece will be $5

Suppose the equilibrium price in the market for widgets is $5, if a law reduced the maximum legal price of widgets to $4

any possible increase in consumer surplus would be larger than the loss of producer surplus

A tariff on a product

increases the domestic quantity supplied

Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by

making it illegal to "disturb the peace"

In a market economy, government intervention

may improve market outcomes in the presence of externalities.

goods that are excludable include

private goods and natural monopolies

the government provides public goods because

private markets would not produce the efficient quantity of the goods

a vacation home in Colorado is

rival in consumption and excludable

Externalities are

side effects passed on to a party other than the buyers and sellers in the market (most of the time government)

what economic argument suggests that if transactions costs are sufficiently low, the equilibrium is economically efficient regardless of how many property rights are distributed

the coase theorem

to achieve the optimal provision of public goods because

the government must either provide the goods or subsidize their production

The privately owned school system in a small town has a virtually unlimited capacity. It accepts all applicants and opperates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit that each citizen receives from having an educated community is a public good, which of the following would NOT be correct

the private market is the best way to supply education