ECON Final
the social security tax is a tax on a. labor b. savings c. land d. capital
a
A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000. Either would restore the radio station's lost profits. What is the economically efficient outcome? a. The dentist gets a new drill; it does not matter who pays for it. b. Neither the radio station nor the dentist purchase additional equipment. c. The radio station puts up a shield, which it pays for. d. The radio station puts up a shield, which the dentist pays for.
a
A monopolist will choose to increase output when a. at the present level of output, marginal revenue exceeds marginal cost. b. at all levels of output, marginal cost increases. c. the demand curve shifts to the left. d. market price increases.
a
A positive externality will cause a market to produce a. less than is socially desirable. b. more than the same market would produce in the presence of a negative externality. c. the socially optimal equilibrium amount. d. more than is socially desirable.
a
By allowing an income-tax deduction for charitable contributions, the government a. encourages a private solution to a particular positive-externality problem. b. encourages a private solution to a particular negative-externality problem. c. discourages a private solution to a particular negative-externality problem. d. discourages a private solution to a particular positive-externality problem. Question 4
a
Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to a. overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good. b. understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good. c. overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good. d. understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.
a
Elephants are endangered, but cows are not because a. elephants are a common resource, while cows are private goods. b. cows are not as valuable as elephants. c. cows are a common resource, while elephants are private goods. d. it is legal to kill cows but not elephants.
a
For any country that allows free trade, a. the domestic price is equal to the world price. b. both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported. c. domestic quantity demanded is equal to domestic quantity supplied at the world price. d. domestic quantity demanded is greater than domestic quantity supplied at the world price.
a
If one person's use of a good diminishes another person's enjoyment of it, the good is a. rival in consumption. b. excludable. c. normal. d. exhaustible.
a
Many movie theaters allow discount tickets to be sold to senior citizens because a. the theaters are profit maximizers. b. senior-citizen laws mandate such discounts. c. goodwill efforts earn community respect and win loyal patrons. d. senior citizens lobby city councils for lower prices.
a
Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production. a. (iii) only b. (i), (ii), and (iii) c. (ii) and (iii) only d. (i) and (ii) only
a
National defense is a classic example of a public good because a. everyone agrees that some level of national defense is important, but only the government knows the optimal amount. b. there are no private firms willing to supply defense goods such as tanks and weapons. c. it is difficult to exclude people from receiving the benefits from national defense once it is provided. d. there is no market for private security services.
a
Perfect price discrimination describes a situation in which the monopolist a. knows the exact willingness to pay of each of its customers. b. experiences a zero economic profit. c. charges exactly two different prices to exactly two different groups of customers. d. maximizes consumer surplus.
a
Public schools, parks, libraries, and roads are paid for largely through tax revenue because a. these goods create a free-rider problem. b. if they were funded privately, too many of these goods would be produced. c. society finds them so valuable that citizens are happy to pay for their full cost. d. All of the above are correct.
a
a $2 tax per gallon of paint placed on the buyers of paint will shift the demand curve a. downward by exactly $2 b. downward by less than $2 c. upward by less than $2 d. upward by exactly $2
a
because of the free rider problem a. private markets tend to undersupply public goods. b. poverty has increased. c. fireworks displays have become increasingly dangerous. d. the federal government spends too many resources on national defense and not enough resources on medical research.
a
other things equal, the deadweight loss of a tax a. increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax b. increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases c. increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax d. decreases as the size of the tax increases
a
property rights are well established for a. private goods. b. public goods. c. common resources. d. both (b) and (c).
a
when a country is on the downward sloping side of the Laffer curves, a cut in the tax rate will a. increase tax revenue and decrease the deadweight loss b. increase tax revenue and increase the deadweight loss c. decrease ta revenue and decrease deadweight loss d. decrease tax revenue and increase the deadweight loss
a
A command-and-control policy is another term for a a. pollution permit. b. government regulation. c. corrective tax. d. Both a and b are correct.
b
A firm's opportunity costs of production are equal to its a. explicit costs + implicit costs + total revenue. b. explicit costs + implicit costs. c. implicit costs only. d. explicit costs only.
b
A firm's opportunity costs of production are equal to its a. explicit costs + implicit costs + total revenue. b. explicit costs + implicit costs. c. implicit costs only. d. explicit costs only.
b
A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.90 per unit. The marginal revenue of the 151st unit of output is a. $5.10. b. -$5.10. c. -$0.10. d. $2.45.
b
In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so : a. because it is impossible to analyze the gains and losses from international trade without making this assumption. b. because then we can assume that world prices of goods are unaffected by that country's participation in international trade. c. in order to rule out the possibility of tariffs or quotas. d. All of the above are correct.
b
It is common knowledge that many U.S. national parks have become overused. One possible solution to this problem is to a. sell the land that the parks currently occupy. b. increase entrance fees. c. decrease camping permit fees. d. require all visitors to register upon entering the park.
b
Suppose that a firm's long-run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing a. specialization. b. constant returns to scale. c. diseconomies of scale. d. economies of scale.
b
Suppose that a firm's long-run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing a. specialization. b. constant returns to scale. c. diseconomies of scale. d. economies of scale.
b
Technology spillover occurs when a. copyright laws prohibit firms from profiting from the research of others. b. a firm's research yields technical knowledge that is used by society as a whole. c. the government subsidizes firms engaged in high-tech research. d. a firm passes the high costs of technical research on to society through higher prices.
b
`Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as a. confirmation that free trade agreements are not necessary. b. confirmation of the virtues of free trade. c. confirmation of the infant-industry argument. d. confirmation that specialization in absolute advantage works.
b
a city street is a. a public good when it is congested, but it is a common resource when it is not congested. b. a common resource when it is congested, but it is a public good when it is not congested. c. always a common resource, whether or not it is congested. d. always a public good, whether or not it is congested.
b
for a country that is considering the adoption of either a tariff an import quota on a particular good, an important difference is that a. an import quota has no effect on producer surplus, while atariff decreases producer surplus b. a tariff raises revenue for that country's government, while an import quota does not c. a tariff raises total surplus, while an import quota does not d. an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus
b
if the labor supply curve is very elastic, a tax on labor a. has a relatively small impact on the number of hours that workers choose to work b. has a large deadweight loss c. raises enough tax revenue to offset the loss in welfare d. results in a large tax burden on the firms that hire labor
b
suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed Brazil a. will either import almonds or export almonds, but it is not clear from the given information b. will import almonds c. would have nothing to gain either from exporting or importing almonds d. will export almonds
b
A good that is rival in consumption and not excludable is called a a. club good. b. public good. c. common resource. d. private good.
c
Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that a. Jenny pays Abe $150 to give the dog to his parents who live on an isolated farm. b. Abe pays Jenny $350 for her inconvenience. c. Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm. d. There is no private transaction that would improve this situation.
c
Diminishing marginal product suggests that the marginal a. cost of an extra worker is less than the previous worker's marginal cost. b. cost of an extra worker is unchanged. c. product of an extra worker is less than the previous worker's marginal product. d. product of an extra worker is greater than the previous worker's marginal product.
c
Diminishing marginal product suggests that the marginal a. cost of an extra worker is less than the previous worker's marginal cost. b. cost of an extra worker is unchanged. c. product of an extra worker is less than the previous worker's marginal product. d. product of an extra worker is greater than the previous worker's marginal product.
c
Fixed costs can be defined as costs that a. vary in proportion with production. b. vary inversely with production. c. are incurred even if nothing is produced. d. are incurred only when production is large enough.
c
Fixed costs can be defined as costs that a. vary in proportion with production. b. vary inversely with production. c. are incurred even if nothing is produced. d. are incurred only when production is large enough.
c
If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to a. $4. b. $24. c. -$4. d. $3.
c
Reaching an efficient bargain is difficult when the a. externality is negative. b. government becomes involved. c. number of interested parties is large. d. externality is large.
c
Which of the following explains why long-run average cost at first decreases as output increases? a. diseconomies of scale b. fixed costs becoming spread out over more units of output c. gains from specialization of inputs d. less-efficient use of inputs
c
With no price discrimination, the monopolist sells every unit at the same price. Therefore a. marginal revenue is equal to price. b. marginal revenue is equal to average revenue. c. price is greater than marginal revenue. d. Both a and b are correct.
c
With pollution permits, the supply curve for pollution rights is a. downward sloping. b. upward sloping. c. perfectly inelastic. d. perfectly elastic.
c
a quota is a. a tax on exports to other countries. b. a tax placed on imports. c. a limit on the quantity of imports. d. an excess of exports over imports.
c
if the Korean steel industry subsidizes the steel that it sells to the US the a. US should subsidize the products it sells to Korea b. US should protect its domestic steel industry form this unfair competition c. harm done to US steel producers is less than the benefit that accuses to US consumers of steel d. harm done to the US steel producers from this unfair competition exceeds the gain to US consumers or cheap Korean steel
c
it does not matter whether a tax is levied on the buyers or the sellers of a good because a. sellers always bear the full burden of the tax b. buyers always bear the full burden of the tax c. buyers and sellers will share the burden of the tax d. none of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax
c
japan imposes a $300 per ton tariff on imported steel, raising the price charged in japan to $1000. Using only this information, which of the following statements is correct a. the world price for steel is $300 b. the world price for steel is $1300 c. The world price for steel is $700 d. the world price for steel is $1000
c
ronald reagen believed that reducing income tax rates would a. result in large increases in deadweight loss b/ lore economic well being, even though tax revenue could possibly increase c. raise economic well being and perhaps even tax revenue d. do little, if anything, to encourage hard work
c
seller of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product b. supply of the product is more elastic than the demand for the product c. demand for the product is more elastic than the supply of the product d. tax is placed on the buyers of the product
c
A difference between explicit and implicit costs is that : a. implicit costs must be greater than explicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. explicit costs must be greater than implicit costs. d. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
d
A difference between explicit and implicit costs is that a. implicit costs must be greater than explicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. explicit costs must be greater than implicit costs. d. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
d
A fundamental source of monopoly market power arises from a. perfectly inelastic demand. b. availability of "free" natural resources, such as water or air. c. perfectly elastic demand. d. barriers to entry.
d
A negative externality will cause a private market to produce a. exactly the quantity that is socially desirable. b. less than the same market would produce in the presence of a positive externality. c. less than is socially desirable. d. more than is socially desirable.
d
For a firm, the production function represents the relationship between a. quantity of output and total cost. b. implicit costs and explicit costs. c. quantity of inputs and total cost. d. quantity of inputs and quantity of output.
d
If marginal cost is greater than average total cost, then a. average total cost remains constant. b. economies of scale are becoming greater. c. profits are increasing. d. average total cost is increasing.
d
If marginal cost is greater than average total cost, then a. average total cost remains constant. b. economies of scale are becoming greater. c. profits are increasing. d. average total cost is increasing.
d
In class action lawsuits interested parties to the lawsuit are not required to pay attorney fees directly. This is an example of an attempt to a. maximize attorney fees. b. reduce the incentive of attorneys to file class action lawsuits. c. regulate attorney fees. d. reduce the transaction costs of finding a private solution to an externality.
d
One problem with government operation of monopolies is that a. a benevolent government is likely to be interested in generating profits for political gain. b. a government-regulated outcome will increase the profitability of the monopoly. c. monopolies typically have rising average costs. d. the government typically has little incentive to reduce costs.
d
Suppose that a firm's long-run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing a. coordination problems. b. constant returns to scale. c. diseconomies of scale. d. economies of scale.
d
Suppose that a firm's long-run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing a. coordination problems. b. constant returns to scale. c. diseconomies of scale. d. economies of scale.
d
Which of the following statements is correct? a. The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. b. The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist. c. The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. d. The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping.
d
if the US threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the US will be a. better off no matter how Honduras responds b. better off if Honduras gives in, and will be no worse off if it doesn't c. worse off no matter how Honduras responds d. worse off if Honduras doesn't give in to the threat
d
one result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the a. supply curve for the good shifts upward by the amount of the tax b. price the buyer effectively pays is lower c. equilibrium quantity of the goo dis unchanged d. tax reduces the welfare of both buyers and sellers
d
suppose russia exports sunflower seeds to ireland and imports coffee from brazil. this situation suggests a. Russia has an absolute advantage over Brazil in producing coffee, and Ireland has an absolute advantage over Russia in producing sunflower seeds. b. Russia has a comparative advantage over Brazil in producing coffee, and Ireland has a comparative advantage over Russia in producing sunflower seeds. c. Russia has an absolute advantage over Ireland in producing sunflower seeds, and Brazil has an absolute advantage over Russia in producing coffee. d. Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantage over Russia in producing coffee.
d
the higher a country's tax rates, the more likely that country will be a. at the top of the Laffer curve b. experiencing small deadweight losses c. on the positively sloped part of the Laffer curve d. on the negatively sloped part of the laffer curve
d