Econ test 3,4

A tax and subsidy are similar in that

I. they both create a deadweight loss. II. the burden of the tax and benefit of the subsidy depend on relative elasticities of demand and supply. III. they both change the equilibrium level of output.

if what is produced is lower than where MC = MR

can increase profit by increasing output.

As long as a producer's marginal cost is less than marginal revenue, the seller can:

increase profit by increasing output.

If Saudi Arabia joins with other oil rich nations to set the price of oil, rather than competing against each other, then

it is participating in a cartel.

Firms in competitive industries:

I. can only charge a price equal to the market price. II. cannot charge any more than the market price. III. will earn less profits if they charge less than the market price.

Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by buyers?

$0.60.

how to calculate deadweight loss with eternalities

?

Which of the following statements are true?

A tax on sellers is equivalent to a tax on buyers.

Suppose that there is a tax of $5 per unit, and the demand curve is more elastic than the supply curve. Which of the following statements could be true?

Buyers pay $1 of the tax.

Which of the following statements are true? The buyer will pay more of the tax burden if:

II. the good is a necessity. III. the good has no substitutes.

Which of the following statements is not true concerning externalities?

In a market that generates external costs, the market equilibrium price is higher and the market equilibrium quantity is lower than the efficient equilibrium price and quantity.

If the marginal revenue from the sale of a No. 2 pencil is 15 cents, and Peter's Pencils is producing pencils at a marginal cost of 12 cents, then:

Peter's Pencils should increase output.

Which of the following are correct answers to the question: Why do smokers pay almost all the tax that is assessed on cigarettes?

Since cigarettes are an addictive item, the demand curve for cigarettes tend to be rather inelastic especially when compared with the much more elastic supply curve for cigarettes. and III. Because sellers of cigarettes can very easily escape a state tax by selling in a different state.

Which of the following is the best example of a common resource?

a Shakespeare play in the park

Which of the following is an example of an action that results in an external cost

a factory emitting air pollution while producing paper

Beekeepers charge farmers for their bees pollinating the farmers' crops. When bees pollinate crops like apples, the honey they produce is sweet and sells well. When bees pollinate almond crops, on the other hand, they produce a poor tasting honey. By charging farmers more for their bees to pollinate almond crops than apple crops,

beekeepers are internalizing externalities.

When a payroll tax is enacted or when a mandate requires firms to provide health insurance to workers the wage paid to workers:

falls and the wage paid by firms rises.

If a multimillionaire music media tycoon is able to monopolize the market for vinyl records by buying out all the various vinyl producers in the market, vinyl enthusiasts can expect the prices for vinyl records to __________ and the quantity of vinyl records in the market to ____________.

increase; decrease

Pfizer sells Atgam in New Zealand for $14/pill and Brazil for $8/pill. This implies that the demand curve in New Zealand must be ________ than in Brazil.

more inelastic

The Coase theorem

states that if transaction costs are low and property rights are clearly defined, private bargains will ensure that the market equilibrium is efficient even when there are externalities.