Sexton Exam 2

Roberto gives piano lessons for $15 per hour. He also grows flowers, which he arranges and sells at the local farmer's market. One day he spends 5 hours planting $50 worth of seeds in his garden. Once the seeds have grown into flowers, he can sell them for $150 at the farmer's market. Roberto's accounting profits are: a) $100, and his economic profits are $25 b)$100, and his economic profits are $0 c)$25, and his economic profits are $100 d)$0, and his economic profits are $125

a) $100, and his economic profits are $25

The tax causes producer surplus to decrease by the area: a) D+F b)D+F+G c)D+F+J D) D+F+G+H

a) D+F

Graph (a) and graph (b) each illustrate a $4 tax placed on a market. In comparison to Graph (a), graph (b) illustrates which of the following statements? a) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic b) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic c) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic d) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic

a) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic

The marginal product of labor begins to diminish with the addition of the ______ picker a) fourth b) fifth c)seventh d)eight e) none

a) fourth

Which of the following must be true if the short run average total cost curve is declining? a)Marginal cost is less than average total cost b) Marginal cost is less than average variable cost c) Marginal cost is greater than average total cost d)Marginal cost equals average total cost

a)Marginal cost is less than average total cost

Suppose that a firm's long-run average total costs of producing smart watches increases as it produces between 90,000 and 100,000 smart watches. For this range of output, the firm is experiencing: a)diseconomies of scale b) constant returns to scale c)economies of scale d)average returns to scale

a)diseconomies of scale

Which graph represents a market with a positive externality? a)graph c only b)graph a c) graph b only d) graphs b and c

a)graph c only

The size of a tax and the deadweight loss that results from the tax are: a)positively related b) negatively related c)independent of each other d) equal to each other

a)positively related

If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be justified on the basis of: a)the benefits principle b) the ability to pay principle c) vertical equity d) horizontal equity

a)the benefits principle

what is the equilibrium quantity of output in this market? a) 5 units b) 4 units c) 3 units d) 6 units

b) 4 units

The tax causes consumers surplus to decrease by the area: a) A b) B+C c) A+B+C d)A+B+C+D+F

b) B+C

Average total cost is very high when a small amount of output is produced because: a)average variable cost is high b)average fixed cost is high c)marginal cost is high d)marginal product is high

b)average fixed cost is high

Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to the consumer surplus in the market for lemons? a) consumer surplus increases b)consumer surplus decreases c)consumer surplus is not affected by this change in market forces d)we would have to know whether the demand for lemons is relatively elastic or inelastic to make this determination

b)consumer surplus decreases

In the US, the marginal tax rate on individual federal income tax: a)decreases as income increases b)increases as income increases c)is constant at all income levels d)applies only to payroll taxes

b)increases as income increases

The deadweight loss from a tax per unit of good will be smallest in a market with: a)inelastic supply and elastic demand b)inelastic supply and inelastic demand c)elastic supply and elastic demand d)elastic supply and inelastic demand

b)inelastic supply and inelastic demand

To internalize a negative externality: a.) a producer's costs could be reduced by an amount equal to the external cost resulting from the production of a good b.) a producer's costs could be increased by an amount equal to the external cost resulting from the production of a good c.)a producer could receive a subsidy equal to the external cost resulting from the production of a good d) none

b.) a producer's costs could be increased by an amount equal to the external cost resulting from the production of a good

In 2017, federal government collected $3.6 trillion in taxes. Which of the following correctly rank the sources of federal government tax revenue from large to small? a)personal income taxes, corporate income taxes, social insurance taxes b) social insurance taxes , personal income taxes , corpoarte income taxes c) personal income taxes, social insurance taxes, corporatet income taxes d) corporate income taxes, social insurance taxes, personal income taxes

c) personal income taxes, social insurance taxes, corporatet income taxes

The overuse of antibiotics leads to the development of antibiotic resistant diseases. Therefore, the external cost of antibiotic overuse is represented by: a) Q3-Q2 b)Q5-Q4 c)P3a-P3b d)P4a- P4b

c)P3a-P3b

In the 1980s, President Ronal Reagan argued that high tax rates distorted economic incentives to work and save. In the 1990s, President Bill Clinton argued that the rich were not paying their fair share of taxes. Which of the following statements best summarizes the economic theories behind the differing philosophies? a) Reagan was concerned about vertical equity, whereas Clinton was concerned about horizontal equity b) Reagan was concerned about average tax rates, whereas Clinton was concerned about horizontal equity c)Reagan was concerned about average tax rates, whereas Clinton was concerned about vertical equity d)Reagan and Clinton were both concerned about horizontal equity

c)Reagan was concerned about average tax rates, whereas Clinton was concerned about vertical equity

The parable called the Tragedy of the Commons applies to goods and services such as: a) emergency medical services and internet TV b)storm sirens and basic research c)clean air and fishing d)antipoverty programs and national defense

c)clean air and fishing

When marginal product is rising, marginal cost will: a) rising b)remaining unchanged c)falling d)rising by an equal amount

c)falling

Under a regressive tax, the marginal tax rate for high-income taxpayers is: a) higher than the marginal tax rate for low-income taxpayer b)the same as the marginal tax rate for low income taxpayers c)lower than the marginal tax rate for low income taxpayers d)is unknown relative to the low income tax payer

c)lower than the marginal tax rate for low income taxpayers

Because public goods are: a)excludable, people have an incentive to be free riders b)excludable, people do not have an incentive to be free riders c)not excludable, people have an incentive to be free riders d)not excludable, people don't have an incentive to be free riders

c)not excludable, people have an incentive to be free riders

A lighthouse is typically considered to be a public good because: a)the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse b)there is rarely another lighthouse nearby to provide competition c) a nearby port authority cannot avoid paying fees to the lighthouse owner d)all passing ships are able to enjoy the benefits of the lighthouse w/o paying

d)all passing ships are able to enjoy the benefits of the lighthouse w/o paying

Both public goods and common resources are: a)rival in consumption b)non-rival in consumption c)excludable d)non excludable

d)non excludable