AP Microecon Unit 6 MCQ
As an unregulated monopolist, City Cable is earning positive economic profits. If the government regulated the firm by requiring it to produce the level of output that allowed the firm to earn zero economic profit, City Cable would set a price that is equal to its
average total cost
One justification for government regulation of a monopoly is that the unregulated monopoly
charges a price higher than a competitive market price
A governmental welfare program that taxes the labor income of the wealthy and redistributes the tax revenue to low income citizens will
decrease income inequality and efficiency
If the government regulates a natural monopolist to produce the allocatively efficient level of output, it will require the monopolist to set a price that is
equal to its marginal cost and grant a subsidy to cover the loss
A perfectly competitive market produces the socially efficient level of output when the marginal social benefit of the last unit of output produced is
equal to the marginal social cost
In a perfectly competitive labor market, an increase in an effective minimum wage will result in
fewer workers being hired
If the monopolist produces the allocatively efficient level of output rather than the profit-maximizing level of output, consumer surplus will (there is a graph here i cant add sorry)
increase the area P5JKP4
Good X is aproduced in a perfectly competitive industry in a long-run equilibrium. If the consumption of good x generates positive externalities, the private market will produced
less than the socially optimum amount of good X
A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the
marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner
pollution abatement policies will improve efficiency if the
marginal cost of abatement is less than the marginal benefit of abatement
The socially optimal quantity of a public good is provided when
marginal social cost equals marginal social benefit
Apple trees need bees to pollinate their flowers and produce apples. Apple farmers hire beekeepers to bring bees to their orchards to pollinate the flowers. This is an example of a
market transaction
A free-rider problem arises when a good is
nonexcludable
National defense is a good example of a pure public good because it is
nonrival and nonexcludable
To correct for positive externalities, the government should
pay a subsidy equal to the marginal external benefit
The following questions refer to the following diagram, which shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) associated with the production of a good in a market.
per-unit tax equal to (P4-P2)
The following questions refer to the diagram below, which shows a market's cost and revenue curves The graph shows the marginal social cost curve, the marginal private cost curve, and the marginal social benefit. The MSC is higher up than the MPC curve. The MSB curve meets at equilibrium with the MSC and MPC curves. Given the position of the marginal social cost curve, one can conclude that the
production of good X creates a negative externality
All of the following are sources of inequality in the distribution of personal income EXCEPT
progressive income taxes
If the government imposes a per-unit tax on the output of a monopoly with a downward-sloping demand curve, the burden of the tax will be
shared by consumers and the monopolist
A lorenz curve can be used to
show inequality in the income distribution
In the US, the federal government redistributes income primarily by
taxing different income levels at different rates
The lorenz curve is used to show which of the following
the degree of inequality in the distribution of income within a country
Which of the following best defines a pure public food?
A good whose benefits can be enjoyed by many consumers at the same time and from which consumers cannot be excluded
Assume that the marginal social benefit of the last unit of vaccination provided is greater than the marginal social cost. Which of the following can be used to achieve efficiency in the market for vaccination?
A per-unit subsidy for vaccinations
A society that wishes to achieve greater income equality is most likely to have which of the following?
A progressive income tax system and high estate and gift taxes
Which of the following is an example of a violation of antitrust laws
Engaging in collusive behavior to restrain competition
Income inequality is measured by what economic concept
Gini coefficient
Based on the information in the lorenz curve above, which of the following is true?
Income is more equally distributed in Country X than in Country Z
National defense is an example of a public good because
It is a nonexcludable and nonrival
Which of the following is a characteristic of a public good?
It is nonrival in consumption
Which of the following is always true about a negative externality?
It results in a market output that is greater than the socially optimal output
Which of the following is most likely to reduce inequality in a country's distribution of income?
Job training for low skilled workers.
If a per unit tax is imposed on a monopolist, how will the monopolist's marginal cost curve, output, and the price paid by the consumers be affected?
Marginal Cost | Output | Price --------------------------------------------- Shift up | Decrease | Decrease
In the absence of externalities, which of the following is true of a competitive market in equilibrium?
Marginal social benefit equals marginal social cost
Which of the following is the best example of a pure public good?
National defense
A pre-unit tax on pollution produced by a firm will affect the firm's output and pollution levels in which of the following ways?
Output = Decrease Pollution = Decrease
The following questions are based on the graph below, which shows the cost and revenue curves of a natural monopolist. If the government wants to regulate this monopoly to produce the socially optimum level output, it should set a price equal to
P2
If an industry ignore the external costs it generates in its production, which of the following will be true a t the competitive market equilibrium output?
Price will be less than the marginal social cost
Which of the following is an example of a good that is nonexcludable and rival in consumption?
Public highway
Home remodeling services are provided in a perfectly competitive market but generate noise that angers neighbors. What is the socially optimal quantity of home remodeling services and the area that represent deadweight loss associated with the market equilibrium ?
Q1 and area ABC
Public goods are underproduced in a competitive market because the free-rider problem causes which of the following?
Reduced market demand
National defense is generally provided by the public sector for which of the following reasons?
The benefits of national defense are mostly onrival and nonexcludable
The equilibrium quantity of labor used in the production of a good will be the largest under which of the following conditions?
When both the labor and output markets are perfectly competitive
The following questions refer to the following diagram, which shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) associated with the production of a good in a market.
__________________________________________________________ Type of Externality | Deadweight Loss | -----------------------|-----------------------| Negative | egh |
The following questions refer to the diagram below, which shows a market's cost and revenue curves The graph shows the marginal social cost curve, the marginal private cost curve, and the marginal social benefit. The MSC is higher up than the MPC curve. The MSB curve meets at equilibrium with the MSC and MPC curves.
_____________________________________________________________________ | Socially Optimal Quantity | Per-unit tax | |--------------------------------|--------------------| | Q2 | P3 - P1 |
An increase in the marginal social benefit of consuming a public good should result in
an increase in the optimal quantity of the good
This is a graph, will try my best to replicate it P | \ / MSC = MSP r | \ / i | \ / c | \ / e | \ / | \ / \ o | / \ f | / \ \ | / \ MPB \ MSB e | /__________________________________ _____________________ MSC = MPB - Marginal Social Cost = Marginal Private cost MSB = Marginal social benefit MPB = Marginal Private Benefit
Consumers of education could be subsidized in order to achieve the socially optimal quantity
The table above shows the distribution of income in Country X in 2010 before and after taxes and transfer payments. Which of the following can be concluded about the effect of the government's tax and transfer policies on income distribution in Country X
The major transfer of income is from the highest quintile to the two lowest quintiles
Assume a profit-maximizing monopoly and firm in a perfectly competitive market have identical cost and revenue conditions. In which market will be a binding price ceiling result in a more efficient outcome and why?
The monopoly will become more efficient because the deadweight loss will decrease.
The surgeon general has determined that smoking causes cancer and heart disease for both smokers and passive smokers, nonsmokers who breathe smoke filled air. If cigarette prices are determined in a free market, which of the following will be true?
The price of cigarettes will be too low and the quantity sold will be too high
