ECO-101 Exam 2
Supply-side economics is a term associated with the views of Select one: a. Ronald Reagan and Arthur Laffer. b. Karl Marx. c. Bill Clinton and Greg Mankiw. d. Milton Friedman.
a. Ronald Reagan and Arthur Laffer.
Economists blame the long lines at gasoline stations in the U.S. in the 1970s on Select one: a. U.S. government regulations pertaining to the price of gasoline. b. the Organization of Petroleum Exporting Countries (OPEC). c. major oil companies operating in the U.S. d. consumers who bought gasoline frequently, even when their cars' gasoline tanks were nearly full.
a. U.S. government regulations pertaining to the price of gasoline.
If the labor supply curve is very elastic, a tax on labor Select one: a. has a large deadweight loss. b. raises enough tax revenue to offset the loss in welfare. c. has a relatively small impact on the number of hours that workers choose to work. d. results in a large tax burden on the firms that hire labor.
a. has a large deadweight loss.
In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to Select one: a. raise revenue from the wealthy. b. prevent wealthy people from buying luxuries. c. force producers of luxury goods to reduce employment. d. limit exports of luxury goods to other countries.
a. raise revenue from the wealthy.
A country has a comparative advantage in a product if the world price is Select one: a. lower than that country's domestic price without trade. b. higher than that country's domestic price without trade. c. equal to that country's domestic price without trade. d. not subject to manipulation by organizations that govern international trade.
b. higher than that country's domestic price without trade.
The Social Security tax is a tax on Select one: a. capital. b. labor. c. land. d. savings.
b. labor.
A payroll tax is a Select one: a. fixed number of dollars that every firm must pay to the government for each worker that the firm hires. b. tax that each firm must pay to the government before the firm can hire workers and operate its business. c. tax on the wages that firms pay their workers. d. tax on all wages above the minimum wage.
c. tax on the wages that firms pay their workers.
Another way to think of the marginal seller is the seller who Select one: a. will accept the lowest price of any seller in the market. b. requires the highest price of any potential seller in the market. c. would leave the market first if the price were any lower. d. would leave the market last if the price falls.
c. would leave the market first if the price were any lower.
The amount of deadweight loss from a tax depends upon the Select one: a. price elasticity of demand. b. price elasticity of supply. c. amount of the tax per unit. d. All of the above are correct.
d. All of the above are correct.
In a market, the marginal buyer is the buyer Select one: a. whose willingness to pay is higher than that of all other buyers and potential buyers. b. whose willingness to pay is lower than that of all other buyers and potential buyers. c. who is willing to buy exactly one unit of the good. d. who would be the first to leave the market if the price were any higher.
d. who would be the first to leave the market if the price were any higher.
In "Venezuela Versus the Market," the long lines and shortages are caused bySelect one: a. declining world energy prices. b. unfettered capitalism. c. price floors that are intended to make food more affordable for the poor. d. Price ceilings that are intended to make food more affordable for the poor.
d. Price ceilings that are intended to make food more affordable for the poor.
Buyers of a good bear the larger share of the tax burden when the (i) supply is more elastic than the demand for the product. (ii) demand in more elastic than the supply for the product. (iii) tax is placed on the sellers of the product. (iv) tax is placed on the buyers of the product. Select one: a. (i) only b. (ii) only c. (i) and (iii) only d. (i) and (iv) only
a. (i) only
Since World War II, GATT has been responsible for reducing the average tariff among member countries from about Select one: a. 40 percent to about 5 percent. b. 40 percent to about 20 percent. c. 80 percent to about 20 percent. d. 20 percent to about 10 percent
a. 40 percent to about 5 percent.
All else equal, what happens to consumer surplus if the price of a good decreases? Select one: a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is unchanged. d. Consumer surplus may increase, decrease, or remain unchanged.
a. Consumer surplus increases.
Assume, for Mexico, that the domestic price of beets without international trade is higher than the world price of beets. This suggests that, in the production of beets, Select one: a. Mexico has a comparative advantage over other countries and Mexico will export beets. b. Mexico has a comparative advantage over other countries and Mexico will import beets. c. other countries have a comparative advantage over Mexico and Mexico will export beets. d. other countries have a comparative advantage over Mexico and Mexico will import beets.
a. Mexico has a comparative advantage over other countries and Mexico will export beets.
A binding minimum wage Select one: a. alters both the quantity demanded and quantity supplied of labor. b. affects only the quantity of labor demanded; it does not affect the quantity of labor supplied. c. has no effect on the quantity of labor demanded or the quantity of labor supplied. d. causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers.
a. alters both the quantity demanded and quantity supplied of labor.
Consumer surplus in a market can be represented by the Select one: a. area below the demand curve and above the price. b. distance from the demand curve to the horizontal axis. c. distance from the demand curve to the vertical axis. d. area below the demand curve and above the horizontal axis.
a. area below the demand curve and above the price.
The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for Select one: a. chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades. b. chicken wings than in the market for razor blades because the quantity of razor blades would fall by more than the quantity of chicken wings. c. razor blades than in the market for chicken wings because the quantity of chicken wings would fall by more than the quantity of razor blades. d. razor blades than in the market for chicken wings because the quantity of razor blades would fall by more than the quantity of chicken wings.
a. chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades.
Deadweight loss is the Select one: a. decline in total surplus that results from a tax. b. decline in government revenue when taxes are reduced in a market. c. decline in consumer surplus when a tax is placed on buyers. d. loss of profits to business firms when a tax is imposed.
a. decline in total surplus that results from a tax.
A decrease in the size of a tax is most likely to increase tax revenue in a market with Select one: a. elastic demand and elastic supply. b. elastic demand and inelastic supply. c. inelastic demand and elastic supply. d. inelastic demand and inelastic supply.
a. elastic demand and elastic supply.
Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that Select one: a. foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding. b. foreign competition may cause unemployment in import-competing industries, but the increase in consumer surplus due to free trade is more valuable than the lost jobs. c. the critics are correct, so countries must protect their industries with tariffs or quotas. d. foreign competition may cause unemployment in import-competing industries, but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs.
a. foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding.
Inefficiency exists in an economy when a good is Select one: a. not being consumed by buyers who value it most highly. b. not distributed fairly among buyers. c. not produced because buyers do not value it very highly. d. being produced with less than all available resources.
a. not being consumed by buyers who value it most highly.
A tax imposed on the buyers of a good will raise the Select one: a. price paid by buyers and lower the equilibrium quantity. b. price paid by buyers and raise the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. effective price received by sellers and raise the equilibrium quantity.
a. price paid by buyers and lower the equilibrium quantity.
As the size of a tax rises, the deadweight loss Select one: a. rises, and tax revenue first rises, then falls. b. rises as does tax revenue. c. falls, and tax revenue first rises, then falls. d. falls as does tax revenue.
a. rises, and tax revenue first rises, then falls.
Externalities are Select one: a. side effects passed on to a party other than the buyers and sellers in the market. b. side effects of government intervention in markets. c. external forces that cause the price of a good to be higher than it otherwise would be. d. external forces that help establish equilibrium price.
a. side effects passed on to a party other than the buyers and sellers in the market.
Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax? Select one: a. supply 1 and demand 1 b. supply 2 and demand 2 c. supply 1 and demand 2 d. supply 2 and demand 1
a. supply 1 and demand 1
Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents Select one: a. tax revenue. b. consumer surplus before the tax. c. producer surplus after the tax. d. total surplus before the tax.
a. tax revenue.
The Laffer curve relates Select one: a. the tax rate to tax revenue raised by the tax. b. the tax rate to the deadweight loss of the tax. c. the price elasticity of supply to the deadweight loss of the tax. d. government welfare payments to the birth rate.
a. the tax rate to tax revenue raised by the tax.
The two basic approaches that a country can take as a means to achieve free trade are the Select one: a. unilateral approach and the multilateral approach. b. short-run approach and the long-run approach. c. continental approach and the global approach. d. industry approach and the security approach.
a. unilateral approach and the multilateral approach.
A seller's opportunity cost measures the Select one: a. value of everything she must give up to produce a good. b. amount she is paid for a good minus her cost of providing it. c. consumer surplus. d. out of pocket expenses to produce a good but not the value of her time.
a. value of everything she must give up to produce a good.
A nonbinding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. Select one: a. (i) only b. (iii) only c. (i) and (iii) only d. (ii) and (iv) only
b. (iii) only
The marginal tax rate on labor income for many workers in the United States is almost Select one: a. 30 percent. b. 40 percent. c. 50 percent. d. 65 percent.
b. 40 percent.
Producer surplus equals Select one: a. Value to buyers - Amount paid by buyers. b. Amount received by sellers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers.
b. Amount received by sellers - Costs of sellers.
Refer to Figure 7-21. Which area represents consumer surplus when the price is P1? Select one: a. A b. B c. C d. D
b. B
Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches? Select one: a. It increases. b. It decreases. c. It remains unchanged. d. It may increase, decrease, or remain unchanged.
b. It decreases.
Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area Select one: a. I+Y. b. J+K+L+M. c. I+Y+B. d. I+J+K+L+M+Y.
b. J+K+L+M.
Refer to Figure 7-23. The efficient price-quantity combination is Select one: a. P1 and Q1. b. P2 and Q2. c. P3 and Q1. d. P4 and 0.
b. P2 and Q2.
Refer to Figure 7-23. The equilibrium price is Select one: a. P1. b. P2. c. P3. d. P4.
b. P2.
At present, the United States uses a system of quotas to limit the amount of sugar imported into the country. Which of the following statements is most likely true? Select one: a. The quotas are probably the result of lobbying from U.S. consumers of sugar. The quotas increase consumer surplus for the United States, reduce producer surplus for the United States, and harm foreign sugar producers. b. The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase producer surplus for the United States, reduce consumer surplus for the United States, and harm foreign sugar producers. c. The quotas are probably the result of lobbying from foreign producers of sugar. The quotas reduce producer surplus for the United States, increase consumer surplus for the United States, and benefit foreign sugar producers. d. U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus for the United States is higher with the quotas than without them
b. The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase producer surplus for the United States, reduce consumer surplus for the United States, and harm foreign sugar producers.
The "invisible hand" is Select one: a. used to describe the welfare system in the United States. b. a concept developed by Adam Smith to describe the virtues of free markets. c. a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. d. a term used by some economists to characterize the role of government in an economy - inevitable but invisible.
b. a concept developed by Adam Smith to describe the virtues of free markets.
A price ceiling is Select one: a. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. b. a legal maximum on the price at which a good can be sold. c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. d. All of the above are correct.
b. a legal maximum on the price at which a good can be sold.
A quota is Select one: a. a tax placed on imports. b. a limit on the quantity of imports. c. a tax on exports to other countries. d. an excess of exports over imports.
b. a limit on the quantity of imports.
According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like Select one: a. a U. b. an upside-down U. c. a horizontal straight line. d. an upward-sloping line or curve. Feedback
b. an upside-down U.
The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-2. The imposition of the tax causes the quantity sold to Select one: a. increase by 1 unit. b. decrease by 1 unit. c. increase by 2 units. d. decrease by 2 units.
b. decrease by 1 unit.
Figure 9-7. The figure applies to the nation of Wales and the good is cheese. Refer to Figure 9-7. With trade, Wales Select one: a. imports Q2 - Q1 units of cheese. b. exports Q2 - Q1 units of cheese. Correct c. imports Q2 - Q0 units of cheese. d. exports Q2 - Q0 units of cheese.
b. exports Q2 - Q1 units of cheese.
If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia Select one: a. should import coffee. b. has a comparative advantage in coffee and should export coffee. c. should produce just enough coffee to satisfy domestic demand. d. should produce no coffee domestically.
b. has a comparative advantage in coffee and should export coffee.
A deadweight loss is a consequence of a tax on a good because the tax Select one: a. induces the government to increase its expenditures. b. induces buyers to consume less, and sellers to produce less. c. increases the equilibrium price in the market. d. imposes a loss on buyers that is greater than the loss to sellers.
b. induces buyers to consume less, and sellers to produce less.
"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the Select one: a. national-security argument. b. infant-industry argument. c. unfair-competition argument. d. jobs argument.
b. infant-industry argument.
Most labor economists believe that the supply of labor is Select one: a. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. b. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. c. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. d. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.
b. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect Select one: a. most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. b. most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. c. the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. d. a large percentage of smokers to quit smoking in response to the tax.
b. most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
A tax imposed on the sellers of a good will Select one: a. raise both the price buyers pay and the effective price sellers receive. b. raise the price buyers pay and lower the effective price sellers receive. c. lower the price buyers pay and raise the effective price sellers receive. d. lower both the price buyers pay and the effective price sellers receive.
b. raise the price buyers pay and lower the effective price sellers receive.
A tax on a good Select one: a. raises the price that buyers effectively pay and raises the price that sellers effectively receive. b. raises the price that buyers effectively pay and lowers the price that sellers effectively receive. c. lowers the price that buyers effectively pay and raises the price that sellers effectively receive. d. lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.
b. raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
Efficiency in a market is achieved when Select one: a. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. b. the sum of producer surplus and consumer surplus is maximized. c. all firms are producing the good at the same low cost per unit. d. no buyer is willing to pay more than the equilibrium price for any unit of the good.
b. the sum of producer surplus and consumer surplus is maximized.
Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and Select one: a. the country becomes an importer of the good as a result. b. the world price exceeds the domestic price of the good that prevailed before international trade was allowed. c. other countries have a comparative advantage, relative to the country in question, in producing the good. d. total surplus does not change as a result.
b. the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is Select one: a. $0.50. b. $0.60. c. $0.70. d. $1.00.
c. $0.70.
Refer to Figure 7-21. Which area represents producer surplus when the price is P1? Select one: a. A b. B c. C d. D
c. C
Figure 9-1The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. From the figure it is apparent that Select one: a. Guatemala will experience a shortage of coffee if trade is not allowed. b. Guatemala will experience a surplus of coffee if trade is not allowed. c. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world. d. foreign countries have a comparative advantage in producing coffee, relative to Guatemala.
c. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.
Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area Select one: a. J+K+L+M. b. J+K+L+M+N. c. I+Y. d. I+Y+B.
c. I+Y.
Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline? Select one: a. The demand for gasoline becomes more inelastic. b. The slope of the supply curve for gasoline becomes steeper. c. The amount of the tax per gallon of gasoline increases. d. All of the above are correct.
c. The amount of the tax per gallon of gasoline increases.
Economists generally believe that rent control is Select one: a. an efficient and fair way to help the poor. b. inefficient but the best available means of solving a serious social problem. c. a highly inefficient way to help the poor raise their standard of living. d. an efficient way to allocate housing, but not a good way to help the poor.
c. a highly inefficient way to help the poor raise their standard of living.
Producer surplus is the area Select one: a. under the supply curve. b. between the supply and demand curves. c. below the price and above the supply curve. d. under the demand curve and above the price.
c. below the price and above the supply curve.
A surplus results when a Select one: a. nonbinding price floor is imposed on a market. b. nonbinding price floor is removed from a market. c. binding price floor is imposed on a market. d. binding price floor is removed from a market.
c. binding price floor is imposed on a market.
To fully understand how taxes affect economic well-being, we must Select one: a. assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. b. compare the taxes raised in the United States with those raised in other countries, especially France. c. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. d. take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.
c. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular good, Select one: a. consumer surplus increases and total surplus increases in the market for that good. b. consumer surplus increases and total surplus decreases in the market for that good. c. consumer surplus decreases and total surplus increases in the market for that good. d. consumer surplus decreases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
Tax incidence Select one: a. depends on the legislated burden. b. is entirely random. c. depends on the elasticities of supply and demand. d. falls entirely on buyers or entirely on sellers.
c. depends on the elasticities of supply and demand.
If the government wants to reduce smoking, it should impose a tax on Select one: a. buyers of cigarettes. b. sellers of cigarettes. c. either buyers or sellers of cigarettes. d. whichever side of the market is less elastic.
c. either buyers or sellers of cigarettes.
If the labor supply curve is nearly vertical, a tax on labor Select one: a. has a large deadweight loss. b. raises a small amount of tax revenue. c. has little impact on the amount of work that workers are willing to do. d. results in a large tax burden on the firms that hire labor.
c. has little impact on the amount of work that workers are willing to do.
A consumer's willingness to pay directly measures Select one: a. the extent to which advertising and other external forces have influenced the consumer's preferences. b. the cost of a good to the buyer. c. how much a buyer values a good. d. consumer surplus.
c. how much a buyer values a good.
Other things equal, the deadweight loss of a tax Select one: a. decreases as the size of the tax increases. b. 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. c. 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. d. 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, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
Economists say that a market where goods are not consumed by those valuing the goods most highly is Select one: a. laissez-faire.. b. unequal. c. inefficient. d. rational.
c. inefficient.
Market power and externalities are examples of Select one: a. laissez-faire economics. b. public policy. c. market failure. d. welfare economics.
c. market failure.
The burden of a luxury tax falls Select one: a. more on the rich than on the middle class. b. more on the poor than on the rich. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor.
c. more on the middle class than on the rich.
Ronald Reagan believed that reducing income tax rates would Select one: a. do little, if anything, to encourage hard work. b. result in large increases in deadweight losses. c. raise economic well-being and perhaps even tax revenue. d. lower economic well-being, even though tax revenue could possibly increase.
c. raise economic well-being and perhaps even tax revenue.
The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as Select one: a. California economics. b. welfare economics. c. supply-side economics. d. elasticity economics.
c. supply-side economics.
Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about Select one: a. the size of labor taxes. b. the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. c. the elasticity of labor supply. d. the elasticity of labor demand.
c. the elasticity of labor supply.
Producer surplus directly measures Select one: a. the well-being of society as a whole. b. the well-being of buyers and sellers. c. the well-being of sellers. d. sellers' willingness to sell.
c. the well-being of sellers.
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because Select one: a. with rent control, the government guarantees landlords a minimum level of profit. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with shortages and waiting lists, they have no incentive to maintain and improve their property. d. with rent control, it becomes the government's responsibility to maintain rental housing.
c. with shortages and waiting lists, they have no incentive to maintain and improve their property.
Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? Select one: a. $50. b. $150. c. $200. d. $350.
d. $350.
A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. Select one: a. (ii) only b. (iv) only c. (i) and (iii) only d. (ii) and (iv) only
d. (ii) and (iv) only
A price floor is Select one: a. a legal minimum on the price at which a good can be sold. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of inefficiency in a market. d. All of the above are correct.
d. All of the above are correct.
A seller's willingness to sell is Select one: a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number. d. All of the above are correct.
d. All of the above are correct.
By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India Select one: a. will export pecans (assuming trade is allowed). b. will import pecans (assuming trade is allowed). c. has a comparative advantage in producing pecans. d. All of the above are correct.
d. All of the above are correct.
Taxes cause deadweight losses because taxes Select one: a. reduce the sum of producer and consumer surpluses by more than the amount of tax revenue. b. prevent buyers and sellers from realizing some of the gains from trade. c. cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall. d. All of the above are correct.
d. All of the above are correct.
Total surplus Select one: a. can be used to measure a market's efficiency. b. is the sum of consumer and producer surplus. c. is the value to buyers minus the cost to sellers. d. All of the above are correct.
d. All of the above are correct.
A tax Select one: a. lowers the price buyers pay and raises the price sellers receive. b. raises the price buyers pay and lowers the price sellers receive. c. places a wedge between the price buyers pay and the price sellers receive. d. Both b) and c) are correct.
d. Both b) and c) are correct.
One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this? Select one: a. He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people. b. He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. c. He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. d. He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.
d. He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.
Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area Select one: a. I+Y. b. J+K+L+M. c. L+M+Y. d. I+J+K+L+M+Y.
d. I+J+K+L+M+Y.
Refer to Figure 7-20. Total surplus can be measured as the area Select one: a. JNK. b. JNML. c. JRL. d. JNL.
d. JNL.
A demand curve reflects each of the following except the Select one: a. willingness to pay of all buyers in the market. b. value each buyer in the market places on the good. c. highest price buyers are willing to pay for each quantity. d. ability of buyers to obtain the quantity they desire.
d. ability of buyers to obtain the quantity they desire.
Laissez-faire is a French expression which literally means Select one: a. to make do. b. to get involved. c. whatever works. d. allow them to do.
d. allow them to do.
A tax affects Select one: a. buyers only. b. sellers only. c. buyers and sellers only. d. buyers, sellers, and the government.
d. buyers, sellers, and the government.
The General Agreement on Tariffs and Trade (GATT) was initiated in response to Select one: a. in increase in exports of low-priced goods from developing countries to developed countries. b. the replacement of manufacturing jobs with service jobs in developed countries. c. economic dislocations caused by the North American Free Trade Agreement (NAFTA) in the 1990s. d. high tariffs imposed during the Great Depression of the 1930s.
d. high tariffs imposed during the Great Depression of the 1930s.
Welfare economics is the study of Select one: a. taxes and subsidies. b. how technology is best put to use in the production of goods and services. c. government welfare programs for needy people. d. how the allocation of resources affects economic well-being.
d. how the allocation of resources affects economic well-being.
Consumer surplus Select one: a. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. b. is represented on a supply-demand graph by the area below the price and above the demand curve. c. measures the benefit sellers receive from participating in a market. d. measures the benefit buyers receive from participating in a market.
d. measures the benefit buyers receive from participating in a market.
In a free, competitive market, what is the rationing mechanism? Select one: a. seller bias b. buyer bias c. government law d. price
d. price
Market failure is the inability of Select one: a. buyers to interact harmoniously with sellers in the market. b. a market to establish an equilibrium price. c. buyers to place a value on the good or service. d. some unregulated markets to allocate resources efficiently.
d. some unregulated markets to allocate resources efficiently.
The benefit that government receives from a tax is measured by Select one: a. deadweight loss. b. consumer surplus. c. tax incidence. d. tax revenue.
d. tax revenue.
The minimum wage has its greatest impact on the market for Select one: a. female labor. b. older labor. c. black labor. d. teenage labor.
d. teenage labor.
A logical starting point from which the study of international trade begins is Select one: a. the recognition that not all markets are competitive. b. the recognition that government intervention in markets sometimes enhances the economic welfare of the society. c. the principle of absolute advantage. d. the principle of comparative advantage.
d. the principle of comparative advantage.
A key lesson from the payroll tax is that the Select one: a. tax is a tax solely on workers. b. tax is a tax solely on firms that hire workers. c. tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. d. true burden of a tax cannot be legislated.
d. true burden of a tax cannot be legislated.