ECON 211- Final
Examples of direct regulation include ____________.
price ceilings, fishing quotas, antismoking laws
A legally determined minimum price that sellers must receive is known as a:
price floor
The federal income tax in the United States is a ______
progressive tax
To reduce inequality and poverty in an economy, the government uses a ___________.
progressive tax system to fund transfer payments.
Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________.
reduce poverty
The equity-efficiency trade-off states that when social inequality is high, further increases in inequality ______ social surplus. The flatter the equity-efficiency curve, the ________ the cost of reducing social inequality in terms of social surplus.
reduce, greater
Which of the following is not an example of paternalism?
repealing the Affordable Health Care Act
Which of the following corresponds to revenues at the state level of government?
revenues mainly redistributed from the Federal government, sales tax, and property tax
All of the following describe a monopoly market structure, except
seller is a price taker
Which of the following is not a result of corruption?
selling goods at a price that does not include tax
When the elasticity of demand for a product is __________ the elasticity of supply, consumers pay __________ of the tax on the product.
smaller than, more than half
The actual division of the tax burden between buyers and sellers is known as:
tax incidence
The government runs a budget surplus when ____________.
tax revenue exceeds its spending.
What is the definition of market power?
the ability of a firm to charge a price greater than marginal cost
Tax incidence refers to ______.
the actual division of the tax between buyers and sellers in a market
Which of the following rights is given to the holder of a patent?
the exclusive right to a new product
Which of the following is the marginal tax rate?
the fraction of each additional dollar of income that must be paid in taxes
If the last dollar of income earned by individuals with the highest incomes is taxed at a rate that is less than the average tax rate, which of the following is correct?
the income tax is a regressive income tax
How is the U.S. federal income tax structured?
the rate at which income is taxed increases as income increases
Which is the following is the average tax rate?
the total tax paid divided by total income
Which of the following is the average tax rate?
the total tax paid divided by total income
What happens when network externalities are present?
the usefulness of a product increases with the number of consumers who use it
Which of these best represents a tax equal to the value of the negative externality?
the vertical distance between S1 and S2
If the implementation of a price control results in a deadweight loss, which of the following statements is true?
there is excess demand
A government would want to be on this curve where ___________.
there is no correct answer to this question, as the answer depends on a government's value judgments.
Which of the following functions is beyond the scope of economics as far as government intervention is considered?
to make a value judgment on whether government is good or bad
Governments deal with natural monopolies by:
using regulation to protect consumers
In which of the following situations can a firm be considered a monopoly?
when a firm can ignore the actions of all other firms
Tax incidence refers to ____________.
who bears the burden of a tax.
In the long run, the monopolist can earn:
zero or positive economic profit
Government spending in the United States has grown over time and now accounts for more than 40 percent of U.S. national income. Does this mean that the government has been consistently running a budget deficit?
No, government deficits depend upon spending and tax revenue.
The monopolist charges a price that is __________ the perfectly competitive industry.
higher than
Black markets may arise if:
price ceilings exist
A patent gives its holder the exclusive right to a product for a period of __________ from the date the patent is filed with the government.
20 years
Which of the following is an example of the opportunity cost of government bureaucracies?
A tax collector who was qualified to produce motherboards
What does a deadweight loss from a tax consist of?
Buyers who must leave the market because they can't afford to pay the higher price and sellers who must leave the market because they can't produce at a lower price.
Price discrimination is the practice of:
Dividing consumers into two or more groups and charging different prices to each group
All of the following statements about the monopolist's demand curve are true, except:
If the price effect dominates, lowering price increases revenue.
Why is city drinking water better off as a natural monopoly?
Industries like city drinking water experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity.
How would you depict the trade-off between equity and efficiency on a graph?
Inequality on one axis and social surplus on the other with a positively-sloped function.
Which of the following is the largest source of revenue for state governments?
Miscellaneous taxes and fees, such as tolls on roads and public transportation tickets.
How does a natural monopoly differ from a firm that becomes a monopoly due to network effects?
Natural monopolies result from economies of scale, while network effects come from the benefits to consumers from having many people use a service.
Many people have argued that an income tax should be "marriage neutral," that is, two people should pay the same total tax whether they are married or they are single. Suppose Amanda earns nothing, Ben earns $60,000, and Cathy and Dylan each earn $30,000. They are all single. Amanda pays no tax because she has no income. If they all live in a country that has a progressive income tax, which will be higher: the tax that Ben pays or the sum of the taxes Cathy and Dylan pay?
The tax that Ben pays because high-income individuals pay higher income taxes.
Which of the following statements explains the trade-off between equity and efficiency?
The equity-efficiency trade-off represents the balance between ensuring an equitable allocation of resources (equity) and increasing social surplus or total output (efficiency).
Which of the following is a factor underlying government taxation and spending decisions?
To raise revenues to pay for operations.
A black market is ____________.
a nonlegal market for regulated goods and services
Which of the following does a income tax rate refer to?
a percentage of income
A monopoly is a market structure that is characterized by:
a single seller of a good or service that does not have a close substitute
In an economy, if the government implements a law for individuals that requires them to save at least 25% of their annual income in a social savings plan framed by the government. For supporting this plan, the government raises revenues by implementing income tax rates that are higher compared to the other countries. Which of the following will be a result(s) of this scenario?
an increase in the deadweight losses and an increase in costs to the government
Laws aimed at promoting competition among firms are known as:
antitrust laws
Natural monopoly happens when the:
average total cost curve is decreasing
A significant difference between monopolies and competitive firms is that:
a monopoly's demand curve is the industry's demand curve, while the competitive firm's demand curve is perfectly elastic.
When network externalities are present, it may create a:
barrier to entry for competing technologies due to high switching costs
Which of the following terms corresponds to a market where buying and selling take place at prices that violate government price regulations?
black market
If the federal government's expenditures are less than its revenue, there is a ______.
budget surplus
Which of the following is a cost associated with government intervention in an economic system?
bureaucracies
A monopolist should continue to increase production until marginal:
cost is equal to marginal revenue.
Which of the following are examples of inefficiencies created by government intervention?
creating a large workforce of professionals who review whether the financial reports of companies are true and fair -and- quality deterioration in a market after government implements a price control
Direct regulation is ____________.
direct actions by the government to control the amount of an activity
Monopolists do not use a supply curve because of they:
do not vary production based on market price.
The only legal restriction concerning price discrimination is that firms cannot use it to:
drive rivals out of business
What types of goods are likely to be traded in a black market?
drug dealing and prostitution
The downward sloping part of the long run average total cost curve is where the firm is achieving:
economies of scale
Economies with lower taxes _______ production and _______ available social surplus. One possible cost of such economies is that the gap between the rich and poor may _______.
encourage, increase, increase
Which of the following statements about U.S. government revenues is correct?
federal revenues have ranged between 25 and 30 percent of GDP for a long time
Consumer sovereignty suggests that ____________.
government should not interfere with consumer choices.
Which of the following is a problem that black markets pose in an economy?
governments use resources to enforce the law
When tax rates increase, the deadweight loss of taxation increases by ________. This implies that, all else being equal, it is better to have _______ rather than _______
greater amount many small tax sources one large tax source
If a monopoly selling 300 computers at $3000 decides to lower its price to $2000 in order to sell 100 more computers, then the firm:
has negative marginal revenue
The monopolist charges a price that is __________ the perfectly competitive industry
higher than
In competitive markets, tax incidence, as well as the equilibrium, is independent of whether the tax is imposed on consumers or sellers because:
if it is imposed on the seller, the seller will raise the price and pass it to the consumer.
Which of these statements about the effect of taxes and transfers on income distribution is correct?
income after taxes is more equally distributed than income before taxes
A progressive tax system is one in which tax rates ________ as taxable base income increases. In a regressive tax system, higher earners pay ______ marginal tax rates.
increase, lower
Which of the following is not a consequence of high levels of taxation?
increased immigation of foreign high earners
Network externalities and economies of scale both can contribute to the formation of a monopoly. However, they differ in that network externalities deal with:
increasing benefits and economies of scale deal with decreasing costs
__________ represent the largest portion of the money the U.S. government collects in tax revenues. ______ tax receipts represent a third of the federal government's tax revenue and are taxes on ______
individual income taxes, social insurance, and wages
The largest source of revenue for the federal government is ___________.
individual income taxes.
Economists toward the paternalistic end of the spectrum would probably say that some mistakes result from the fact that:
individuals are not used to making decisions of a certain type
Which of the following arguments is not consistent with paternalism?
individuals make choices that reflect their true preferences and know what is best for them
Educational grants afforded to poorer developing countries are often:
ineffective because government officials often misuse the funds.
For a monopolist, total revenue______ calculated the same way as in perfect competition; marginal revenue ______ equal to price.
is, is not
Why are there two different views on the effect of taxation on labor supply in the United States?
it depends on normative questions such as how much to tax or how much government intervention is necessary, the effect of a tax on labor supply depends on the elasticity of labor supply, and the effect of a tax on labor supply depends on the amount of deadweight loss created by the tax.
Examples of direct regulation include ____________.
laws restricting alcohol purchases, fishing quotas, and price ceilings
A monopolist will maximize profit at the level of output where:
marginal cost equals marginal revenue
In which of the following market structures is the firm's demand curve the same as the market demand for the product?
monopoly
Which of the following is an effect of a monopoly?
monopoly causes a reduction in consumer surplus
Which of the following statements regarding natural monopoly is true?
natural monopoly is most likely to occur in markets where fixed costs are large relative to variable costs
A tax is efficient if it imposes ________
no deadweight loss
A monopoly has _____ and _____. Price is set _______ marginal cost.
one seller and many buyers, greater than
Which of the following statements is correct about the U.S. tax system?
payroll taxes include social security and medicare taxes
Paternalism is the view that ___________.
people do not always know what is best for them, and government should encourage them to make the right choices.