ECON 2302_HW 3

Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are A) $1.90 and 38 units, respectively. B) $1.80 and 35 units, respectively. C) $1.60 and 42 units, respectively. D) $1.35 and 58 units, respectively.

$1.60 and 42 units, respectively

Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are A) $1.90 and 38 units, respectively. B) $1.80 and 35 units, respectively. C) $1.60 and 42 units, respectively. D) $1.35 and 58 units, respectively.

$1.80 and 35 units, respectively

A positive externality occurs when A) Jack receives a benefit from John's consumption of a certain good. B) Jack receives personal benefits from his own consumption of a certain good. C) Jack's benefit exceeds John's benefit when they each consume the same good. D) Jack's receives a loss from John's consumption of a certain good.

Jack receives a benefit from John's consumption of a certain good

What happens to the total surplus in a market when the government imposes a tax? A) Total surplus increases by the amount of the tax. B) Total surplus increases but by less than the amount of the tax. C) Total surplus decreases. D) Total surplus is unaffected by the tax.

Total surplus decreases

Which parable describes the problem of wild animals that are hunted to the point of extinction? A) Coase theorem B) Tragedy of the Commons C) Cost-benefit analysis D) Clean Air Act

Tragedy of the Commons

Which of the following is a way to address an externality problem? A) command and control solution B) corrective tax C) corrective subsidy D) all of the above.

all of the above

Goods that are rival in consumption include both A) club goods and public goods. B) public goods and common resources. C) common resources and private goods. D) private goods and club goods.

common resources and private goods

Total surplus is A) the total cost to sellers of providing the good minus the total value of the good to buyers. B) the total value of the good to buyers minus the cost to sellers of providing the good. C) the difference between consumer surplus and sellers' cost. D) always smaller than producer surplus.

the total value of the good to buyers minus the cost to sellers of providing the good

Refer to Figure 7-15. At the equilibrium price, total surplus is A) $150. B) $200. C) $250. D) $300.

$250

The difference between social cost and private cost is a measure of the A) loss in profit to the seller as the result of a negative externality. B) cost of an externality. C) cost reduction when the negative externality is eliminated. D) cost incurred by the government when it intervenes in the market.

cost of an externality

Refer to Figure 7-15. At the equilibrium price, producer surplus is A) $80. B) $100. C) $120. D) $135.

$100

Once tradable pollution permits have been allocated to firms, A) the government controls the price of permits. B) firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits. C) the value of pollution-saving technology will be lower than the market value of a pollution permit. D) the Coase theorem is no longer applicable as a solution to reducing pollution.

firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits

A country has a comparative advantage in a product if the world price is 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.

higher than that country's domestic price without trade

When a good is rival in consumption, A) one person's use of the good diminishes another person's ability to use it. B) people can be prevented from using the good. C) an unlimited number of people can use the good at the same time. D) everyone will be excluded from obtaining the good.

one person's use of the good diminishes another person's ability to use it

When a good is excludable, A) one person's use of the good diminishes another person's ability to use it. B) people can be prevented from using the good. C) no more than one person can use the good at the same time. D) everyone will be excluded from using the good.

people can be prevented from using the good

Markets do not ensure that the air we breathe is clean because A) clean air has no value. B) the government prevents markets from doing so. C) property rights are not well established for clean air. D) clean air is impossible to produce .

property rights are not well established for clean air

A tax on an imported good is called a A) quota. B) tariff. C) supply tax. D) trade tax.

tariff

Economists typically measure efficiency using A) the price paid by buyers. B) the quantity supplied by sellers. C) total surplus. D) profits to firms.

total surplus

We can say that the allocation of resources is efficient if A) producer surplus is maximized. B) consumer surplus is maximized. C) total surplus is maximized. D) sellers' costs are minimized.

total surplus is maximized

The Coase theorem suggests that private solutions to an externality problem A) are effective under all conditions. B) will usually allocate resources efficiently if private parties can bargain without cost. C) are only efficient when there are negative externalities. D) may not be possible because of the distribution of property rights.

will usually allocate resources efficiently if private parties can bargain without cost

The price of sugar that prevails in international markets is called the A) export price of sugar. B) import price of sugar. C) comparative-advantage price of sugar. D) world price of sugar.

world price of sugar

Refer to Figure 7-15. At the equilibrium price, consumer surplus is A) $150. B) $200. C) $250. D) $350.

$150

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area A) I+Y. B) J+K+L+M. C) L+M+Y. D) I+J+K+L+M+Y.

I+J+K+L+M+Y

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area A) I+Y. B) J+K+L+M. C) I+Y+B. D) I+J+K+L+M+Y.

J+K+L+M

Refer to Figure 10-7. Which quantity represents the social optimum for this market? A) Q1. B) Q2. C) Q3. D) Q4.

Q3

Patterns of trade among nations are primarily determined by A) cultural considerations. B) political considerations. C) comparative advantage. D) differences in the income elasticity of demand among nations.

comparative advantage

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as A) confirmation of the virtues of free trade. B) confirmation of the infant-industry argument. C) confirmation that free trade agreements are not necessary. D) confirmation that specialization in absolute advantage works.

confirmation of the virtues of free trade

On a graph, consumer surplus is represented by the area A) between the demand and supply curves. B) below the demand curve and above price. C) below the price and above the supply curve. D) below the demand curve and to the right of equilibrium price.

below the demand curve and above price

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic, A) buyers of the good will bear most of the burden of the tax. B) sellers of the good will bear most of the burden of the tax. C) buyers and sellers will each bear 50 percent of the burden of the tax. D) both equilibrium price and quantity will increase.

buyers of the good will bear most of the burden of the tax

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the A) deadweight loss due to the tax. B) loss in consumer surplus due to the tax. C) loss in producer surplus due to the tax. D) total surplus before the tax.

deadweight loss due to the tax

A tax levied on the buyers of a good shifts the A) supply curve upward (or to the left). B) supply curve downward (or to the right). C) demand curve downward (or to the left). D) demand curve upward (or to the right).

demand curve downward (or to the left)

When a country allows trade and becomes an importer of a good, A) both domestic producers and domestic consumers become better off. B) domestic producers become better off, and domestic consumers become worse off. C) domestic producers become worse off, and domestic consumers become better off. D) both domestic producers and domestic consumers become worse off.

domestic producers become worse off, and domestic consumers become better off

The size of the deadweight loss generated from a tax is affected by the A) elasticities of both supply and demand. B) elasticity of demand only. C) elasticity of supply only. D) total revenue collected by the government.

elasticities of both supply and demand

Neither public goods nor common resources are A) excludable, but only public goods are not rival in consumption. B) excludable, but only common resources are not rival in consumption. C) rival in consumption, but only public goods are not excludable. D) rival in consumption, but only common resources are not excludable.

excludable, but only public goods are not rival in consumption

A command-and-control policy is another term for a A) pollution permit. B) government regulation. C) corrective tax. D) Both a and b are correct.

government regulation

A consumer's willingness to pay directly measures 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.

how much a buyer values a good

Externalities tend to cause markets to be A) inefficient. B) unequal. C) unnecessary. D) overwhelmed.

inefficient

Which of the following is not a common resource? A) clean air B) clean water C) open grazing land D) national defense

national defense

When the government intervenes in markets with externalities, it does so in order to A) increase production when negative externalities are present. B) protect the interests of bystanders. C) make certain all benefits are received by market participants. D) reduce production when positive externalities are present.

protect the interests of bystanders

Refer to Figure 10-7. To internalize the externality in this market, the government should A) impose a tax on this product. B) provide a subsidy for this product. C) forbid production. D) produce the product itself.

provide a subsidy for this product

When a tax is placed on a product, the price paid by buyers A) rises, and the price received by sellers rises. B) rises, and the price received by sellers falls. C) falls, and the price received by sellers rises. D) falls, and the price received by sellers falls.

rises, and the price received by sellers falls

A seller is willing to sell a product only if the seller receives a price that is at least as great as the A) seller's producer surplus. B) sellers's cost of production. C) seller's profit. D) average willingness to pay of buyers of the product.

sellers's cost of production

The U.S. government protects fish, a common resource, by A) subsidizing the fishing industry. B) heavily taxing competing industries. C) selling fishing licenses and regulating fish lengths. D) None of the above is correct.

selling fishing licenses and regulating fish lengths

A tax levied on the sellers of a good shifts the A) supply curve upward (or to the left). B) supply curve downward (or to the right). C) demand curve upward (or to the right). D) demand curve downward (or to the left).

supply curve upward (or to the left)

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents A) tax revenue. B) consumer surplus before the tax. C) producer surplus after the tax. D) total surplus before the tax.

tax revenue

Which of the following suggests that private markets can be effective in dealing with externalities? A) the "invisible hand" B) the law of diminishing social returns C) the Coase theorem D) technology policy

the Coase theorem

Assume, for the U.S., that the domestic price of pineapples without international trade is lower than the world price of pineapples. This suggests that, in the production of pineapples, A) the U.S. has a comparative advantage over other countries and the U.S. will export pineapples. B) the U.S. has a comparative advantage over other countries and the U.S. will import pineapples. C) other countries have a comparative advantage over the U.S. and the U.S. will export pineapples. D) other countries have a comparative advantage over the U.S. and the U.S. will import pineapples.

the U.S. has a comparative advantage over other countries and the U.S. will export pineapples

Consumer surplus is A) the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. B) the amount a buyer is willing to pay for a good minus the cost of producing the good. C) the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. D) a buyer's willingness to pay for a good plus the price of the good.

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

Producer surplus is A) measured using the demand curve for a good. B) always a negative number for sellers in a competitive market. C) the amount a seller is paid minus the cost of production. D) the opportunity cost of production minus the cost of producing goods that go unsold.

the amount a seller is paid minus the cost of production

When a country allows trade and becomes an exporter of a good, A) the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good. B) the gains of the domestic consumers of the good exceed the losses of the domestic producers of the good. C) the losses of the domestic producers of the good exceed the gains of the domestic consumers of the good. D) the losses of the domestic consumers of the good exceed the gains of the domestic producers of the good.

the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good