Micro Econ Unit 2 Question

In a competitive market, the actions of any single buyer or seller will

have a negligible impact on the market price

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

higher than that country's domestic price without trade.

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?

Consumer Surplus Decrease

State and local governments receive the largest portion of their tax revenues from

property taxes and sales taxes.

When a tax on a good is enacted,

buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.

Many economists believe that the U.S. tax system would be made more efficient if the basis of taxation were changed so that people paid taxes, more so than they do now, based on their

spending rather than their income.

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

tax revenue decreases, and the deadweight loss increases.

Deadweight losses are associated with

taxes that distort the incentives that people face.

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

the ability-to-pay principle.

A consumption tax is a tax on

the amount of income that people spend.

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,

the country will be an exporter of the good.

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

$3,000 and 10 percent, respectively

If the market price is $1,000, the producer surplus in the market is Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800

$300

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i) Marginal revenue equals $5. (ii) Average revenue equals $5. (iii) Price equals $5.

(i), (ii), and (iii)

If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

100

When the price is P1, consumer surplus is

A+B+C

Which area represents producer surplus when the price is P1?

BCG

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Which of the following is a tax on labor?

Medicare, social security, and federal income

You have an extra ticket to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the ticket. Who makes the winning bid, and what does he offer to pay for the ticket Buyer Willingness to Pay Michael $500 Earvin $400 Larry $350 Charles $300

Michael; more than $400 but less than or equal to $500

All of the following are transfer payments except Welfare Unemployment Personal income Social Security

Personal Income

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

Sellers cost of Production

The two taxes that together provide the U.S. federal government with almost 80 percent of its revenue are

individual income taxes and payroll taxes.

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?

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 price elasticities of supply and demand affect

both the size of the deadweight loss from a tax and the tax incidence.

If a government sells debt to help meet its expenditures, then the government has a

budget deficit. Other things the same, the deficit rises if government expenditures rise.

Suppose New York City passes a local "big gulp" tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the "big gulp" tax is earmarked for diabetes research, the "big gulp" tax may be justified

on the basis of the benefits principle.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

decreasing output would increase the firm's profit

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

the quantity at which market price is equal to Mr. McDonald's marginal cost of production

The Laffer curve relates

the tax rate to tax revenue raised by the tax.

When a country allows trade and becomes an importer of a good,

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

When a tax is imposed on a good, the

equilibrium quantity of the good always decreases.