micro exam 2

The notion that similar taxpayers should pay similar amounts of taxes is known as horizontal equity. taxpayer efficiency. the benefits principle. vertical equity.

horizontal equity.

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 is the average tax rate when income is $50,000? 15 percent 12 percent 20 percent 10 percent

12 percent

The U.S. federal government collects about two-thirds of the taxes in our economy. three-fourths of the taxes in our economy. one-half of the taxes in our economy. one-third of the taxes in our economy.

two-thirds of the taxes in our economy.

When the nation of Duxembourg allows trade and becomes an importer of software, residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises. residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg falls. residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg rises. residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg falls.

residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises.

A textbook is a private good and the knowledge that one gains from reading the book is a common resource. private good and the knowledge that one gains from reading the book is a public good. common resource and the knowledge that one gains from reading the book is a private good. common resource and the knowledge that one gains from reading the book is a public good.

private good and the knowledge that one gains from reading the book is a public good.

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy, producer surplus increases and total surplus increases in the market for that good. producer surplus increases and total surplus decreases in the market for that good. producer surplus decreases and total surplus increases in the market for that good. producer surplus decreases and total surplus decreases in the market for that good.

producer surplus decreases and total surplus decreases in the market for that good.

Health insurance companies charge patients co-payments to minimize adverse selection. minimize negative externality. reduce moral hazard. maximize positive externality.

reduce moral hazard.

Knowledge that is patented is a public good, whereas knowledge that is not patented is a common resource. private good, whereas knowledge that is not patented is a club good. club good, whereas knowledge that is not patented is a public good. common resource, whereas knowledge that is not patented is a private good.

club good, whereas knowledge that is not patented is a public good.

When negative externalities are present in a market private costs will be greater than social costs. only government regulation will solve the problem. social costs will be greater than private costs. the market will not be able to generate an equilibrium.

social costs will be greater than private costs.

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 income rather than their wealth. spending rather than their income. wealth rather than their spending. saving rather than their income.

spending rather than their income.

Consider an imaginary country of Florin with a population of 15,000 people. Suppose that a serious disease affects 3% of the population. The treatment costs $2,000. Given that all citizens are risk-averse, how much is likely to be their insurance payment? $60. $1,500. $2,000. $0.

60

The town of Isle is on a small island connected to Big City by a single bridge. Most of the residents of Isle work in Big City. As a result, the bridge becomes very congested for two hours each day at the typical morning and evening commute times. Which of the following policies considered by the mayor of Isle would likely be most efficient in alleviating the congestion? Any vehicle crossing the bridge at any time must have a sticker paid for with a one-time fee of $25. A press conference in which the mayor requests that people try to cross the bridge earlier or later than the typical commute times. A fixed toll for the bridge payable by every vehicle crossing the bridge at all days and times. A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times.

A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times.

Which of the following are taxed? Dividends shareholders receive but not corporate profits Both corporate profits and dividends shareholders receive Neither corporate profits nor dividends shareholders receive Corporate profits but not dividends shareholders receive

Both corporate profits and dividends shareholders receive

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to Only existing customers who now get lower prices on the gowns they were already planning to purchase. Only new customers who enter the market because of the lower prices. Both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. Consumer surplus does not increase; it decreases.

Both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

All else equal, what happens to consumer surplus if the price of a good increases? Consumer surplus decreases Consumer surplus may increase, decrease, or remain unchanged Consumer surplus increases Consumer surplus is unchanged

Consumer surplus decreases

The distinction between efficiency and equality can be described as follows: Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

Which of the following statements is not correct? Government policies cannot improve upon private market outcomes. A tax is a way for the government to reduce the production of a good with a negative externality. A tax that accurately reflects external costs produces the socially optimal outcome. A patent is a way for the government to encourage the production of a good with technology spillovers.

Government policies cannot improve upon private market outcomes.

Suppose Japan exports cars to Russia and imports wine from France. This situation suggests Japan has an absolute advantage relative to Russia in producing cars, and France has an absolute advantage relative to Japan in producing wine. Japan has an absolute advantage relative to France in producing wine, and Russia has an absolute advantage relative to Japan in producing cars. Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to Japan in producing wine. Japan has a comparative advantage relative to France in producing wine, and Russia has a comparative advantage to Japan in producing cars.

Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to Japan in producing wine.

Which of the following is a feature of the market for healthcare? The main interested parties are the buyers and sellers. The allocation of resources can be highly inefficient. Buyers pay sellers directly. Buyers always have a very good idea of what product they want to buy.

The allocation of resources can be highly inefficient.

The deadweight loss from a tax per unit of good will be smallest in a market with inelastic supply and inelastic demand. elastic supply and inelastic demand. elastic supply and elastic demand. inelastic supply and elastic demand.

inelastic supply and inelastic demand

Which of the following is not a reason why government agencies subsidize basic research? The government wants to attract the brightest researchers away from private research firms. The private market devotes too few resources to basic research. The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies. The general knowledge developed through basic research can be used without charge.

The government wants to attract the brightest researchers away from private research firms.

To work as a nurse, Mateo Lopez needs to be at least 21 years old. receive an FDA approval. volunteer at a local hospital. acquire a medical license.

acquire a medical license.

A value-added tax or VAT is a tax on pollution. retail purchases only. all stages of production of a good. wholesale purchases only.

all stages of production of a good.

A family's income tax liability is a standard percentage of all income earned. constant from year to year. based on total taxable income. determined by wage income rather than dividend and interest income.

based on total taxable income.

A tax affects buyers and sellers only. buyers only. buyers, sellers, and the government. sellers only.

buyers sellers and the government

When property rights are not well established, private goods become public goods. markets fail to allocate resources efficiently. the distribution of private goods is unfair. government resources are used inefficiently.

markets fail to allocate resources efficiently.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it minimizes costs and maximizes output. maximizes the combined welfare of buyers and sellers. minimizes the level of welfare payments. maximizes both the total revenue for firms and the quantity supplied of the product.

maximizes the combined welfare of buyers and sellers.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market may increase, decrease, or remain unchanged. is unchanged. decreases. increases.

may increase, decrease, or remain unchanged.

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system more like a consumption tax than it otherwise would be. more like an income tax than it otherwise would be. more like a payroll tax than it otherwise would be. less like European tax systems than it otherwise would be.

more like a consumption tax than it otherwise would be.

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his producer deficit. cost of building fences. producer surplus. profit.

cost of building fences.

A good is excludable if it is not a normal good. people can be prevented from using it. the government can regulate its availability. one person's use of the good diminishes another person's enjoyment of it.

people can be prevented from using it.

The Affordable Care Act signed by President Obama in 2010 and often called "Obamacare" forced the healthiest patients to forgo coverage by increasing insurance premiums to everyone. allowed health insurance companies charge more to cover people with pre-existing medical conditions. prevented health insurance companies from charging more to cover people with pre-existing medical conditions. reduced adverse selection by decreasing the insurance premiums to everyone.

prevented health insurance companies from charging more to cover people with pre-existing medical conditions.

Representative Vazquez cites the "jobs argument" when he argues before Congress in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Representative Vazquez's reasoning is that he ignores the fact that the gains from trade are based on comparative advantage. unemployment of labor is not a serious problem relative to other economic problems. there is no evidence that any worker ever lost their job because of free trade. the gains from trade are based on absolute advantage.

the gains from trade are based on comparative advantage.

Part of the administrative burden of a tax is the cost of administering programs that use tax revenue. the hassle and expense of filling out tax forms that is imposed on taxpayers who comply with the tax. the money people pay to the government in taxes. reducing the size of the market because of the tax.

the hassle and expense of filling out tax forms that is imposed on taxpayers who comply with the tax.

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that both the value of tablets to consumers and the cost of producing tablets has decreased. the value of tablets to consumers has decreased, and the cost of producing tablets has increased. both the value of tablets to consumers and the cost of producing tablets has increased. the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

the value of tablets to consumers has increased, and the cost of producing tablets has decreased.