Microeconomics Midterm 2

If personal income up to and including $25,000 is not taxed, income of $25,001 to $50,000 is taxed at 10%, and income over $50,000 is taxed at 20%, then a family earning an income of $75,000 will pay _____ in personal taxes. A. $7,500 B. $11,250 C. $15,000 D. $6,000

A. $7,500

Taken collectively, people in nations that engage in international trade are NOT likely to: A. be made worse off. B. gain from lower opportunity costs of production. C. raise their standards of living. D. consume more than they were able to consume in the absence of trade.

A. be made worse off.

Saudi Arabia has a tremendous comparative advantage in petroleum. Which factor is a source of this comparative advantage? A. large reserves of crude oil B. mild temperatures C. high tariffs on oil from other nations D. no opportunity cost associated with oil production

A. large reserves of crude oil

Demand for Gala apples is relatively elastic compared to the supply of Gala apples, so if a tax is imposed on the consumers of Gala apples, the tax incidence: A. cannot be determined without more information. B. is typically on producers more than consumers. C. is typically split equally between consumers and producers. D. is typically on consumers more than producers.

B. is typically on producers more than consumers.

An urbanized country has 100 million workers living on 100 square miles of land. A country that is principally rural has 1 million workers living on 10 square miles of land. From this information we know that the urbanized country is _____ relative to the rural country. A. labor-intensive B. labor-abundant C. land-intensive D. land-abundant

B. labor-abundant

A higher tax rate is more likely to increase tax revenue if the price elasticity of demand is _____ and the price elasticity of supply is _____. A. low; high B. low; low C. high; low D. high; high

B. low; low

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, we know that: A. Belgium has an absolute advantage in raising beef. B. the Netherlands has a comparative advantage in raising beef. C. the Netherlands has a comparative advantage in raising tulips. D. Belgium has a comparative advantage in raising beef

B. the Netherlands has a comparative advantage in raising beef.

The price elasticity of demand for a particular cancer drug is zero and the price elasticity of supply is 0.50. If a $1 excise tax is levied on producers, how much of this tax will eventually be paid by consumers? A. $0.50 B. $0 C. $1 D. $1.50

C. $1

If demand and supply are both very inelastic, a decrease in the rate of an excise tax will likely: A. make demand and supply both elastic. B. increase government revenue. C. decrease government revenue. D. not affect government revenue

C. decrease government revenue.

The burden of a tax system comes from its: A. effect on elasticity. B. inequity. C. effect on marginal incentives. D. government revenue.

C. effect on marginal incentives.

Taxation according to the benefits principle is best illustrated in the United States by: A. personal income tax B. sales tax C. gasoline tax D. corporate income tax

C. gasoline tax

An excise tax that the government collects from the producers of a good: A. reduces revenue for the government. B. has an effect similar to that of a tax subsidy. C. shifts the supply curve upward. D. shifts the supply curve downward.

C. shifts the supply curve upward.

If an excise tax is imposed on beer and collected from the producers, the _____ curve will shift _____ by the amount of the tax. A. supply; downward B. demand; upward C. supply; upward D. demand; downward

C. supply; upward

A lump-sum tax, such as the fee for a driver's license, does not take into consideration: A. the benefits principle. B. efficiency. C. the ability-to-pay principle. D. the tax base.

C. the ability-to-pay principle.

France and England both produce wine and clothing with constant opportunity costs. France will have a comparative advantage in wine production if: A. the absolute cost of producing wine is lower in France than in England. B. it can produce more wine than England. C. the opportunity cost of wine production is lower in France than in England. D. its labor productivity in wine production is greater than England's

C. the opportunity cost of wine production is lower in France than in England.

The governor wants to levy a $1 excise tax on a product but wants to minimize the deadweight loss. The deadweight loss will be LEAST when the demand curve is _____ and the supply curve is _____. A. inelastic; elastic B. elastic; elastic C. elastic; inelastic D. inelastic; inelastic

D. inelastic; inelastic

Lower wages in China reflect _____ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _____ in China than in the United States. A. higher; higher B. higher; lower C. lower; lower D. lower; higher

D. lower; higher

Suppose the government imposes a $9 per month tax on cell phone service. If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping, the monthly price for cell phone service will: A. increase by $9. B. increase by more than $9. C. increase by $4.50. D. not change.

D. not change.

If the marginal tax rate equals the average tax rate, the tax system is: A. progressive. B. regressive. C. digressive. D. proportional.

D. proportional.

Which tax reflects the ability-to-pay principle? A. the payroll tax B. a sales tax on food C. Social Security tax D. the federal income tax

D. the federal income tax