nwoha econ 202 exam 2

(refer to figure 10-1) this graph represents the tobacco industry. without any government intervention, the equilibrium price and quantity are

$2.07 and 38 units, respectively

(refer to figure 10-1) this graph represents the tobacco industry. the socially optimal price and quantity are

$2.80 and 24 units, respectively

bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

(refer to figure 9-1) in the absence of trade, the equilibrium price of coffee in Guatemala is

$90

(refer to figure 7-1) when the price is P1, consumer surplus is

A+B+C

who among the following is a free rider?

Ernie listens to National Public Radio, but does not contribute to any fundraising efforts

(refer to figure 9-1 [1/2]) from the figure it is apparent that

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world

(refer to figure 9-1 [2/2]) from the figure it is apparent that

Guatemala will export coffee if trade is allowed

Zaria and Hannah are roommates. Zaria assigns $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase Theorem?

Zaria pays Hannah $16 so that Zaria can smoke

Why do some policymakers support a consumption tax rather than an income tax?

a consumption tax would encourage people to save earned income

employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

a transaction cost

in which of the following systems does total tax liability increase as income increases?

both proportional and progressive

a tax affects

buyers, sellers, and the government

what is the fundamental basis for trade among nations?

comparative advantage

(refer to figure 7-1) Area C represents the

consumer surplus to new consumers who enter the market when the price falls from P2 to P1

an efficient tax system is one that imposes small

deadweight losses and administrative burdens

(refer to figure 7-1) when the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C

the US income tax

discourages saving

import quotas and tariffs produce some common results. Which of the following is not one of those common results?

equal revenue is always raised for the domestic government

a demand curve reflects each of the following except the:

highest price buyers are willing to pay for each quantity

private decision about consumption of common resources and production of public goods usually lead to an

inefficient allocation of resources and external effects

the deadweight loss from a tax per unit of a good will be smallest in a market with

inelastic supply and inelastic demand

the infant-industry argument

is based on the belief that protecting industries when they are young will pay off later

a country is using a proportional tax when

its marginal tax rate equals its average tax rate

suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

might increase or decrease

(refer to figure 10-1) this graph represents the tobacco industry. the industry creates

negative externalities

because public goods are

not excludable, people have an incentive to be free riders

an externality is the uncompensated impact of

one person's actions on the well-being of a bystander

a textbook is a

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

(refer to figure 8-1) Suppose the government imposes a tax of P'-P'''. The area measured by M represents

producer surplus after the tax

a tax on a good

raises the price that buyers pay and lowers the price that sellers recieve

one tax system is less efficient than another if it

raises the same amount of revenue at a higher cost to taxpayers

a free rider is a person who

receives the benefit of a good but avoids paying for it

the goal of requiring licenses for hunting and fishing is to

reduce the use of a common resource

which of the following statements regarding a Laffer curve is the most plausible?

reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate

Dioxin emissions that result from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they create

which of the following events would increase producer surplus?

sellers' costs stay the same and the price of the good increases

a tax levied on the sellers of a good shifts the

supply curve upward by the size of the tax

a tax on imported goods is called a

tariff

the overuse of a common resource relative to its economically efficient use is called

the Tragedy of the Commons

a consumption tax is a tax on

the amount of income that people spend

when a country allows trade and becomes an exporter of a good, which of the following is not a consequence?

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

suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

the response of buyers and sellers to a change in the price of bananas is strong

efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized

a simultaneous increase in both the demand for tablets and the supply of tablets would imply that

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

what happens to the total surplus in a market when the government imposes a tax?

total surplus decreases

a seller's opportunity cost measures the

value of everything she must give up to produce a good

tax incidence refers to

who bears the tax burden

a cost-benefit analysis of a highway is difficult to conduct because analysts

will have difficulty estimating the value of the highway