EC 2

The government auctions off 500 units of pollution rights. They sell for $50 per unit, raising total revenue of $25,000. This policy is equivalent to a corrective tax of _____ per unit of pollution.

$50

When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation?

Domestic production of coffee falls, and Ectenia becomes a coffee importer.

Which of the following is an example of a positive externality?

Hillary's newly cut lawn makes her neighborhood more attractive.

Which of the following statements about corrective taxes is not true?

They cause deadweight losses.

If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity.

above, less

Which of the following is an example of a common resource?

fish in the ocean

The main difference between imposing a tariff and handing out licenses under an import quota is that a tariff increases

government revenue.

When the government levies a tax on a good equal to the external cost associated with the good's production, it ________ the price paid by consumers and makes the market outcome ________ efficient.

increases, more

Which of the following is an example of a public good?

national defense

Common resources are

overused in the absence of government.

Which categories of goods are excludable?

private goods and club goods

Which categories of goods are rival in consumption?

private goods and common resources

When a nation opens itself to trade in a good and becomes an importer,

producer surplus decreases, but consumer surplus and total surplus both increase.

Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade?

starting to allow trade when the world price is greater than the domestic price

If a nation that imports a good imposes a tariff, it will increase

the domestic quantity supplied.

If a nation that does not allow international trade in steel has a domestic price of steel lower than the world price, then

the nation has a comparative advantage in producing steel and would become a steel exporter if it opened up trade.

The Coase theorem does not apply if

transaction costs make negotiating difficult.

Public goods are

underprovided in the absence of government.