ECON 130, Chapters 4, 5, & 6

(Units and subject(s) subject to change) A town in New York currently has a ​$'1.50' per unit tax on sales of liquor. ​ Annually, 50,000 'bottles' of 'liquor' are​ sold, and so the town collects ​$'75,000'. The mayor proposes that the tax be increased to ​$'2.50' per 'bottle'. If the mayor uses static tax​ analysis, he expects that the new tax revenue will be ​$__________. ​(Round your answer to the nearest​ dollar.) Using dynamic tax​ analysis, it is likely that the tax base will __________ if the tax is​ imposed, and thus the new tax revenue will be __________ the tax revenue based on the assumptions of static tax analysis.

$2.50 * 50,000 = $125,000; decrease; less than

The price of apartments would be $__________________ if there was no rent control. With the rent​ control, the implicit or black market price is likely to be __________________

$700 (equilibrium); around $__________________

Consumer sovereignty means that consumers have the individual freedom to decide what they wish to purchase. A. True B. False

A. True

(Units subject to change) Suppose that the figure to the right applies to​ Pennsylvania's steel market. The demand curve for steel is D. The supply​ curve, S1​, includes only the costs that the firms in the market have to pay. Market equilibrium occurs at point​ E, with a price of​ $800 per ton and a quantity of 110 million tons per year. Producing​ steel, however, also involves externalities. If producers had to pay these external​ costs, the supply curve would shift to S2​, the equilibrium quantity would fall to 90 million tons per​ year, and the price would rise to ​$990 per ton. Equilibrium would shift from E to E1. Now suppose that "steel manufacturers in this state adopt a new technique for producing steel that entails a smaller external cost. If​ Pennsylvania's government aims to correct the steel​ market's negative externality via an effluent​ fee, is the appropriate fee higher or lower now that steel producers have adopted the new​ technique?" ​1.) Using the line drawing​ tool, draw either a new demand curve ​(D1​) or a new supply curve ​(S3​) that shows how an improved production technique affects the market for this good. Properly label your line. ​2.) Using the point drawing tool​, indicate the new equilibrium price and quantity. Label this point ​'E2​.' Carefully follow the instructions​ above, and only draw the required objects.

(Draw new supply curve) S3; (5.51,18.4), (45.6,49.6) E2; (27.7,35.4) (In-between existing lines and points)

(Units subject to change) Consider the figure to the right. Suppose that the government raises its sales tax rate from 2 percent to 5 percent. Does the direction of the effect on the​ government's tax revenues indicated by the​ figure's dynamic tax analysis accord with the prediction that would have been forthcoming from static tax​ analysis? Explain briefly. ​ 1.) Using the point drawing tool​, indicate the point on the curve associated with a sales tax rate of 2 percent. Label this point​ 'Low Tax​ Revenue.' ​ 2.) Using the point drawing tool​, indicate the point on the curve associated with a sales tax rate of 5 percent. Label this point​ 'High Tax​ Revenue.' Carefully follow the instructions​ above, and only draw the required objects. If the sales tax increases from 2 percent to 5 ​percent, the​ figure's dynamic tax analysis __________ the prediction that would have been forthcoming from a static tax analysis because this sales tax increase causes the​ government's tax revenues to __________.

(points are very straight forward) Order - Low, High, then Max Point; accords with; increase

('Subject(s)' subject to change) Key taxes at the 'federal' level do not include​: A. 'property' taxes. B. individual income taxes. C. 'Social Security' taxes. D. corporate income taxes. __________________________________________________________________ Key taxes at the 'state and local' level do not include​: A. Social Security taxes. B. property taxes. C. corporate income taxes. D. individual income taxes.

A. 'property' taxes or sales; A. Social Security taxes.

(Units and subject subject to change) The figure to the right shows the relationship between a​ government's sales tax revenue and its sales tax rate. According to this​ figure, 'dynamic' tax analysis provides a good approximation of the revenue effects of an increase in the tax rate over the tax rate range from A. 5 to 8 percent. B. 3 to 7 percent. C. 0 to 8 percent. D. 0 to 5 percent.

A. 5 to 8 percent. from max point to lowest, the end, point

Governments that wish to maximize their tax revenues should always assess a high tax rate. A. False B. True

A. False

The most common provider of public goods is the private sector. A. False B. True

A. False

Which of the following is not an economic function of​ government? A. Income redistribution. B. Providing a legal system. C. Promoting competition. D. Ensuring​ economy-wide stability.

A. Income redistribution.

Christino: Income- $2,000 $3,000 $4,000 Taxes Paid- $300 $400 $500 Jarius: Income- $2,000 $3,000 $4,000 Taxes Paid- $300 $450 $600 Meg: Income- $2,000 $3,000 $4,000 Taxes Paid- $300 $500 $700 Refer to the above table when answering the following questions. Does Christino experience​ progressive, proportional, or regressive​ taxation? A. Regressive taxation. B. Progressive taxation. C. Proportional taxation. D. None of the above. Does Jarius experience​ progressive, proportional, or regressive​ taxation? A. Progressive taxation. B. Regressive taxation. C. Proportional taxation. D. None of the above. Does Meg experience​ progressive, proportional, or regressive​ taxation? A. Proportional taxation. B. Regressive taxation. C. Progressive taxation. D. None of the above.

A. Regressive taxation; C. Proportional taxation; C. Progressive taxation

The two primary money transfer payments in our system are A. Social Security​ old-age and disability benefits and unemployment insurance benefits. B. Disability benefits and unemployment insurance benefits. C. Welfare benefits and unemployment insurance benefits. D. Social Security​ old-age and disability benefits and welfare benefits.

A. Social Security​ old-age and disability benefits and unemployment insurance benefits.

What is the economic effect of price​ floors? A. Surpluses. B. A black market will emerge. C. There are no economic effects. D. Shortages.

A. Surpluses.

Middlemen specialize in lowering transaction costs. A. True B. False

A. True

The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime. Others claim that more people will use these drugs. Suppose that some of these drugs are legalized so that anyone may sell them and use them. Based on positive economic​ analysis, such decriminalization will lead to A. a reduction in price of these drugs and an increase in quantity demanded. B. a reduction in both quantity demanded of these drugs and in price. C. a reduction in quantity demanded of these drugs and an increase in price. D. an increase in quantity demanded of these drugs and in price.

A. a reduction in price of these drugs and an increase in quantity demanded.

A specified interval of income to which a specific and unique marginal tax rate is applied is called A. a tax bracket. B. a tax rate. C. a tax base. D. an average tax rate.

A. a tax bracket.

Scarcity implies that A. a way of rationing supplies of goods must be found. B. there can never be surpluses for long periods of time. C. middlemen perform no useful function in society. D. there will always be shortages.

A. a way of rationing supplies of goods must be found.

Public schools provide educational services at a price A. below the market price. B. determined by the federal government. C. above the market price. D. equal to the market price.

A. below the market price.

All of the following are ways the government can correct positive externalities except A. imposing positive taxes. B. financing the production of the good. C. subsidizing the product or service. D. imposing regulations.

A. imposing positive taxes.

Opponents of minimum wage legislation argue that higher minimum wages serve to A. increase​ unemployment, particularly among unskilled minority teenagers. B. increase the quantity of labor demanded. C. decrease the quantity of labor supplied. D. increase​ unemployment, particularly among high income executives.

A. increase​ unemployment, particularly among unskilled minority teenagers.

One reason that collective and private decision making differ is A. individuals working in the government sector face a different incentive structure than those in the private sector. B. the government actions do not have an opportunity cost while private actions do. C. private individuals compete and act in their own interest while government bureaucrats do not. D. there is no difference between collective and private decision making.

A. individuals working in the government sector face a different incentive structure than those in the private sector.

Which of the following is a characteristic of a public​ good? A. no individual can be excluded from the benefits of consuming it B. exclusion of paying consumers is feasible C. one​ person's consumption of such a good reduces the amount available for another person to consume D. it cannot be consumed by many people simultaneously

A. no individual can be excluded from the benefits of consuming it

Black markets usually arise when there are A. price ceilings. B. price floors. C. price quotas. D. price subsidies

A. price ceilings.

One result of the agriculture price supports cited in the text is that A. sometimes surplus food is given away. B. food shortages result in most cases. C. small farms receive most of the benefits. D. None of the above.

A. sometimes surplus food is given away.

The federal corporate income tax structure results in double taxation because A. stockholders pay taxes on dividends that were already taxed as profits of the corporation. B. corporations pay taxes on any retained earnings and stockholders pay taxes on dividends. C. corporations pay taxes on their profits and additional taxes for any retained earnings. D. stockholders pay taxes on corporate earnings and the company pays taxes on profits.

A. stockholders pay taxes on dividends that were already taxed as profits of the corporation.

A proportional​ tax, or​ flat-rate tax A. takes the same percentage of a​ person's taxable income in tax regardless of their level of income. B. takes a greater percentage of a​ person's taxable income in tax as their income rises. C. takes a greater percentage of a​ person's taxable income in tax as their income falls. D. takes a lesser percentage of a​ person's taxable income in tax as their income rises.

A. takes the same percentage of a​ person's taxable income in tax regardless of their level of income.

Under progressive​ taxation, as a​ person's taxable income​ increases, A. the marginal tax rate is always above the average tax rate. B. the marginal tax rate is always below the average tax rate. C. the marginal tax rate is always equal to the average tax rate.

A. the marginal tax rate is always above the average tax rate.

Market failure occurs because A. the market system does not make individuals responsible for the social​ costs/benefits of their actions. B. the market system forces individuals to consider the social consequences of their actions. C. the market system forces individuals to consider the social and private consequences of their actions. D. the market system does not make individuals responsible for the private​ costs/benefits of their actions.

A. the market system does not make individuals responsible for the social​ costs/benefits of their actions.

(Units subject to change) An excise tax of ​$'0.40' is levied on a product. As a result of the​ tax, the market price of the product goes from ​$'2.00' to ​$'2.30'. How much of the tax does the consumer​ pay? A. ​$'0.30'. B. $'0.15'. C. $'0.10'. D. The consumer pays none of the tax.

A. ​$'0.30'. (Since the original price was ​$2.00 and the new price was $2.30​, consumers pay $0.30 of the $0.40 tax.)

(Part 2 of previous) If producers have to pay external​ costs, the supply curve will shift to the​ ______, and if consumers take external benefits into​ account, the demand curve will shift to the​ ________. A. ​left; right B. left; left C. right; left D. right; right

A. ​left; right

The Social Security tax is imposed on earnings up to roughly A. ​$100,000 at a rate of 6.2 percent on employers and 3.1 percent on employees. B. $133,000 at a rate of 6.2 percent on employers and 6.2 percent on employees. C. $150,000 at a rate of 8.2 percent on employers and 8.2 percent on employees. D. $135,000 at a rate of 5.0 percent on employers and 6.0 percent on employees.

B. $133,000 at a rate of 6.2 percent on employers and 6.2 percent on employees.

Suppose Canada spends less per capita on national defense than many other countries of similar size and income. A reasonable economic explanation would be that A. Canadians perceive national defense as generating external costs rather than as a public good. B. Canada is able to​ free-ride on the defense spending of the United States. C. national defense is not a public good in Canada. D. Canada's tax system is less efficient than other industrial nations.

B. Canada is able to​ free-ride on the defense spending of the United States.

An effluent fee refers to a government regulation which specifies a maximum allowable rate of pollution. A. True B. False

B. False

Market failure refers to a situation where a market economy collapses. A. True B. False

B. False

Markets which are temporarily out of equilibrium will always return to equilibrium immediately. A. True B. False

B. False

Most of the benefits from agricultural price supports have gone to​ small, family-owned farms. A. True B. False As long as a price floor is​ ________ the market clearing​ price, imposing a price floor creates a​ ________. A. above; shortage B. below; shortage C. above; surplus D. below; surplus

B. False; C. above; surplus

Which of the following is not a difference between market and collective decision​ making? A. The government can use expropriation to extract​ payments, but private firms cannot. B. Government goods are costless to​ produce, while private goods have production costs. C. Money payments can signal intensity of desire for a​ product, but voting cannot. D. Government goods are often provided free of​ charge, while market goods have a price.

B. Government goods are costless to​ produce, while private goods have production costs.

An excise tax of 60 cents is levied on a product. As a result of the​ tax, the price of the product goes from​ $1 to​ $1.40. Which of the following is​ true? A. The consumer pays the entire tax. B. The consumer pays the majority of the tax but not the entire tax. C. The producer pays the majority of the tax but not the entire tax. D. The producer pays the entire tax.

B. The consumer pays the majority of the tax but not the entire tax.

Which of the following is NOT an example of transaction cost? A. The time and effort spend researching the product as well as its various sellers. B. The enjoyment of using the good. C. The cost of returning a defective product. D. The opportunity cost of time spent looking for stores selling the desired item.

B. The enjoyment of using the good.

A positive difference between the purchase price and the sale price of an asset is called a capital gain. A. False B. True

B. True

Much of our legal system is involved with defining and protecting property rights. A. False B. True

B. True

Rationing by the price system leads to the most efficient use of available resources. A. False B. True

B. True

The goal of antitrust legislation is to reduce the power of firms that can determine the market price of the goods they sell. A. False B. True

B. True

In the United​ States, government-imposed price supports are most often associated with A. industrial products. B. agricultural products. C. high-tech products. D. consumer electronics.

B. agricultural products.

Prices perform a rationing function by A. making sure that buyers do not have to wait for goods. B. allocating goods to the buyers who are willing and able to pay the highest price. C. eliminating scarcity in the market. D. allowing​ high-demand buyers to trade ration coupons.

B. allocating goods to the buyers who are willing and able to pay the highest price.

A cost or benefit of an economic activity that has an impact on an​ individual's well-being, even though the individual was not directly involved in the​ activity, is known as​ a(n) A. public good. B. externality. C. capital loss. D. free-rider.

B. externality.

With respect to the purchased​ items, a sales tax is a A. social wlefare tax. B. proportional tax. C. progressive tax. D. regressive tax.

B. proportional tax.

People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect A. reconstruction to take less time because the price controls reduce animosity and potential conflict. B. reconstruction to take longer because the quantity supplied of new materials would increase more slowly. C. reconstruction to take less time because people will have more money to spend. D. reconstruction never to occur.

B. reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

What reason do critics cite against boosting Social Security collections via higher tax​ rates? Critics argue that collecting more taxes will A. shift the burden of the tax from​ lower- and​ middle-income earners to​ higher-income earners. B. reduce incentives for businesses to hire workers and for people to offer to supply their labor. C. increase incentives for businesses to hire workers and for people to offer to supply their labor. D. encourage people to find ways to avoid purchasing taxable goods and services.

B. reduce incentives for businesses to hire workers and for people to offer to supply their labor.

The corporate income tax in the United States A. excludes dividends paid out. B. results in​ individuals' being doubly taxed on corporate earnings. C. only taxes retained earnings. D. does not apply to profits earned on exports.

B. results in​ individuals' being doubly taxed on corporate earnings.

According to the static tax analysis approach to evaluating how changes in tax rates affect government tax​ collections, A. the tax base may be influenced by tax increases. B. the tax rate will have no effect on the tax base. C. incentives must be examined when raising taxes. D. there is a maximum tax that can be charged to maximize tax revenue.

B. the tax rate will have no effect on the tax base.

Market failure occurs when A. the market system fails to allocate resources to each individual according to their abilities. B. the unrestrained market economy leads to too few or too many resources going to a specific economic activity. C. the market system fails to allocate an equal share of resources to all individuals. D. the market system fails to allocate resources to each individual according to their needs.

B. the unrestrained market economy leads to too few or too many resources going to a specific economic activity.

Some economists argue that corporate income taxes are typically not paid by the​ firm, but by A. the government. B. the​ stockholders, employees, and customers. C. bondholders. D. the​ firm's board of directors.

B. the​ stockholders, employees, and customers.

An example of free riding would be A. using the library even though you​ don't have a card. B. walking on a golf course to play without paying. C. trying a sample of food at a grocery store. D. having a friend buy you a movie ticket.

B. walking on a golf course to play without paying.

Which of the following is consistent with dynamic tax​ analysis? A. A decrease in the tax rate will likely cause a decrease in the tax base. B. An increase in the tax rate will have no impact on the tax base. C. An increase in the tax rate will likely cause a decrease in the tax base. D. An increase in the tax rate will likely cause an increase in the tax base.

C. An increase in the tax rate will likely cause a decrease in the tax base.

A true public good must be provided by the government. Which of the following goods provided by the government is a true public​ good? A. Postal service. B. Highways where tolls are collected. C. Flood control. D. Tax collection.

C. Flood control.

Which of the following is an example of a 'transfer in kind'​? A. Disability benefits. B. Unemployment insurance benefits. C. Food stamps. D. Social Security.

C. Food stamps.

The French government recently allocated the equivalent of more than​ $120 million in public funds to Quaero ​(Latin for​ "I ​ search"), an Internet search engine analogous to Google or Yahoo. Is a publicly funded Internet search engine a public good or a government sponsored​ good? A. It is a public​ good, unlikley to be provided in the private market. B. It is a public​ good, deemed socially desirable through the political process. C. It is a government sponsored​ good, deemed socially desirable through the political process. D. It is a government sponsored​ good, deemed politically desirable through the political process.

C. It is a government sponsored​ good, deemed socially desirable through the political process.

Which of the following is NOT true of the federal unemployment insurance​ tax? A. It covers the costs of the unemployment insurance system. B. It is paid only by employers. C. It is paid by employers and employees. D. The tax rate is 0.6 percent on the first​ $7,000 of annual wages of each employee who earns more than​ $1,500.

C. It is paid by employers and employees.

(Part 2 of ^) Does an Internet search engine satisfy the key characteristics of a public​ good? A. No, because the principle of rival consumption does not apply but user could be excluded. B. No, because it can be used by many people simultaneously at no additional opportunity cost, but users can be excluded C. No, it can be consumed simultaneously by many users at little or no additional cost, but the advertising space is limited, and advertisers can be excluded. D. Yes, because the principle of rival consumption does not apply and it would be costly to exclude users.

C. No, it can be consumed simultaneously by many users at little or no additional cost, but the advertising space is limited, and advertisers can be excluded.

Which one of the following is a primary difference between a public good and a private​ good? A. Private goods are manufactured because of the workings of the price system while public goods come about through antitrust legislation. B. Private goods are purchased by money transfers while public goods are purchased by​ in-kind transfers. C. Private goods are subject to the principle of rival consumption while public goods are not. D. A private good is subject to the​ free-rider problem while a public good is not.

C. Private goods are subject to the principle of rival consumption while public goods are not.

The theory of public choice is the study of A. the study of the system of rewards or punishments in the private sector. B. how the price system allocates resources in the public sector. C. the process through which​ voters, politicians, and other interested parties interact to influence nonmarket choices. D. how legal coercion influences the allocation of resources in the private sector.

C. the process through which​ voters, politicians, and other interested parties interact to influence nonmarket choices.

Which of the following is a dissimilarity between the market sector and the public sector decision​ making? A. the existence of competition B. the types of individuals working in the private sector and working in the public sector C. the type of voting system D. the existence of an opportunity cost associated with every action

C. the type of voting system

Which of the following is a similarity between the market sector and the public sector decision​ making? A. goods are furnished to the ultimate consumers without payment required B. governments can resort to using force in their regulation of economic affairs C. there is an opportunity cost associated with every action D. a dollar voting system is in effect

C. there is an opportunity cost associated with every action

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as A. merit payments. B. demerit payments. C. transfer payments. D. black market payments.

C. transfer payments.

Rent control is a type of price floor. A. False B. True Evidence indicates that the group which benefits most from rent ceilings is A. local municipalities. B. property owners. C. upper-income professionals. D. low-income individuals.

C. upper-income professionals.

Chapter 4

Chapter 4

Chapter 5

Chapter 5

Chapter 6

Chapter 6

In a price​ system, changes in prices A. imply that people have made mistakes in the past. B. signal to policymakers what goods should and should not be taxed. C. make it difficult for the economy to function well. D. signal to consumers that some goods are relatively more or less scarce.

D. signal to consumers that some goods are relatively more or less scarce.

The accompanying graph depicts the market for unskilled labor. With the market initially in​ equilibrium, let a minimum wage be set at​ $8 per hour. The amount of unemployment is now A. 50,000 hours of labor. B. 20,000 hours of labor. C. zero. D. 40,000 hours of labor.

D. 40,000 hours of labor. (The amount of unemployment at the minimum wage is the difference between the quantity supplied and the quantity demanded at minimum wage line. In other​ words, it is equal to the excess quantity​ supplied, or the surplus.)

Corporate income taxes account for A. 2 percent of all federal taxes collected and make up about 7 percent of all state and local taxes collected. B. 50 percent of all federal taxes collected and make up about 21 percent of all state and local taxes collected. C. 36.7 percent of all federal taxes collected and make up about 14 percent of all state and local taxes collected. D. 7 percent of all federal taxes collected and make up about 2 percent of all state and local taxes collected.

D. 7 percent of all federal taxes collected and make up about 2 percent of all state and local taxes collected.

Which of the following best demonstrates the principle of rival​ consumption? Be sure to include state parks in your answer. A. No one can be readily excluded from enjoying the services of a state park. B. When I visit a state​ park, you can visit the same park at the same time. C. When I enter a picturesque​ park, it does not reduce your ability to enjoy some of the beauty of the park. D. Either you use a​ park's campsite or I use it.

D. Either you use a​ park's campsite or I use it.

The most important categories in the federal budget are A. national defense and the judicial system. B. health and​ hospitals, waste​ treatment, and garbage collection. C. health and hospitals and the judicial system. D. Medicare and other​ health-related spending, Social Security and other​ income-security programs, and national defense.

D. Medicare and other​ health-related spending, Social Security and other​ income-security programs, and national defense.

Which of the following are possible ways to address the current shortfalls of the Social Security​ system? Possible approaches to funding the current Social Security shortfall include A. increasing the ages at which older people qualify for Social Security benefits. B. raising the current Social Security contribution rate from 12.4 percent to nearly 15 percent over the next 25 years. C. shifting a larger portion of the tax burden on to businesses and away from​ workers' earnings. D. Only A and B are correct. E. All of the above are correct.

D. Only A and B are correct.

The economic functions of government include A. regulation of​ government-inhibited goods. B. the provision of​ government-sponsored goods. C. income redistribution. D. providing public goods. E. All of the above.

D. providing public goods. (Or legal system)

('Subject' is subject to change) Correcting 'positive' externalities will result in a​ new, corrected, market 'demand' curve that is to the A. left of the initial curve. This will increase the output level. B. right of the initial curve. This will decrease the output level. C. left of the initial curve. This will decrease the output level. D. right of the initial curve. This will increase the output level.

D. right of the initial curve. This will increase the output level.

The average tax rate is the A. tax rate paid by the average taxpayer. B. fraction of each additional dollar of income that must be paid in taxes. C. income range within which a tax rate applies. D. total tax paid divided by total income.

D. total tax paid divided by total income.

('Subject' is subject to change) In a small​ town, a 'paper mill' produces 'water' pollution. If the government does not intervene, the equilibrium price of 'paper' will be​ __________, and the equilibrium quantity of 'paper' will be​ __________. A. less than the socially optimal​ price, less than the socially optimal quantity B. greater than the socially optimal​ price, less than the socially optimal quantity C. greater than the socially optimal​ price, greater than the socially optimal quantity D. equal to the socially optimal​ price, equal to the socially optimal quantity E. less than the socially optimal​ price, greater than the socially optimal quantity

E. less than the socially optimal​ price, greater than the socially optimal quantity

Evidence indicates that a system of rent controls primarily benefits A. poor people looking for a first apartment. B. all renters. C. the government. D. property owners. E. upper-income professionals.

E. upper-income professionals.

(Subject is subject to change) During World War​ II, many goods such as​ butter, sugar, and gasoline were rationed or price controls were imposed. The graph on the right shows the market for sugar. Suppose that the government decides to set a price ceiling of​ $2.00 on sugar. This price is shown on the graph. ​1.) Using the line drawing tool​, show the implicit supply​ curve, given the price ceiling. Label it​ 'implicit supply'. ​2.) Using the point drawing tool​, identify the implicit price and quantity. Label it​ 'implicit price'. Carefully follow the instructions​ above, and only draw the required objects.

Implicit Supply; (8.75,9.46), (9.11,0) Implicit Price; (Where Implicit Supply line and Demand line intersect)

In​ Lungtopia, cigarettes sell for​ $5 per​ pack, and​ 5,000 packs are sold every week. In an effort to raise government​ revenue, the mayor of the city decides to impose a​ $2 per pack tax on cigarettes. ​1.) Using the line drawing tool​, show the approximate effect of the tax on the market supply curve for cigarettes. Properly label your line. ​ 2.) Using the point drawing tool​, indicate the new equilibrium price and quantity. Label your point E1. Carefully follow the instructions​ above, and only draw the required objects.

Line to the left of initial supply line E1 point: (3.96, 6.12) S1: (0.784,2.76), (6.68,9.03)

__________________ also known as​intermediaries, specialize in linking ultimate sellers and buyers and lowering these​parties' __________________ costs.

Middlemen; transaction

Suppose that the U.S. government places a ceiling on the price of a medical drug of​ $7. ​1.) Using the point drawing tool​, plot the quantity supplied on the supply line and label it. ​ 2.) Using the point drawing tool​, plot the quantity demanded on the demand line and label it. ​3.) Using the double arrow line​, ​indicate, via a​ label, the shortage or surplus. Carefully follow the instructions​ above, and only draw the required objects.

QS: (7, 98) QD: (7, 102) Line connects QS & QD, Below making it a shortage line

The diagram at right shows the market for pharmaceutical drugs. The pharmaceutical industry has benefited from advances in research and development that enable manufacturers to identify potential cures more quickly and therefore at lower cost. At the same​ time, the aging of our society has increased the demand for new drugs. Using the line drawing tool​, illustrate the impacts of these developments on both the demand and supply. Label the new lines. Carefully follow the instructions​ above, and only draw the required objects.

S1; (3.2,2.08), (17.3,16.2) D1; (2.68,19.1), (18.1,4.46)

__________ are payments made to individuals for which no services or goods are rendered in​return, compared with __________, which people must direct to spending on specified goods.

Transfer payments; income transfers in kind

For each of the following goods or​ services, select whether it is a public or a private good. (Objects vary) An open-air concert in the park is __________. A CD is __________. Clean air is _________.

a public good; a private good; a public good

(Part 2 ^) ​So, in the absence of any government action to correct the negative externality from steel​ production, the overallocation of resources to steel production in Pennsylvania would __________ following the adoption of the new​ steel-manufacturing technique.

be smaller

External __________ result in an underallocation of resources to the specific activity. Three possible government corrections are __________ the production of the​ activity, __________ private firms or consumers to engage in the​ activity, and __________.

benefits; financing; subsidizing; regulation

External __________ lead to an overallocation of resources to the specific economic activity. Two possible ways of correcting these spillovers are __________ and __________ deregulation regulation.

costs; taxation; regulation

The sales tax rate applied to all purchases within a state was 0.04​ (4 percent) throughout 2019 but increased to 0.05 ​(5 percent​) during all of 2020. The state government collected all taxes​ due, but its tax revenues were equal to​ $40 million each year. Within this​ state, the sales tax base from 2019 to 2020 must have __________. Which of the following could account for this change in the tax​ base? A. A weaker state economy. B. Rapid economic growth. C. People avoiding the purchase of taxable items. D. All of the above. E. Both A and C.

declined; E. Both A and C.

The equilibrium market price will __________________. The equilibrium market quantity will __________________.

decrease ;change in an indeterminate way

When the __________________ curve shifts outward or inward with an unchanged __________________ curve, equilibrium price and quantity increase or​ decrease, respectively. When the __________________ curve shifts outward or inward given an unchanged __________________ curve, equilibrium price moves in the direction opposite to equilibrium quantity.

demand; supply supply; demand

The economic activities of government include​ (1) correcting for __________, ​(2) providing a __________, (3) promoting __________, ​(4) producing __________ goods, and​ (5) ensuring __________.

externalities; legal system; competition; public; economy-wide stability

Prices in a market economy perform a rationing function because they reflect relative​ scarcity, allowing the market to clear. Other ways to ration goods in an economy include __________________, __________________, __________________, __________________, and __________________.

first come first served; political power; physical force; random assignment; coupons

The black market price of butter​, including cost of​ time, is likely to be __________________.

higher than the original equilibrium price

If the government aims to correct the positive externality in the inoculation market via a​ per-unit subsidy to​ consumers, the​ per-unit subsidy would need to be __________ before the study because the study found the external benefits to be __________.

higher than; higher

When there is a shift in demand or​ supply, the new equilibrium price is not obtained __________________. Adjustment __________________.

immediately; takes time

The equilibrium market price will __________________. The equilibrium market quantity will __________________.

increase; change in an indeterminate way

(Part 2 of ^)​ Thus, in light of the findings of the new​ study, the underallocation of resources to the provision of​ flu-vaccine inoculations is __________ indicated in the figure.

larger than

With the new​ steel-manufacturing technique in​ place, the appropriate effluent fee imposed by the Pennsylvania government would be __________ because the new production technique results in __________ external cost.

lower; a smaller

The political system is run by __________ rule, whereas the market system is run by __________ rule.

majority; proportional

Consider a nation with a government that does not provide people with property rights for a number of items and that fails to enforce the property rights it does assign for remaining items. Externalities would be __________ common in this nation than in a country such as the United States.

more

Public goods have two​ characteristics: (1) Once they are​ produced, there is no additional __________ when additional consumers use​ them, because your use of a public good does not deprive others of its simultaneous​ use; and​ (2) consumers cannot conveniently be __________ on the basis of use.

opportunity cost; charged

A key feature of the __________________ system is __________________ exchange​, which involves trades between individuals that they both perceive to raise their​ well-being.

price; voluntary

For purposes of assessing income​ taxes, there are three official income levels for workers in a small​ country: high,​ medium, and low. The table to the right gives the marginal tax rate for the last hour on the job during a​ 40-hour workweek for each of these three worker types. Based only on this​ information, this​ nation's income tax system appears to be __________.

progressive

Even when business people can change​ prices, some rationing by waiting may occur. Such __________________ arises when there are large changes in demand coupled with high costs of satisfying those changes immediately.

queuing

The principle of __________ does not apply to public goods as it does to private goods.

rival consumption

Many U.S.​ cities, especially those with large populations of​ renters, have rent controls. Suppose that Los Angeles sets a rent control of ​$500 per month on​ one-bedroom apartments. The graph on the right shows this situation. The rent control will create a __________________ of apartments equal to __________________.

shortage; (Qd - Qs)

(Part 2 of ^) The government could best correct this externality by __________.

taxing the production of paper

What is the market price of apartments in this​ town? ​$__________________. What is the equilibrium quantity of apartments in this​ town? __________________. If this town imposes a rent control of​ $450 per​ month, how many studio apartments will be​ rented? __________________.

$500; 2,000; 1,800

The legal price is ​$__________________. The maximum quantity demanded for black market service is A. 102 thousand customers. B. 4 thousand customers. C. 98 thousand customers. D. 2 thousand customers. The maximum quantity supplied by black market providers is A. up to 2 thousand customers. B. between 98 and 102 thousand customers. C. up to 98 thousand customers. D. up to 4 thousand customers. The highest feasible black market price is ​$__________________.

$7; B. 4 thousand customers.; D. up to 4 thousand customers.; $9

(May appear twice) Inoculations against communicable diseases generate external benefits. As shown in the figure to the​ right, if each individual ignores these external​ benefits, the demand curve for inoculations would be D1​, and together with the supply​ curve, S, the market clearing quantity would be 150 million.​ However, if buyers of inoculations took the external benefits into​ account, the demand curve would shift to D2. The new equilibrium quantity would be 200 ​million, and the equilibrium price​ of an inoculation would rise from​ $10 to ​$15. Now assume that a careful study of the likely transmission of influenza in light of a changed population distribution has revealed that the external benefits from inoculations are greater than those currently displayed in the graph. In light of this​ information, is the underallocation of resources to the provision of​ flu-vaccine inoculations larger or smaller than indicated in the​ figure? ​1.) Using the line drawing​ tool, draw either a new demand curve ​(D3​) or a new supply curve ​(S1​) that shows how higher external benefits from inoculations affect the market for this good. Properly label your line. ​ 2.) Using the point drawing tool​, indicate the new equilibrium price and quantity. Label this point ​'E3​.' Carefully follow the instructions​ above, and only draw the required objects.

(Draw new Demand curve) D3; (24.4,47.9), (54.7,23.3) E3; (38.5,36.5) (Ahead of existing lines)

(Units subject to change) Suppose that the figure to the right applies to​ Pennsylvania's steel market. The demand curve for steel is D. The supply​ curve, S1​, includes only the costs that the firms in the market have to pay. Market equilibrium occurs at point​ E, with a price of​ $800 per ton and a quantity of 110 million tons per year. Producing​ steel, however, also involves externalities. If producers had to pay these external​ costs, the supply curve would shift to S2​, the equilibrium quantity would fall to 90 million tons per​ year, and the price would rise to ​$990 per ton. Equilibrium would shift from E to E1. Now suppose that steel manufacturers in this state adopt a new technique for producing steel that entails a smaller external cost. "In the absence of any government action to correct the negative externality from steel​ production, would the overallocation of resources to steel production in Pennsylvania be larger or smaller following the adoption of the new​ steel-manufacturing technique?" ​1.) Using the line drawing​ tool, draw either a new demand curve ​(D1​) or a new supply curve ​(S3​) that shows how an improved production technique affects the market for this good. Properly label your line. ​2.) Using the point drawing tool​, indicate the new equilibrium price and quantity. Label this point ​'E2​.' Carefully follow the instructions​ above, and only draw the required objects.

(Draw new supply curve) S3; (5.51,18.4), (45.6,49.6) E2; (27.7,35.4) (In-between existing lines and points)

The information contained in the table to the right applies to the market for a particular item in the absence of a unit excise tax. ​ (Throughout this exercise all numerical responses should be entered as whole​ numbers). According to this​ information, in the absence of a unit excise​ tax, the market price is ​$__________. Suppose that the government decides to subject producers of this item to a unit excise tax equal to​ $2 per unit sold. The new equilibrium market price will be ​$__________ and the new equilibrium quantity is __________. The payment of this tax is A. borne most heavily by consumers. B. split evenly between consumers and producers. C. borne most heavily by producers.

(Equilibrium value)(7); (Equilibrium value)(125); (if a​ $2 per unit excise tax is​ imposed, then any given output will now be forthcoming only if the price is higher by exactly​ $2. Try graphing this​ "adjusted" supply data against the original demand curve to find the new equilibrium outcome.)($8); (Quantity Demanded of matching Price unit on graph) (100); B. split evenly between consumers and producers.

After the​ subsidy, consumers will pay __________% of the cost of the​ treadmill, and the state will pay __________% of the cost.

(First determine the percentage of the cost paid by the​ state: percentage paid by the state= (subsidy amount($'600'))/(price of treadmill($1,000))*100. Then the percentage paid by the consumer is 100 minus the percentage paid by the state.) 40;60

The diagram at right shows the market for smartphones. In recent​ years, technological improvements have greatly reduced the costs of producing​ smartphones, and a number of new firms have entered the smartphone industry. At the same​ time, prices of substitutes for​ smartphones, such as various tablet​ devices, have declined considerably. Using the line drawing tool​, illustrate the impacts of these developments on both the demand and supply. Label the new lines. Carefully follow the instructions​ above, and only draw the required objects.

(No image available) S1; (6.69,1.56), (19.3,14.8) D1; (0,14.4), (12.9,1.71)

Scans of internal organs using magnetic resonance imaging​ (MRI) devices are often covered by subsidized health insurance programs such as Medicare. Consider the table to the right illustrating hypothetical quantities of individual MRI testing procedures demanded and supplied at various​ prices, and then answer the questions that follow. ​Note: Throughout this exercise all responses should be entered as whole numbers. In the absence of a​ government-subsidized health​ plan, the equilibrium price of MRI tests is ​$__________ and the amount of​ society's total spending on MRI tests is ​$__________ million. Suppose that the government establishes a health plan guaranteeing that all qualified participants can purchase MRI tests at an effective price​ (that is,​ out-of-pocket cost) to the individual of​ $100 per test. In this case people will consume __________ MRI tests. The​ per-unit price that induces producers to provide the amount of MRI tests demanded at the government guaranteed price of​ $100 is ​$__________ and​ society's total spending on MRI tests becomes $__________ million. Under the​ government's coverage of MRI​ tests, the​ per-unit subsidy it provides is $__________ and the total subsidy that the government pays to support MRI testing at its guaranteed price is $__________ million.

(Price at which Demanded and Supplied is equal) $500; The amount of​ society's total spending on MRI tests is the product of the equilibrium price and the equilibrium quantity. $40;​ (Quantity demanded) 100,000; (Look at which price gives Quantity Demanded in the Quantity Supplied) $700; (The amount of​ society's total spending on MRI tests will be the product of the supply price​ ($700) and the quantity demanded at the​ government's guaranteed price.) $70; (the difference between the supply price and the​ government-guaranteed minimum price.) $600; (Multiply the​ per-unit subsidy by the quantity of MRI tests consumed at the​ government-guaranteed minimum price.) $60

('Subjects' and units subject to change) Suppose that the State of 'Connecticut' decides to subsidize the cost of purchasing a treadmill for cardiac​ patients, as prescribed by their doctors. Prior to the​ program, the equilibrium price of treadmills was​ $800, and the equilibrium quantity purchased was​ 50,000. The state decides to subsidize ​$'600' of the cost of the​ treadmill, and with the​ subsidy, the quantity that consumers wish to purchase is​ 70,000. Manufacturers are willing to supply this quantity at a price of​ $1,000. The cost of this program to the State of 'Connecticut' is ​$__________million.

(The cost of the subsidy is the amount of the subsidy per treadmill ($'600'​) multiplied by the number of treadmills purchased​ (70,000). To convert your result to millions of​ dollars, divide it by​ 1,000,000.)) $'42' million

(Subjects and units subject to change) Suppose that in the figure to the​ right, the government 'lowers' the floor price of peanuts below the displayed​ $500-per-ton floor​ price, to ​$450 per ton. Will the excess quantity of peanuts supplied increase or decrease as a​ consequence? At the floor price of​ $500 per​ ton, the excess quantity of peanuts supplied is __________________ million tons per time period. ​(Enter your response rounded to one decimal​ place.) If the government 'lowers' the floor price of peanuts from​ $500 per ton to $450 per​ ton, the excess quantity of peanuts supplied will __________________.

(The excess quantity of peanuts supplied is the difference between the amounts supplied and demanded at the floor price.) 4.5-2.5= 2; decrease

(Units subject to change) Suppose that in the figure to the​ right, the government reduces the floor price of peanuts below the displayed ​$500​-per-ton floor​ price, to​ $400 per ton. Will the excess quantity of peanuts supplied increase or decrease as a​ consequence? At the floor price of ​$500 per​ ton, the excess quantity of peanuts supplied is nothing million tons per time period. ​(Enter your response rounded to one decimal​ place.) If the government reduces the floor price of peanuts from ​$500 per ton to​ $400 per​ ton, the excess quantity of peanuts supplied will __________________ to __________________ million tons per time period. ​(Enter your response rounded to one decimal​ place.)

(The excess quantity of peanuts supplied is the difference between the amounts supplied and demanded at the floor price.) 4.5-2.5= 2; decrease; '0' million

Based on the accompanying graph which depicts the market for CAT​ scans, in the free​ market, the price of a CAT scan would be __________. In the free market the quantity of CAT scans consumed would be __________. The government subsidizes the CAT scans and pays hospitals​ $450. When the subsidy is paid there will be __________ CAT scans produced. Consumers are willing to pay __________ out of the pocket expenses for a CAT scan. The amount of subsidy is __________. Subsidizing CAT scans results in __________ CAT scans being consumed.

(Where lines intersect) $250; (X intercept of above) 100; (The amount of CAT scans consumed is equal to the quantity supplied at the subsidized price of​ $450.) (X-axis where point is placed) 180; (This is the amount consumers pay. It is a point along the demand curve.) $100; (This is the amount consumers pay. It is a point along the demand curve.) $350; more

(Units subject to change) (dependant on table) Suppose Cameron earns $100,000 per year but must pay income taxes according to the tax schedule given in the table to the right. According to the​ chart, the income tax Cameron faces is a __________ tax. Assume Cameron has no tax exemptions or deductions. How much in income taxes must Cameron​ pay? Cameron must pay ​$__________ in income taxes. ​(Enter your response as a whole​ number.) Assume Cameron has no tax exemptions or deductions. What is his marginal tax​ rate? What is his average tax​ rate? ​Cameron's marginal tax rate is __________​% and his average tax rate is ___________​%. ​(Enter your responses as whole​ numbers.)

(always) progressive; (TL;DR) Do the first income rate normally, next take how much there are in between the incomes (example: $5,001 to $28,000 -> 28,000 - 5,000), do that again until you get to the category Cameron falls within (example: makes 100,000 a year, fourth bracket) and subtract it from the lowest in the fourth bracket, multiply that by the brackets tax rate%. Add all of those values up (there should be maybe 4 total) there's your answer ($23,250) (https://www.homeworklib.com/qaa/1169532/suppose-cameron-eams-80000-per-year-but-must-pay); marginal = (bracket it falls within) 30%; The average tax rate = the total tax paid / total income * 100, 23%

(Units subject to change) Consider the figure to the right. Suppose that the government raises its sales tax rate from 6 percent to 9 percent. Are the predictions of static tax analysis and dynamic tax analysis in agreement on the direction of the change of the​ government's tax​ revenues? Explain briefly. ​ 1.) Using the point drawing tool​, indicate the point on the curve associated with a sales tax rate of 6 percent. Label this point ​'High Tax Revenue​.' ​2.) Using the point drawing tool​, indicate the point on the curve associated with a sales tax rate of 9 percent. Label this point ​'Low Tax Revenue​.' Carefully follow the instructions​ above, and only draw the required objects. If the sales tax increases from 6 percent to 9 percent, the​ figure's dynamic tax analysis __________ the prediction that would have been forthcoming from a static tax analysis because this sales tax increase causes the​ government's tax revenues to __________ instead of __________.

(points are very straight forward) Order - Max, High, and Low; does not accord with; decrease; increasing

(Units subject to change) Consider the market for wheat in​ Pakistan, illustrated in the graph at right. In recent​ years, the government of Pakistan has established a support price for wheat of about ​$0.24 per kilogram of wheat. At this​ price, consumers are willing to purchase approximately 9 billion kilograms of wheat per​ year, while Pakistani farmers are willing to grow and harvest approximately 19 billion kilograms of wheat per year. The government purchases and stores all surplus wheat. What are annual consumer expenditures on the Pakistani wheat​ crop? ​$__________________ billion ​(round your answer to two decimal​ places) How​ much, in​ total, do Pakistani wheat farmers receive for the wheat they​ produce? ​$__________________ billion ​(round your answer to two decimal​ places) What are annual government expenditures on the Pakistani wheat​ crop? ​$__________________ billion ​(round your answer to two decimal​ places)

(value of wheat per kilogram*consumers approximate purchase of wheat per year) 0.24*9 = $2.16 billion; (value of wheat per kilogram*Pakistani wheat farmers approximate amount they are willing to grow and harvest per year) 0.24*19 = $4.56 billion; Difference between the two previous values, $2.4 billion

How do the taxes that are levied on goods and services affect market prices and​ quantities? A. The equilibrium quantity will decrease and the market price will increase by less than the amount of the tax. B. The equilibrium quantity will decrease and the market price will increase by the same amount as the amount of the tax. C. The equilibrium quantity will decrease and the market price will increase by more than the amount of the tax. D. Taxes have no influence on market price and quantity.

A. The equilibrium quantity will decrease and the market price will increase by less than the amount of the tax.

(Subject is subject to change) The price of milk increases. Which of the following is not part of the likely chain of events that follows from this price​ change? A. The manufacturers of milking machines lay off some workers. B. The demand for orange juice increases. C. Some consumers of milk reduce their consumption of milk. D. Producers of milk increase their production of milk.

A. The manufacturers of milking machines lay off some workers.

A good that has been deemed socially desirable through the political process is known as A. a merit good. B. a demerit good. C. a positive externality. D. a​ free-rider.

A. a merit good.

(Units and Tables subject to change) Consider the following hypothetical income tax brackets for a married couple. Assume for simplicity there are no exemptions or deductions. Suppose the​ couple's income is ​$70,000. The​ couple's marginal tax rate is __________ percent. ​(Enter your response as a whole​ number.) The​ couple's average tax rate is __________ percent. ​(Enter your response rounded to the nearest whole​ number.)

Answer is whatever bracket the couple's income falls within; (TL;DR) Do the first income rate normally, next take how much there are in between the incomes (example: $5,001 to $28,000 -> 28,000 - 5,000), do that again until you get to the category the couple falls within (example: makes 100,000 a year, fourth bracket, subtract it from the lowest in the fourth bracket), multiply that by the brackets tax rate%. Add all of those values up (there should be maybe 4 total) there's your answer = (18,000) Now, the average tax rate is the total tax paid divided by total income * 100 = (26%)

Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of A. an effluent fee because it is as if the factory is taxing the community. B. an external cost as the​ community, not the​ factory, is paying for the clean up. C. a public good. D. an external benefit since it creates jobs in environmental science.

B. an external cost as the​ community, not the​ factory, is paying for the clean up.

Employers match​ employees' contributions for A. Medicare taxes. B. unemployment insurance taxes. C. Social Security taxes. D. All of the above.

C. Social Security taxes.

What is the structure of the U.S. income tax​ system? A. The U.S. income tax system only considers the average tax rate for an individual. B. The U.S. income tax system is basically a proportional tax system since all people with the same income pay the same tax. C. The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate. D. The U.S. income tax system is a regressive tax system since higher income individuals pay a higher tax.

C. The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.

Which of the following explains the difference between the average tax rate and the marginal tax​ rate? A. The average tax rate uses total income while the marginal tax rate refers to the tax rate of the first dollar earned. B. The average tax rate refers to the last dollar earned while the marginal tax rate uses total income. C. The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned. D. The average tax rate refers to the first dollar earned while the marginal tax rate uses total income.

C. The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned.

Suppose the market clearing price of a specific medication is​ $45 per​ unit, as shown by the graph. The legal ceiling​ price, however, is​ $30 per unit. Based on this​ graph, will a shortage or surplus exist in the​ market? A. There is a surplus of​ 4,000 units. B. There is a shortage of​ 2,000 units. C. There is a shortage of​ 4,000 units. D. The market is in equilibrium.

C. There is a shortage of​ 4,000 units.

The minimum wage is an example of A. an input quota. B. a price ceiling. C. a price floor. D. an effective wage rate.

C. a price floor.

Assessing taxes by charging a tax rate equal to a fraction of the market price of each unit purchased is known as A. transactional taxation. B. dynamic taxation. C. ad valorem taxation. D. value added taxation.

C. ad valorem taxation.

Most private goods​ ________ rival in​ consumption, and most public goods​ ________ rival in consumption. A. are​ not; are not B. are​ not; are C. are; are not D. are; are

C. are; are not

Government-enforced prices such as price ceilings A. aid in the rationing function performed by prices in a market system. B. are only imposed on goods where market price has no useful function. C. disrupt the rationing function performed by prices in a market system. D. ration economic resources more efficiently than prices in a market system.

C. disrupt the rationing function performed by prices in a market system.

Buyers and sellers receive information about what should be bought and what should be produced A. from friends and family. B. by listening to TV news programs. C. from prices in a market system. D. from newspaper gossip columns.

C. from prices in a market system.

Sports​ stadiums, museums,​ ballets, plays, and concerts are examples of A. jurisdictional goods. B. capital goods. C. government-sponsored goods. D. discretionary goods.

C. government-sponsored goods.

(Variation of ^) Correcting 'negative' externalities will result in a​ new, corrected, market 'demand' curve that is to the A. left of the initial curve. This will increase the output level. B. right of the initial curve. This will decrease the output level. C. left of the initial curve. This will decrease the output level. D. right of the initial curve. This will increase the output level.

C. left of the initial curve. This will decrease the output level.

In the​ figure, P and Q locate the socially optimal price and quantity of a good. In the case of a good that generates positive​ externalities, the market price would be​ _____ P and the market quantity would be​ ______ Q​, while in the case of a good that generates negative​ externalities, the market price would be​ ________ P and the market quantity would be​ ____________ Q. A. lower​ than; equal​ to; higher​ than; equal to B. equal​ to; lower​ than; higher​ than; equal to C. lower​ than; lower​ than; lower​ than; higher than D. lower​ than; lower​ than; higher​ than; higher than

C. lower​ than; lower​ than; lower​ than; higher than

Voluntary exchange A. makes one party better off while making the other party worse off. B. is not part of the market system. C. makes both parties to a trade better off. D. relates to price ceilings and price floors.

C. makes both parties to a trade better off.

The study of collective decision​ making, or the process through which​ voters, politicians and other interested parties influence nonmarket choices is known as A. a private choice theory. B. the exclusion principle. C. public choice theory. D. antitrust legislation.

C. public choice theory.

The​ "incidence of a​ tax" A. is a special tax on individuals with high income. B. is a tax paid by​ self-employed workers. C. refers to those who bear the final burden of taxation. D. is a benefit tax.

C. refers to those who bear the final burden of taxation.

The imposition of an excise tax on a product will shift that​ product's ________ curve vertically by the exact amount of the tax. This represents​ ________. A. ​supply; an increase in supply B. demand; a decrease in demand C. supply; a decrease in supply D. demand; an increase in demand

C. supply; a decrease in supply

Suppose the market price of corn is​ $5 a bushel but the government sets a price of​ $7. As a​ result, A. the private demand will increase over time until​ $7 is the market price. B. there is a shortage of corn. C. the government must purchase the surplus to maintain the price. D. farmers will reduce planting until the market price is​ $7.

C. the government must purchase the surplus to maintain the price.

The more flexible prices​ are, A. the larger the shifts in supply will be following a change in demand. B. the greater the demand shifts necessary to bring about a new equilibrium. C. the more quickly a shock to the economy can be absorbed. D. the greater the hesitancy of sellers to change the nominal price.

C. the more quickly a shock to the economy can be absorbed.

Given the existence of relative​ scarcity, resources can be rationed by A. ​queuing, or standing in line. B. political mandate. C. a system of prices. D. All of the above.

D. All of the above.

Price​ ceilings, such as rent controls A. discourage the construction of new housing. B. reduce tenant mobility as people may be reluctant to change apartments. C. lead to the deterioration of existing housing. D. All of the above.

D. All of the above.

What is the economic effect of price​ ceilings? A. Resources will be allocated efficiently. B. An effective price ceiling will lead to a surplus. C. There are no economic effects. D. An effective price ceiling will lead to a shortage.

D. An effective price ceiling will lead to a shortage.

In many​ countries, education is either wholly provided by the government or is heavily subsidized. How would an economist explain​ this? A. The only way to provide education is through a​ government-sponsored system. B. Individuals will not purchase education because they do not benefit from it. C. Since education has a spillover​ cost, private markets will over provide for it. D. Since education has a spillover​ benefit, private markets will under provide for it. E. Education is a pure public good and those who do not pay cannot be excluded from it.

D. Since education has a spillover​ benefit, private markets will under provide for it.

Which of the following is an example of a 'transfer payment'​? A. Subsidized public housing. B. Medicare. C. food stamps. D. Social Security.

D. Social Security.

Which of the following is not a source of funding available to​ governments? A. Taxes. B. Borrowing. C. User charges. D. Stock sales.

D. Stock sales.

(Subject is subject to change) Suppose that you are investigating the market for aluminum. The price of steel​, a substitute​ good, has decreased. Which of the following would best describe the market reaction to this​ event? A. The supply of steel increases since steel firms must produce more steel to make up for the price decrease. B. The demand for aluminum ​decreases, creating a shortage and forcing the price of aluminum to increase. C. The supply of aluminum decreases since the price of steel decreases. D. The demand for aluminum ​decreases, which creates a surplus of aluminum​, causing the price of aluminum to decrease.

D. The demand for aluminum ​decreases, which creates a surplus of aluminum​, causing the price of aluminum to decrease.

Which of the following statements is true concerning the consequences of rent​ controls? A. Low income earners are big winners since it is easier to obtain housing. B. Property owners are big winners since they receive a guaranteed amount of rent. C. Construction companies are big winners because more housing units are being built due to guaranteed rental income. D. Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices. E. All of the above.

D. Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices.

Economists assume that when there is a change in demand​ and/or supply, that prices reach a new equilibrium A. after a protracted negotiation process. B. quickly. C. slowly. D. after an adjustment period that varies.

D. after an adjustment period that varies.

A price ceiling is A. a​ government-imposed minimum price that may be charged for a good or​ service, which can lead to shortages. B. a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to surpluses. C. a​ government-imposed minimum price that may be charged for a good or​ service, which can lead to surpluses. D. a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to shortages.

D. a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to shortages.

The most important tax in the U.S. economy is the A. personal income​ tax, which accounts for 86 percent of all federal revenues. B. corporate income​ tax, which accounts for 21 percent of all federal revenues. C. corporate income​ tax, which accounts for 50 percent of all federal revenues. D. personal income​ tax, which accounts for 50 percent of all federal revenues.

D. personal income​ tax, which accounts for 50 percent of all federal revenues.