Exam 2 Microecon

Government revenue raised by the tariff is represented by the area a. E. b. B + E. c. D + E + F. d. B + D + E + F.

A. E

The table represents a market in which a. there is no externality. b. there is a positive externality. c. there is a negative externality. d. The answer cannot be determined from inspection of the table.

Benefit = Positive Externality

If you have a ticket that you sell to the group in an auction, who will buy the ticket? a. Kevin b. Sasha c. Erica d. Biyu

Biyu

A tax affects a. buyers only. b. sellers only. c. buyers and sellers only. d. buyers, sellers, and the government.

Buyers, sellers, and the government

If the price of the product is $110, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Sasha

Calvin, Sam, and Andrew

The production of the 400th gallon of gasoline entails an a. external cost of $0.11. b. external cost of $0.29. c. external benefit of $0.11. d. external benefit of $0.29.

Social cost - private cost = 0.29

Graph (a) and Graph (b) each illustrate a $4 tax placed on a market. In comparison to Graph (a), Graph (b) illustrates which of the following statements? a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. b. When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. d. When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.

Each unit of plastics that is produced results in an external a. cost of $6. b. cost of $8. c. benefit of $6. d. benefit of $8.

cost of $6

The phenomenon of free riding is most closely associated with which type of good? a. Private goods b. Club goods c. Inferior goods d. Public goods

d. public goods

Cost is a measure of the a. seller's willingness to sell. b. seller's producer surplus. c. producer shortage. d. seller's willingness to buy.

seller's willingness to sell.

Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is a. $60. b. $120. c. $160. d. $200.

$120

If you have 2 (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket? a. $7 b. $16 c. $10 d. $21

$16

The loss of consumer surplus as a result of the tax is a. $3. b. $2. c. $4.5. d. $1.

$4.50

Suppose the world price of cardboard is $139 and international trade is allowed. Then Boxland's consumers demand a. 102 tons of cardboard and Boxland's producers supply 357 tons of cardboard. b. 102 tons of cardboard and Boxland's producers supply 204 tons of cardboard. c. 204 tons of cardboard and Boxland's producers supply 357 tons of cardboard. d. 204 tons of cardboard and Boxland's producers supply 204 tons of cardboard.

102 tons of cardboard and Boxland's producers supply 357 tons of cardboard.

With trade, total surplus in the Ugandan coffee market amounts to a. $90.00. b. $350.00. c. $440.00. d. $412.50.

440.00

The table represents a market in which a. there is no externality. b. there is a positive externality. c. there is a negative externality. d. The answer cannot be determined from inspection of the table.

Cost = Negative Externality

Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct? a. Erin will now clean her own house. b. Ernesto will continue to clean Erin's house, but his producer surplus will decline. c. Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. d. Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.

Erin will now clean her own house

If a country is exporting a good, this is because the country has an absolute advantage in the production of that good.

False

Assume, for India, that the domestic price of copper without international trade is lower than the world price of copper. This suggests that, in the production of copper, a. India has a comparative advantage over other countries and India will import copper. b. India has a comparative advantage over other countries and India will export copper. c. other countries have a comparative advantage over India and India will import copper. d. other countries have a comparative advantage over India and India will export copper.

India has a comparative advantage over other countries and India will export copper.

Total surplus can be measured as the area a. JNK. b. JNML. c. JRL. d. JNL.

JNML

If the government charged a fee of $80 per unit of pollution, how many units of pollution would the firms eliminate altogether? a. 8 b. 9 c. 10 d. 11

a. 8

Without trade, the equilibrium price of roses is a. $4 and the equilibrium quantity is 300 roses. b. $3 and the equilibrium quantity is 200 roses. c. $3 and the equilibrium quantity is 400 roses. d. $2 and the equilibrium quantity is 500 roses.

a. $4 and the equilibrium quantity is 300 roses.

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct? a. At the current output level, the marginal social cost exceeds the marginal private cost. b. The current output level is inefficiently high. c. A per-shot tax could turn an inefficient situation into an efficient one. d. At the current output level, the marginal social benefit exceeds the marginal private benefit.

a. At the current output level, the marginal social cost exceeds the marginal private cost.

Who among the following is a free rider? a. Mike listens to National Public Radio, but does not contribute to any fundraising efforts. b. Greg takes the commuter rail to work, but he purchases the discounted monthly passes rather than buying tickets each day. c. Peter sends his five children to a private school rather than to the public school in his neighborhood. d. Bobby goes to Marsha's house to watch a basketball game on the local commercial television channel.

a. Mike listens to National Public Radio, but does not contribute to any fundraising efforts.

The socially optimal quantity of output is a. 40 units, since the value to the buyer of the 40th unit is equal to the cost incurred by the seller of the 40th unit. b. 40 units, since the value to society of the 40th unit is equal to the cost incurred by the seller of the 40th unit. c. 70 units, since the value to the buyer of the 70th unit is equal to the cost incurred by the seller of the 70th unit. d. 70 units, since the value to society of the 70th unit is equal to the cost incurred by the seller of the 70th

b

A benevolent social planner would prefer a. a $24 price to any other price. b. 70 units to any other quantity of output. c. a subsidy of $30 per unit to a subsidy of $27 per unit. d. a tax of $27 per unit to a subsidy of $27 per unit.

b. 70 units to any other quantity of output.

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal? a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.

b. The equilibrium quantity is greater than the socially optimal quantity.

When trade in coffee is allowed, consumer surplus in Uganda a. increases by the area B + F. b. increases by the area A + D. c. decreases by the area B + F. d. decreases by the area F + H.14.

decreases by the area B + F.

The parable called the Tragedy of the Commons applies to goods and services such as a. police protection and cable TV. b. tornado sirens and medical research. c. grazing land and fishing. d. antipoverty programs and national defense.

c. grazing land and fishing.

If the government decides to build a new community center, the first step would be to conduct a study to determine the value of the project. The study is called a a. budget analysis. b. project analysis. c. reimbursement analysis. d. cost-benefit analysis.

d. cost-benefit analysis

Goods that are excludable include both a. club goods and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and club goods.

d. private goods and club goods.

Suppose the world price of cardboard is $139. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard, a. domestic producers of cardboard become better off and domestic consumers of cardboard become better off. b. domestic producers of cardboard become worse off and domestic consumers of cardboard become better off. c. domestic producers of cardboard become better off and domestic consumers of cardboard become worse off. d. domestic producers of cardboard become worse off and domestic consumers of cardboard become worse off.

domestic producers of cardboard become better off and domestic consumers of cardboard become worse off.