Micro Econ Exam 3

Refer to Table 10-4. Take into account private and external costs and assume the quantity of output is always a whole number (that is, fractional units of output are not possible). The maximum total surplus that can be achieved in this market is a. $40. b. $46. c. $29. d. $35.

b. $46.

When a tax is imposed on the buyers of a good, the demand curve shifts a. downward by less than the amount of the tax. b. downward by the amount of the tax. c. upward by more than the amount of the tax. d. upward by the amount of the tax.

b. downward by the amount of the tax.

Refer to Figure 10-6. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to a. $2,500. b. $1,600. c. $1,250. d. $2,000.

d. $2,000.

Refer to Figure 10-2. If this market is currently producing at Q 4 , then total economic well-being would be maximized if output a. decreased to Q1. b. stayed at Q4. c. decreased to Q3. d. decreased to Q2.

d. decreased to Q2.

Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is a. $3. b. $0. c. $1.50. d. $4.50

a. $3.

Refer to Figure 8-2. The amount of tax revenue received by the government is a. $5. b. $9. c. $2.50. d. $4.

a. $5.

Refer to Figure 10-3. What is the socially optimal quantity of output in this market? a. 10 units b. More than 10 units c. Between 8 and 10 units d. 8 units

a. 10 units

Refer to Figure 8-7. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would a. decrease government revenue and increase the deadweight loss from the tax. b. decrease government revenue and decrease the deadweight loss from the tax. c. increase government revenue and increase the deadweight loss from the tax. d. increase government revenue and decrease the deadweight loss from the tax.

b. decrease government revenue and decrease the deadweight loss from the tax.

Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is a. $3. b. $4.50. c. $1.50. d. $0.

c. $1.50.

When Monique drives to work every morning, she drives on a congested highway. What Monique does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway. In this case, the external cost of Monique's highway trip a. lowers the social cost below the private cost. b. increases the social cost above the private cost. c. decreases the social value below the private benefit. d. increases the social value above the private benefit.

b. increases the social cost above the private cost.

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a a. corrective tax. b. subsidy. c. command-and-control policy. d. market-based policy

c. command-and-control policy.

Taxes on labor encourage which of the following? a. Fathers to take on second jobs b. Labor demand to be more inelastic c. Workers to work overtime d. Mothers to stay at home rather than work in the labor force

d. Mothers to stay at home rather than work in the labor force

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss? a. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon. b. There is insufficient information to make this determination. c. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon. d. The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.

d. The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.