micro review chapters 9-12

refer to figure 7-24. at equilibrium, total surplus is measured by the area A. ABD B. FBD C. ABF D. HGCI

A. ABD

deadweight loss measures the loss A. in a market to buyers and sellers that is not offset by an increase in government revenue B. of equality in a market due to government intervention C. in revenue to the government when buyers chose to buy less of the product because of the tax

A. in a market to buyers and sellers that is not offset by an increase in government revenue

a result of welfare economics that the equilibrium price of a product is considered to be the best price because it... A. maximizes the combined welfare of buyers and seller's B. minimizes the level of production C. minimizes costs and maximizes output D. maximizes both the total revenue for firms and the quantity supplied of the product

A. maximizes the combined welfare of buyers and seller's

refer to figure 8-7. the deadweight loss associated with this tax amounts to A. $80, and this figure represents the amount by which tax revenue to the gov. exceeds the combined loss of producer and consumer surpluses. B. $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers C. $60, and this figure represents the amount the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers D. $60, and this figure represents the amount by which tax revenue to the gov. exceeds the combined loss of producer and consumer surpluses.

B. $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers

consumer surplus is the A. value of a good to a consumer B. amount a consumer is willing to pay minus the amount the consumer actually pays C. amount a consumer pays minus the amount the consumer is willing to pay D. amount of a good consumers get without paying anything

B. amount a consumer is willing to pay minus the amount the consumer actually pays

refer to figure 9-13. with trade, the country A. exports 400 units of the good B. exports 200 units of the good C. imports 600 units of the good D. imports 400 units of the good

C. imports 600 units of the good

a tariff is A. limit on how much of a good can be imported B. tax on an exported good C. tax on an imported good D. limit on how much of a good can be exported

C. tax on an imported good

refer to figure 7-2. if the price decreases from $80 to $70 due to shift in the supply curve, consumer surplus increases by A. $1000 B. $250 C. $750 D.$500

C.$750

Total Cost (TC)

FC + VC

Average Fixed Cost (AFC)

FC/Q

Average Total Cost (ATC)

TC/Q or AFC + AVC

Average Variable Cost (AVC)

VC/Q

refer to figure 9-1. when trade is allowed a. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse coffee b.both Guatemalan producers and consumers of coffee are worse off c. both Guatemalan producers and consumers of coffee are better off d. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become better off

a. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse coffee

Altering incentives so that people take account of the external effects of their actions a. all the above are correct b. can be done by imposing a corrective tax c. is the role of government in markets with externalities d. is called internalizing the externality

a. all the above are correct

when a state levies a tax, the tax a. occasionally excludes items that are deemed to be necessities b. is commonly levied on labor services c. applies to wholesale purchases but not retail d. is paid only by the state's residents

a. occasionally excludes items that are deemed to be necessities

Welfare economics is the study of how a. the allocation of resources affects economic well-being b. the government helps poor people c. a consumer's optimal choice affects her demands curve d. a price ceiling compares to a price floor

a. the allocation of resources affects economic well-being

When a free-rider problem exists, a. the market will devote too few resources to the production of the good. b. the cost of the good will always be more than the benefit of the good. c. the good will not be produced. d. entrepreneurs will eventually find a way to make free-riders pay their share.

a. the market will devote too few resources to the production of the good.

the difference between social cost and private cost is a measure of the a. cost incurred by the government when it intervenes in the market b. cost of an externality c. cost reduction when the negative externality is eliminated d. loss in profit to the seller as the results of a negative externality

b. cost of an externality

in a market economy economy, government intervention a. reduces efficiency in the presence of externalities b. may improve market outcomes in the presence of externalities c. will always improve market outcomes d. is necessary to control individual greed

b. may improve market outcomes in the presence of externalities

corporate profits distributed as dividends are a. taxed once b. taxed twice c. tax free d. taxed three times

b. taxed twice

If good x is available free of charge, then a. good x must be provided by nature b. the private market cannot ensure an efficient allocation of resources in the market for good x c. good x must be provided by the government d. government policy is incapable of increasing total surplus in the market for good x

b. the private market cannot ensure an efficient allocation of resources in the market for good x

what is the fundamental basis trade among nations? a. absolute advantage b. misguided economic policies c. comparative policies d. shortages or surpluses in nations that do not trade

c. comparative advantage

Which of the following statements is true when the price a good or service rises? a. the total consumer surplus in the market increases b. buyers who were already buying the good or service are better off c. some buyers exit the market d. the total value of purchases before and after the price change is the same

c. some buyers exit the market

which of the following will cause an increase in producer surplus? a. buyer expect the price of the good to be lower next month b. income increase and buyers consider the good to be inferior c. the price of a substitute increases d. the imposition of a binding price ceiling in the market

c. the price of a substitute increases

if a country is an exporter of a good, then it must be the case that a. the world price is less than its domestic price b. consumer surplus is higher c. the world price is greater than its domestic price d. the used an infant-industry argument to protect its producers

c. the world price is greater than its domestic price

which of the following tax systems is the most fair? a. proportional taxes b. regressive taxes c. there is no objective way to asses fairness amount the three systems d. progressive taxes

c. there is no objective way to asses fairness amount the three systems

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil ... a. will either import almonds or export almonds, but it is not clear from the given information b. would have nothing to gain either from exporting or importing almonds c. will import almonds d. will export almonds

c. will import almonds

the Coase theorem that the private market will always solve the problem of externalities and allocate resources efficiently a. only when there is a large number of private parties that engage in bargaining b. all of the above are correct c. even if private parties experience substantial costs of bargaining d. even if the initial distribution of legal rights is skewed in favor of some private parties over others

d. even if the initial distribution of legal rights is skewed in favor of some private parties over others

Without government intervention, public goods tend to be a. overproduced and common resources tend to be over consumed b. overproduced and common resources tend to be under consumed c. underproduced and common resources tend to be under consumed d. underproduced and common resources tend to be over consumed

d. underproduced and common resources tend to be over consumed