Microeconomics Test 2

Who observed that "in this world nothing is certain but death and taxes"? a) Ben Franklin b) Mark Twain c) Richard Nixon d) P.T. Barnum

a) Ben Franklin

Which of the following is correct? a) Total surplus is measures as the area below the demand curve and above the supply surge, up to the equilibrium quantity b) Producer surplus refers to a situation in which there are more sellers than buyers in a market c) Consumer surplus refers to a situation in which there are more buyers than sellers in a market d) All of the above are correct

a) Total surplus is measures as the area below the demand curve and above the supply surge, up to the equilibrium quantity

When government receipts exceed total government spending during a fiscal year, the difference is a) a budget surplus b) a budget deficit c) automatically refunded d) the national debt

a) a budget surplus

A demand curve reflects each of the following except the a) ability of buyers to obtain the quantity they desire b) value each buyer in the market places on the good c) willingness to pay of all buyers in the market d) highest price buyers are willing to pay for each quantity

a) ability of buyers to obtain the quantity they desire

Suppose that the cost of installing an overhead pedestrian walkway in a college town is $150,000. The walkway is expected to reduce the risk of fatality by 1.5%, and the cost of a human life is estimated at $10 million. The town should a) be indifferent between installing and not installing the walkway because the estimated benefit equals cost b) not install the walkway, since the cost is twice the estimated benefit c) install the walkway because the estimated benefit is twice the cost d) install the walkway, since the cost of even a single life is too great not to take action

a) be indifferent between installing and not installing the walkway because the estimated benefit equals cost

Which of the following is not a common resource? a) national defense b) clean water c) clean air d) open grazing land

a) national defense

Chad is willing to pay $5.00 for his first cup of morning latte; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latte for $3.75 per cup. he returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following is correct? a) Char is irrational in that he is willing to pay a different price for his second cup of latte than what he is willing to pay for the first cup b) Chad's willingness to pay for his second cup of latte was smaller than his willingness to pay for his first cup of latte c) Chad's consumer surplus on his second cup of latte was larger than his consumer surplus on his first cup of latte d) Chad places a higher value on his second cup of latte than on his first cup of latte

b) Chad's willingness to pay for his second cup of latte was smaller than his

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy, a) consumer surplus decreases and total surplus increases in the market for that good b) consumer surplus increases and total surplus decreases in the market for that good c) consumer surplus increases and total surplus increases in the market for that good d)consumer surplus decreases and total surplus decreases in the market for that good

b) consumer surplus increases and total surplus decreases in the market for that good

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

b) private goods and club goods

Suppose Roger and Regina receive a great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice, $9 for his second slice, and $5 for his third slice. The current market price is $5 per slice. Assumed that the government paces a $2 tax on each slice of cheesecake and that the new equilibrium price is $7. What is the deadweight loss of the tax? a) $3 b) zero c)$6 d)$8

b) zero

Governments can improve market outcomes for a) neither public goods more common resources b) common resources but not public goods c) both public goods and common resources d) public goods but not common resources

c) both public goods and common resources

Some good can be produced at lo cost only if they are produced in large quantities. This phenomenon is called a) marginal benefit of size b) marginal cost of production c) economies of scale d) economies of production

c) economies of scale

Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of the new free-trade policy? a) consumers of all three goods b) producers of incense and consumers of steel c) producers of steel and consumers of incense d) consumers of incense and producers of rugs

c) producers of steel and consumers of incense

A free rider is a person who a) rides public transit regularly b) can produce a good at no cost c) receives the benefit of a good but avoids paying for it d) will only purchase a product on sale

c) receives the benefit of a good but avoids paying for it

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 over consumed d) underproduced band common resources tend to be under consumed

c) underproduced and common resources tend to be over consumed

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

c) will import sugar

Taxes are costly to market participants because they a) alter incentives b) transfer resources from market participants to the government c) distort market outcomes d) All of the above are correct

d) All of the above are correct

Which of the following statements is correct? a) Tax avoidance is illegal, whereas tax evasion is legal b) Both tax avoidance and tax evasion are legal c) Both tax avoidance and tax evasion are illegal d) Tax avoidance is legal, whereas tax evasion is illegal

d) Tax avoidance is legal, whereas tax evasion is illegal

Which parable describes the problem of wild animals that are hunted to the point of extinction? a) Coase theorem b) Clean Air Act c) Cost-benefit analysis d) Tragedy of the Commons

d) Tragedy of the Commons

A quota is a) an excess of exports over imports b) a tax on exports to other countries c) a tax placed on imports d) a limit on the quantity of imports

d) a limit on the quantity of imports

Which of the following states is true of both pollution permits and corrective taxes? a) Both policies require firms to pay for their pollution b) Both policies internalize the externality of pollution c) Both policies lead to the establishment of an equilibrium price of pollution d) all of the above are correct

d) all of the above are correct

The world price of a pound of T-bone steak is $9.00. Before Latvia allowed trade in been, the price of a pound of T-bone steak there was $7.50. Once Latvia began allowing trade in beef with other countries, Latvia began a) importing T-bone steak and the price per pound in Latvia increased to $9.00 b) importing T-bone steak and the price per pound in Latvia remained at $7.50 c) exporting T-bone steak and the price per pound in Latvia remained at $7.50 d) exporting T-bone steak and the price per pound in Latvia increased to $9.00

d) exporting T-bone steak and the price per pound in Latvia increased to $9.00

in 2009, which category represented the largest source of receipts for the U.S. federal government? a) Medicare b) Social Security c) corporate income taxes d) individual income taxes

d) individual income taxes

The welfare of sellers is measure by a) consumer surplus b) price c) total surplus d) producer surplus

d) producer surplus