econ 202 test 2

This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are

$2.07 and 38 units, respectively

In the absence of trade, the equilibrium price of coffee in Guatemala is

$90

Area C represents the

Consumer surplus to new customers who enter the market when the price falls from P2 to P1

employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

a transaction cost

a demand curve reflects each of the following except

ability of buyers to obtain the quantity they desire

In which of the following tax systems does total tax liability increase an income increases?

both proportional and prgressive

A tax effects

buyers, sellers, and the government

what is the fundamental basis for trade among nations?

comparative advantages

An efficient tax is one that imposes small

deadweight losses and administrative burdens

When the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B + C

The U.S. income tax

discourages saving.

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

equal revenue is always raised for the domestic government

Private decisions about consumption of common resources and production of public goods usually lead to an

inefficient allocation of resource and external effects

A free rider is a person who

receives the benefit of a good but avoids paying for it

Tax incidence refers to

who bears the tax burden

Why do some policymakers support a consumption tax rather than an income tax?

A consumption tax would encourage people to save earned income.

When a country allows trade and becomes an exporter of a good, which of the following is a consequence?

the losses of domestic consumers of the good exceed the gains of domestic producers of the good.

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

the response of buyers and sellers to change in the price of bananas is strong

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized

the overuse of a common resource relative to its economically efficient use is called

the tragedy of the commons

a simultaneous increase in both the demand for tablets and the supply go tablets would imply that

the value of tablets to consumers has increased and the cost of producing tablets has decreased

What happens to the total surplus in a market when the government imposes a tax?

total surplus decreases

a sellers opportunity cost measures the

value of everything she must give up to produce a good

A cost-benefit analysis of a highway s difficult to conduct because analysts

will have difficulty estimating the value of the highway.

This graph represents the tobacco industry. the socially optimal price and quantity are

$3.00 and 30 units respectively

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

When the price is P1, consumer surplus is

A + B + C

Zaria and Hannah are roommates. Zara assigns a $30 value to smoking cigarettes. Hannah values smoke-free air $15. Which of the following scenarios is a successful example of the Coase Theorem?

Zaria pays Cathy $16 so that Zaria can smoke.

who among the following is a free rider?

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

From the figure, it is apparent that

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

From the figure it is apparent that

Guatemala will export coffee if trade is allowed

Suppose the government imposes a tax PI-PIII. The area measured by M represents

producer surplus after the tax

the deadweight loss from a tax per unit of good will be the smallest in a market with

inelastic supply and inelastic demand

the infant industry argument

is based on the belief that protecting industries when they are young will pay off later

A country is using a proportional tax when

its marginal tax rate equals its average tax rate.

Suppose the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

might increase or decrease

this graph represents the tobacco industry. the industry creates

negative externalities

because public goods are

not excludable, people have an incentive to be free riders.

an externality is the uncompensated impact of

one persons actions on the well-being of a bystander

When negative externalities are present in a market

only government regulation will solve the problem

A textbook is a

private good and the knowledge one gains from reading the book is a public good.

A tax on a good

raises the price that buyers effectively pay and lowers the price that sellers effectively receive

One tax system is less efficient than another if it

raises the same amount of revenue at a higher cost to taxpayers.

the goal of requiring licenses for hunting and fishing is to

reduce the use of a common resource

Which of the following regarding a Laffer curve is the most plausible?

reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.

Dioxin emission that results from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they create

which of the following events would increase producer surplus?

seller's costs stays the same and the price of the good increases

A tax levied on the sellers of a good shifts the

supply curve upward by the size of the tax

A tax on an imported good is called a

tariff

A consumption tax is a tax on

the amount of income that people spend