Econ test 3 pt1

D

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

D

When a country allows international trade and becomes an exporter of a good, a. domestic producers of the good become better off. b. domestic consumers of the good become worse off. c. the gains of the winners exceed the losses of the losers. d. All of the above are correct.

D

12. Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the a. base of the triangle that represents the deadweight loss triples. b. height of the triangle that represents the deadweight loss triples. c. deadweight loss of the tax increases by a factor of nine. d. All of the above are correct.

A

All else equal, what happens to consumer surplus if the price of a good decreases? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is unchanged. d. Consumer surplus may increase, decrease, or remain unchanged.

D

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

B

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

D

Chad is willing to pay $5.00 to get his first cup of morning latté. He buys a cup from a vendor selling latté for $3.75 per cup. Chad's consumer surplus is a. $8.75. b. $5.00. c. $3.75. d. $1.25.

B

If a tax shifts the supply curve upward (or to the left), we can infer that the tax was levied on a. buyers of the good. b. sellers of the good. c. both buyers and sellers of the good. d. We cannot infer anything because the shift described is not consistent with a tax.

B

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that a. producer surplus exceeds consumer surplus in the market for hammers. b. consumer surplus exceeds producer surplus in the market for hammers. c. the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. d. the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

C

If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by a. the area of one triangle. b. the area of one rectangle. c. the combined areas of two different triangles. d. the combined areas of two different rectangles.

A

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is a. $500. b. $3,000. c. $3,500. d. $6,500.

C

Several arguments for restricting trade have been advanced. Those arguments do not include a. the jobs argument. b. the protection-as-a-bargaining-chip argument. c. the no-deadweight-loss argument. d. the infant-industry argument.

B

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that a. Spain imports olive oil. b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. c. consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. d. All of the above are correct.

C

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the a. smaller is the response of quantity supplied to the tax. b. larger is the tax burden on sellers relative to the tax burden on buyers. c. larger is the deadweight loss of the tax. d. All of the above are correct.

A

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for a. chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades. b. chicken wings than in the market for razor blades because the quantity of razor blades would fall by more than the quantity of chicken wings. c. razor blades than in the market for chicken wings because the quantity of chicken wings would fall by more than the quantity of razor blades. d. razor blades than in the market for chicken wings because the quantity of razor blades would fall by more than the quantity of chicken wings.

D

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that a. other countries have an absolute advantage, relative to Isolani, in producing cars. b. Isolani has a comparative advantage, relative to other countries, in producing cars. c. if Isolani were to allow trade, it would import motorcycles. d. the world price of motorcycles exceeds the price of motorcycles in Isolani.

D

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

D

When a tax is imposed on a good for which both demand and supply are very elastic, a. sellers effectively pay the majority of the tax. b. buyers effectively pay the majority of the tax. c. the tax burden is equally divided between buyers and sellers. d. None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

B

Which of the following quantities decrease in response to a tax on a good? a. the equilibrium quantity in the market for the good, the effective price of the good paid by buyers, and consumer surplus b. the equilibrium quantity in the market for the good, producer surplus, and the wellbeing of buyers of the good c. the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus d. None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

B

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be a. $200. b. $250. c. $475. d. $625.