Microeconomics Chapters 8-10

A tariff ____ a) Provides revenue to the government b) enables the government to satisfy the self-interest of people who earn their incomes in import-competing c)is a tax imposed on a good when it is imported d) all of the above

D) all of the above

___ are the ___ that we sell to people in other countries

Exports; goods

____are the ___that we buy from people in other countries.

Imports; goods and services

Choose the correct statement.

Marginal social cost equals marginal cost plus marginal external cost.

Suppose that the world price of bananas is 18 U.S. cents a pound and that when Australia does not trade bananas internationally, the market prices of bananas in Australia is 12 U.S. cents a pound. a) If Australia opens up to trade; Australia ___ bananas. The price of bananas in Australia___. b) The quantity of bananas consumed in Australia ___ and the quantity of bananas grown in Australia ____.

a) exports; rises b) decreases; increases

In Germany, the marginal income tax rates range from 31.5 percent to 48.1 percent Germany places a ____weight on the ability-to-pay principle than the U.S. Germany places a ____ weight on efficiency than does the U.S. b) Germany places a ____ weight on fairness than does the U.S.

a) greater:smaller b)greater

Concerned about the political fallout rising gasoline prices, the government cuts the tax on gasoline. At the same time, the oil producing nations increase production. a) The tax cut ____ the supply of gasoline and the increase in oil production _____ the supply of gasoline. b)The price of gasoline____ and the quantity of gasoline bought_____.

a) increases; decreases b) falls; increases

Florida levies the following taxes: a 5.5 percent corporate income tax; a 6 percent sales tax; taxes of cents a gallon on gasoline; 33.9 cents on a pack of cigarettes, $0.48 a gallon on beer, and $2.25 a gallon on wine; and property taxes that vary across the countries and range from 1.4 percent to 2.0 percent of property values. a) Florida's property taxes are most likely ____ taxes and the corporate tax is a _____ tax. b) The sales tax, gasoline tax, cigarette tax, and beer tax are ____ taxes.

a) progressive; proportional b)regressive

Suppose that the world price of steel is $100 a ton, India does not trade internationally, and the equilibrium price of steel in India is $60 a ton. Suppose that India begins to trade internationally. a)The price of steel in India___. The quantity of steel produced in India ____. b) The quantity of steel bought by India ___. India___ steel.

a) rises; increase b) decreases; exports

In the 1950's Ford and General Motors established a small car-producing industry in Australia and argued for a high tariff on car imports. The tariff has remained through the years. Until 2000, the tariff was 22.5% a) Ford's and general motor argument for the high tariff was most likely _____. b) Choose the correct statement.

a) the infant-industry argument b) A subsidy financed out of taxes is a more efficient way to keep Australia's auto industry operating.

Suppose that the world rice of sugar is 20 cents a pound, Brazil does not trade internationally, and the equilibrium price of sugar in Brazil is 10 cents a pound. Suppose that Brazil now begins to trade internationally. a) The price of sugar in Brazil____. The quantity of sugar produce in Brazil___. b) The quantity of sugar bought by Brazil ____. Brazil ____ sugar.

a)rises; increases b)decreases; exports

If country A has a comparative advantage in the production of automobiles and country B has a comparative advantage in the production of boats___.

both countries will gain if country A exports automobiles to country B and country B exports boats to country A

A poll tax is ____ and _____ under the benefits and ability-to-pay principles.

efficient; unfair

Vertical equity is the requirement that taxpayers with ____ ability to pay should pay _____ share of taxes.

greater; a greater

When a country opens up to a free international trade, producers of the exported good receive a ___ price and sell a ___ quantity of it. Producers receive a ____ producer surplus.

higher;greater greater

Before 1995, the U.S. imposed tariffs on goods imported from Mexico and Mexico imposed tariffs on goods imported from the U.S. In 1995, Mexico joined NAFTA. U.S. tariffs on imports from Mexico and Mexican tariffs on imports from the U.S. are gradually being removed. The quantity of U.S. exports to Mexico has ____ the U.S. government's tariffs revenue from trade with Mexico has____.

increased; decreased

The ability-to-pay principle _____.

involves comparing people along two dimensions: horizontally and vertically.

Marginal external cost ___.

is an opportunity cost.

Horizontal equity _____.

is easy to agree with in principle, but difficult to implement in practice.

The argument that protection ___ is a ____ argument.

is necessary for infant industries; strong new

The benefits principle _____.

is the proposition that people should pay taxes equal to the benefits they receive from public goods and services.

Which tax is more inefficient and why? A tax on the income from farmland is ____ a tax on the dividends paid on stocks because the supply of farmland is ___ and the supply of stocks is ____.

more efficient than; inelastic; elastic

National comparative advantage arises from the differences in ____ across countries.

opportunity cost

The ability-to-pay principle is the proposition that___ should pay___ according to how easily they can bear the burden.

people; taxes

A poll tax is fixed amount per person. Mrs. Thatcher introduced a poll tax in the United Kingdom during the 1980s. A poll tax is a _____ tax. A poll tax differs from a sales tax because _____.

regressive: it doesn't raise the price of goods and services and it doesn't decrease the quantity produced.

Phil Mickelson pays his own social security tax and the PGA pays note of its because the _____ Phil Mickelson's labor is _____.

supply of; perfectly inelastic

The benefits principle is the proposition that people should pay ____ the benefits they receive from public goods and services.

taxes equal to

Marginal external benefit is ____.

the benefit from an additional unit of a good or service that people other than the consumer of that good or service receives.

Horizontal equity is the requirement that taxpayers with ___ ability to pay should pay ___ share of taxes.

the same; the same

Choose the statement that is incorrect

The number of people who lose from free trade is larger than the number of people who gain. The gain per person is large, s these people have an incentive to create a lobby group with a strong political voice.

Suppose that this year, tomato growers in Florida lobby the U.S. government to impose an import quote on Mexican tomatoes. If the lobbying is successful and the U.S. government imposes quota,____ gain and ____lose.

U.S. growers of tomatoes; U.S. consumers of tomatoes

An externality is a cost of benefit that is created by ____.

a production activity or a consumption activity.

Former Venezuelan president Hugo Chavez opposed the creation of a Free Trade Area of the Americas. Why? Who did he think he would gain and lose? a) President thought that ____. b) Do you think he is correct?

a) both A and B (a. poor workers in Venezuela would lose and rich American firms would win. b. Venezuela would lose tariff revenue) b) No, because greater free trade would bring gains for all, including low-income workers in Venezuela