Microeconomics exam 2

Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 5.3 percent to 2.1 percent over the life of the highway. If a human life is worth $10 million, then the project is worth doing as long as it does not cost more than

$320,000.

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Denmark

When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government,

the quantity of motorcycles bought and sold in the market is reduced.

The current top marginal federal income tax rate in the United States is roughly:

37%

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product.

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $600 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

80 per month.

Because of the complex nature of the US tax code, you can make more money (pre-tax), but then must pay so much additional taxes that your post-tax income actually decreases.

False

In general, the United States government spending is __________ its revenues.

Larger than

Which of the following is an example of a positive externality?

Mary not catching the flu from Sue because Sue got a flu vaccine

Which of the following is the most accurate statement?

Protection is not necessary for an industry to grow.

Which parable describes the problem of wild animals that are hunted to the point of extinction?

The Tragedy of the Commons

Which of the following is an example of a positive externality?

The mayor of a small town plants flowers in the city park.

Which of the following is not correct? a. The economy contains many labor markets for different types of workers. b. The impact of the minimum wage depends on the skill and experience of the worker. c. The minimum wage is binding for workers with high skills and much experience. d. The minimum wage is not binding when the equilibrium wage is above the minimum

The minimum wage is binding for workers with high skills and much experience.

Minimum-wage laws dictate

a minimum wage that firms may pay workers.

Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany

a. may prompt German farmers to invoke the unfair-competition argument. b. increase the consumer surplus of German buyers of wheat. c. increase the total surplus of the German people.

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

Governments can improve market outcomes for

both public goods and common resources

The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?

common resources

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

decreases, but the price paid by buyers increases.

When a country allows trade and becomes an exporter of a good,

domestic producers gain and domestic consumers lose.

Each of the following explains why cost-benefit analysis is difficult except

government projects rarely have sufficient funding to complete them on time.

deadweight loss is a consequence of a tax on a good because the tax

induces buyers to consume less, and sellers to produce less.

In a market economy, government intervention

may improve market outcomes in the presence of externalities

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good.

Producers have little incentive to produce a public good because

there is a free-rider problem.

The Coase theorem suggests that private markets may not be able to solve the problem of externalities

when the number of interested parties is large and transaction costs are high.

The price of a good that prevails in a world market is called the

world price