Microeconomics Test 2
An efficient tax system results in small
Deadweight losses and administrative burdens
Without a tariff would this country import or export the good. How much?
Import. Q4 - Q1
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by M represents
Producer surplus after the tax.
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by L+M+Y represents
Producer surplus before tax
Without a tariff what is the quantity demanded domestically
Q4
Supply-side economics is a term associated with the views of
Ronald Reagan and Arthur Laffer.
A person who receives the benefit of a good but does not pay for it is
free rider
Which of the following is an example of the tragedy of the commons?
sheep overgraze land that was jointly owned by everyone in a town.
An externality is the impact of
society's decisions on the well-being of society.
Which of the following is a payroll tax?
Tax on wages paid to workers
If an externality is present in a market, economic efficiency may be enhanced by
government intervention.
Refer to Figure 3. If the economy is at point B on the curve, then an increase in the tax size will
increase the deadweight loss of the tax and decrease tax revenue.
The costs other than the money price that are incurred in trading goods or services are called
indirect costs
The three largest sources of tax revenue for the U.S. federal government in order are:
personal income taxes highest, payroll taxes for social insurance and corporate income taxes
The benefit that government receives from a tax is measured by
tax revenue.
A toll is a tax on citizens who use toll roads. This policy can be viewed as an application of
the benefits principle
Cost benefit analysis is difficult because
All the above
The economist Pigou is known for developing the concept of
Corrective taxes
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents
Tax revenue
Refer to Figure 2. The size of the tax is represented by the
length of the line segment connecting points A and B.
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents
Consumer surplus after the tax.
Which of the following is a tax on labor?
federal income tax
Which of the following would not be considered a private good?
cable TV service
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the
Deadweight loss due to the tax.
With a tariff what is the revenue from a tariff? (It is shown by an area on the graph)
E
Without a tariff what is the quantity supplied domestically?
Q1
With a tariff what is the quantity supplied domestically?
Q2
With a tariff what is the quantity demanded domestically
Q3
The amount that taxes increase from an additional dollar of income is
The marginal tax rate.
Refer to Figure 2 Q1 refers to
The quantity produced after the tax
The proposition that private parties can bargain to solve externalities on their own is
Coase theorem
Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+I represents
Consumer surplus before the tax.
With a tariff would this country import or export the good. How much?
Import. Q3 - Q2
Refer to Figure 3. The curve that is shown on the figure is called the
Laffer curve.
Which of the following statements about private goods and public goods is correct?
Private goods are rival in consumption and public goods are not excludable.
A negative externality arises when a person engages in an activity that has
a beneficial effect on a bystander who pays the person who causes the effect.
The term market failure refers to
a market that fails to allocate resources efficiently.
Which of the following goods is both excludable and rival in consumption?
a wristwatch
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.
Refer to Figure 3. If the economy is at point A on the curve, then a decrease in the tax size will
decrease the deadweight loss of the tax and decrease tax revenue.
Which of the following is an example of a common resource
fish in a public pond
Refer to Figure 3. If the economy is at point A on the curve, then a small increase in the tax size will
increase the deadweight loss of the tax and increase tax revenue
A corrective tax
induces private decision makers to take account of social costs
Altering incentives so that people take account of their actions could be a case of
internalizing externalities
A tax where everyone pays a $1,000 is called
lump sum
When a good is rival in consumption,
one person's use of the good diminishes another person's ability to use it.
A good is excludable if
people can be prevented from using it.
Research into new technologies provides a
positive externality, and too few resources are devoted to research as a result.
Refer to Figure 2. The price labeled as P2 on the vertical axis represents the
price of the good before the tax is imposed.
Refer to Figure 2. The price labeled as P1 on the vertical axis represents the price
received by sellers after the tax is imposed.
A tax for which high income taxpayers pay a smaller fraction of their income than do lower income taxpayers is called
regressive
Welfare economics refers to
the study of how the allocation of resources affects economic well-being.