Test 2 Review

more educated population tends to result in lower crime rates.

Education yields positive externalities. For example,

Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.

Under which of the following scenarios would a park be considered a common resource?

Social and private incentives differ, and common resources are not excludable but are rival in consumption.

What causes the Tragedy of the Commons?

residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg falls.

When the nation of Duxembourg allows trade and becomes an importer of software,

Cable TV service

Which of the following would not be considered a private good?

creates a deadweight loss of $15 per day.

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

2 acres

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"

Allison- 2.00-1.50-0.75

For each of the three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. Refer to Table 7-4. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

negative externality.

If a road is congested, then use of that road by an additional person would lead to a

not shift.

If a tax is levied on the sellers of a product, then the demand curve will

Equal revenue is always raised for the domestic government.

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

excludable and rival in consumption.

Private goods are both

$2.07 and 38 units, respectively.

Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are

Q4 to point Q5.

Refer to Figure 10-4, Graph (b) and Graph (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, a government policy that internalized the externality would move the quantity of smokestack scrubbers installed from point

there is a positive externality.

Refer to Figure 10-5. The graph represents a market in which

B.

Refer to Figure 11-1. A membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

a surplus

Refer to Figure 6-4 . In graph (b), there will be

less than Q3.

Refer to Figure 6-8 . When the price ceiling is enforced in this market, and the supply curve for gasoline shifts from S 1 to S 2 , the resulting quantity of gasoline that is bought and sold is

A+B+C.

Refer to Figure 7-1 . When the price is P 1 , consumer surplus is

$2,500

Refer to Figure 7-5. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

A+B+C+D+H+F.

Refer to Figure 7-9. At equilibrium, total surplus is represented by the area

A.

Refer to Figure 7-9. If the price were P3, consumer surplus would be represented by the area

deadweight loss due to the tax.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the

producer surplus after the tax.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by M represents

$5.

Refer to Figure 8-2. The amount of tax revenue received by the government is

When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.

Refer to Figure 8-5. Graph (a) and Graph (b) each illustrate a $4 tax placed on a market. In comparison to Graph (a), Graph (b) illustrates which of the following statements?

$90.

Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is a.$110.

$3,240.

Refer to Figure 9-2 . Without trade, producer surplus amounts to

$4 and the equilibrium quantity is 300.

Refer to Figure 9-3 . Without trade, the equilibrium price of roses is

has a comparative advantage relative to other countries in the production of crude oil and it will export crude oil.

Refer to Figure 9-4. The country for which the figure is drawn

Roland and Karla still can engage in a mutually-agreeable trade.

Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. Refer to Scenario 8-2. Assume Roland is required to pay a tax of $3 each time he mows a lawn. Which of the following results is most likely?

buyers will bear a greater burden of the tax than the sellers.

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

$6, and consumer surplus with the tax is $1.50.

The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-2. Consumer surplus without the tax is

exporting almonds and the price per pound in Uruguay increased to $4.50.

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

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

When a country allows trade and becomes an exporter of a good, which of the following is not a consequence?

downward by the amount of the tax.

When a tax is imposed on the buyers of a good, the demand curve shifts

regardless of how the tax is levied.

When a tax is levied on a good, the buyers and sellers of the good share the burden,

residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.

When the nation of Worldova allows trade and becomes an exporter of silk,

Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation.

Which of the following is not a characteristic of pollution permits?

They subsidize the production of goods with positive externalities.

Which of the following is not an advantage of corrective taxes?

Both policies increase the amount of pollution compared to the market equilibrium.

Which of the following statements is not true of both pollution permits and corrective taxes?