econ final exam study pt 2

M and J are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, M can make 40 cupcakes or 20 muffins, and J can make 15 cupcakes or 15 muffins. Based on this information, _____ has the comparative advantage in cupcakes, and _____ has the comparative advantage in muffins. a. M; J b. M; M c. J; M d. J; J

a. M; J

Why might a tariff be preferred to a quota in the importing country? a. Tariffs generate government revenue while quotas (normally) do not. b.Tariffs don't hurt domestic consumers. c. Tariffs do not generate any deadweight loss. d. All of the other answers are correct. e. Tariffs help domestic producers more.

a. Tariffs generate government revenue while quotas (normally) do not.

In a market system, public goods would: a. be underproduced. b. lack demand. c. be overproduced. d. have no costs.

a. be underproduced.

The Coase theorem implies that: a. given low bargaining costs, private individuals can achieve a socially optimal solution without the involvement of the government. b. all goods that generate an external cost (or benefit) should be produced up to the point where the marginal social benefit equals the marginal social cost of the good. c. private individuals will not produce the socially optimal outcome because bargaining costs are generally quite high. d. given external costs, the government must intervene to achieve the socially optimal output.

a. given low bargaining costs, private individuals can achieve a socially optimal solution without the involvement of the government.

The free-rider problem results from: a. the inability to prevent individuals who do not pay for a good from consuming it. b. average cost pricing. c. monopoly pricing. d. the horizontal summing of supply curves.

a. the inability to prevent individuals who do not pay for a good from consuming it.

One problem with assuming that people's willingness to pay is a measure of the marginal benefit they would receive from the product is that: a. willingness to pay reflects ability to pay as well as marginal benefit. b. a person's perceived marginal benefit from a product is not related to their willingness to pay. c. marginal benefit reflects more than just willingness to pay. d. marginal benefit is negatively rather than positively related to willingness to pay.

a. willingness to pay reflects ability to pay as well as marginal benefit.

The price elasticity of demand for a particular life-saving drug is zero, and the price elasticity of supply is 0.50. If a $10 tax is levied on producers, how much of this tax will eventually be paid by consumers? a. $0 b. $10.00 c. $7.50 d. $5.00

b. $10.00

A tax on buyers causes which of the following? (i) a leftward shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay a. (ii) and (iii) b. (i), (ii), and (iii) c. only (i) d. (i) and (iii)

b. (i), (ii), and (iii)

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. Without trade, the opportunity cost of 1 ton of wheat in Germany is: a. 100 tons of wheat. b. 10 boxes of daisies. c. 1,000 boxes of daisies. d. 0.1 box of daisies.

b. 10 boxes of daisies.

A higher income Gini coefficient means what? a. more people above the poverty line b. less equal income distribution c. more total income d. more equal income distribution

b. less equal income distribution

Income in the United States is ... a. just as equally distributed as income in other high-income economies. b. less equally distributed than income in other high-income economies. c. much more equally distributed than income in other high-income economies. d. more equally distributed than income in other high-income economies.

b. less equally distributed than income in other high-income economies.

Normative analysis in economics: a. is the branch of economic analysis that describes how the economy actually works. b. makes prescriptions recommendations about how the economy should work. c. is the same as positive externalities. ​d. involves model building based on assumptions that have been proven true.

b. makes prescriptions recommendations about how the economy should work.

The area on a market graph that lies below the price and above the supply curve is equal to: a. economic equity. b. economic efficiency. c. producer surplus. d. consumer surplus.

c. producer surplus.

Why would the government allow companies to buy and sell permits that allow companies to emit specified amounts of pollutants? a. It eliminates the costs of any externalities. b. It reduces the externality even more than setting limits without the possibility of trading emissions permits. c.It ensures that emissions reductions are primarily undertaken by firms that can reduce emissions at a lower cost than others can. d. It eliminates bias in the allocation of emissions rights.

c.It ensures that emissions reductions are primarily undertaken by firms that can reduce emissions at a lower cost than others can

What word best defines this tax system: Income: $50,000 $100,000 $200,000 Income Tax: $10,000 $15,000 $20,000 a. progressive b. proportional c.regressive

c.regressive

How do people's beliefs about the distribution of wealth in the United States compare to the actual distribution of wealth in the country? a. People believe the distribution of wealth is more unequal than it actually is. b. People have an accurate view of the distribution of wealth. c. People believe the distribution of wealth is changing rapidly and becoming more equal. d. People believe the distribution of wealth is more equal than it actually is.

d. People believe the distribution of wealth is more equal than it actually is.

Marginal benefit minus price equals: a. economic equity. b. producer surplus. c. economic efficiency. d. consumer surplus.

d. consumer surplus.

Assume that the United States imposes an import quota on English wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____, and the equilibrium price of suits in England will most likely _____. a. remain the same; increase b. remain the same; decrease c. increase; increase d. increase; decrease

d. increase; decrease

A nonexcludable good is a good in which: a. the good has no cost of production and so is available to consumers at no cost. b. there is a regulation that the good must be provided to everyone. c. one person consuming or using the good cannot prevent others from using or consuming the same unit of the good. d. it is difficult to prevent someone from using or having access to the good.

d. it is difficult to prevent someone from using or having access to the good.