Economics Exam 2
T/F A tax on buyers increases the size of the market
F
T/F GATT is an example of a successful unilateral approach to achieving free trade
F
T/F If the government a binding price floor in a market, then the consumer surplus will increase
F
T/F The more inelastic demand and supply, the greater is the deadweight loss of a tax
F
T/F When a tax of $1 per gallon is imposed on the sellers of gasoline, the supply curve for gasoline shifts upward but by less than $1
F
Who once said that taxes are the price we pay for a civilized society?
Oliver Wendell Holmes Jr
T/F Economist Authur Laffer made the argument that tax rates in the United States were so high that reducing rates would increase tax revenue
T
T/F Price controls often hurt those they are trying to help
T
T/F workers determine the supply of labor
T
What happens to the total surplus in a market when the government imposes a tax
Total surplus decreases
The study of how the allocation of resources affects economic well being is called
Welfare economics
Which of the following will increase consumer surplus
a technological improvement in the production of a good
A demand curve reflects each of the following except the
ability of buyers to obtain the quantity they desire
A seller's willingness to sell is a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number. d. All of the above are correct.
all of the above
Policy makers use taxes
both to raise revenue for public purposes and to influence market outcomes
On a graph the area below the demand curve and above the price measures
consumer surplus
The decrease in total surplus that results from a market distortion such as a tax is called a
dead weight loss
The size of the dead weight loss generated from a tax is affected by the
elasticities of both supply and demand
The deadweight loss from a tax of $x per unit will be smallest in a market
in which demand is inelastic and supply is inelastic
If the government removes a tax on a good, then the quantity of the good sold will
increase
A dead weight loss is a consequence of a tax on a good because the tax
induces buyers to consume less and sellers to produce less
infant industry argument
is based on the belief that protecting industries when they are young will pay off later.
Market power and externalities are examples of
market failure
Inefficiency exists in an economy when a good is
not being consumed by buyers who value it most highly.
The tax burden will fall most heavily on sellers of a good when the demand curve is
relatively flat, and the supply curve is relatively steep
Rent control policies tend to cause
relatively smaller shortages in the short run than in the long run because supply and demand tend to be more inelastic in the short run than in the long run
If a tax is levied on the sellers of a product, then the supply curve will
shift up
A tax on an imported good is called a
tariff
Tariffs and quotas are different in the sense that
tariffs raise revenue for the government, while quotas do not raise revenue for the government.
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 exporter of the good
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers
If a price ceiling is not binding, then
the equilibrium price is below the price ceiling
If a nonbinding price floor is imposed on a market, then a. the quantity sold in the market will decrease. b. the quantity sold in the market will stay the same. c. the price in the market will increase. d. the price in the market will decrease.
the quantity sold in the market will stay the same
Which of the following tools and concepts is useful in the analysis of international trade
total surplus, domestic supply, equilibrium price
The marginal seller is the seller who
would leave the market first if the price were any lower
