Exam 2 Microeconomics

A Tariff is a. a tax placed on an imported good, which brings the domestic price further from the price which would prevail in the absence of trade. b. a tax placed on an exported good, which brings the domestic price further from the price which would prevail in the absence of trade. c. a tax placed on an exported good, which brings the domestic price closer to that the price which would prevail in the absence of trade. d. a tax placed on an imported good, which brings the domestic price closer to that the price which would prevail in the absence of trade.

D

A tax on all forms of income will a. lower the effective rate of interest on savings. b. have no effect on savings. c. enhance social welfare because the benefits will outweigh the costs. d. enhance the incentives to save.

A

According to the New York Times' article "This Is Not Arthur Laffer's Famous Napkin," which U.S. political party has relied more on the Laffer curve to motivate tax policy? a. Republicans b. Democrats c. Libertarians d. Socialists

A

Senator Gordon argues that the gains from trade are based on comparative advantage, and as such, free trade will not cause a net job loss because workers can find new jobs in the industry in which the United States has a comparative advantage. Which aspect of the job argument is Senator Gordon refuting? a. everything can be produced at lower cost in other countries, so free trade cannot create jobs domestically. b. there is no evidence that any worker ever lost his or her job because of free trade. c. Unemployment of labor is not a serious problem relative to other economic problems. d. there will be no gains from trade.

A

The U.S. federal personal income tax is a. progressive. b. proportional. c. regressive. d. awesome!! (Because paying taxes is fun.)

A

The incentive to save is decreased by a tax on a. income. b. consumption. c. both income and consumption. d. neither income nor consumption.

A

The size of the deadweight loss that results from a tax on cola is smaller, the a. less time cola sellers have to adjust to the tax. b. more substitutes there are for cola. c. more time cola sellers have to adjust to the tax. d. less of a necessity cola drinkers consider cola to be.

A

When a good is taxed, a. both buyers and sellers of the good are made worse off. b. only buyers are made worse off, because they ultimately bear the burden of the tax. c. only sellers are made worse off, because they ultimately bear the burden of the tax. d. neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

A

Which of the following statements is correct when comparing U.S. government revenue, as a percent of GDP, to that of other countries? a. Government revenue as a percent of GDP is smaller in the U.S. when compared to most western European countries (for example, Germany and France). b. Government revenue as a percent of GDP is larger in the U.S. when compared to most western European countries (for example, Germany and France). c. Government revenue as a percent of GDP is larger in the U.S. than any other country in the world. d. Government revenue as a percent of GDP is smaller in the U.S. than any other country in the world.

A

Which of the following statements is correct? a. A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. b. A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. c. A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. d. A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.

A

Which of the following will cause a decrease in consumer surplus? a. Sellers expect the price of the good to be higher next month. b. The imposition of a binding price ceiling in the market c. A decrease in the price of one of the inputs for the good d. An improvement in production technology for the good

A

A tax on the sellers of chocolate a. increases the amount of chocolate that will be bought and sold. b. decreases the amount of chocolate that will be bought and sold. c. may increase, decrease, or have no effect on the amount of chocolate that will be bought and sold. d. has no effect on the amount of chocolate that will be bought and sold.

B

According to the article "Trade Can Be a Game of Chicken. Sometimes Literally," the reason that U.S. automakers have such a large share of the light truck market in the U.S. is because a. American government subsidizes automakers to produce more light trucks. b. the U.S. put tariffs on German light trucks in response to a German tariff on U.S. chicken. c. trucks are important to U.S. farming and the production of livestock, such as chickens. d. Americans like eating chicken while driving around in pick-up trucks.

B

Consumer surplus is a good measure of economic welfare a .if policymakers are concerned about equity, but not efficiency. b. if policymakers want to respect the preferences of buyers. c. for those who only enter the market when the price of a substitute increases. d. because it accounts for the effects of price changes on buyers and sellers.

B

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so... a.because it is impossible to analyze the gains and losses from international trade without making this assumption. b. because then we can assume that world prices of goods are unaffected by that country's participation in international trade. c. in order to rule out the possibility of tariffs or quotas. d. All of the above are correct.

B

Last year President Trump stated that the U.S. steel industries is important for national security reasons. This argument is given as a reason for a. reducing exports. b. restricting imports. c. not requiring U.S. steel companies to pay any taxes. d. not requiring steel workers to pay federal income tax.

B

Suppose the country of Fiauce enacts a policy of free-trade and Fiauce begins exporting rice. Then a. the rest of the world has an absolute advantage relative to Fiauce in the production of rice. b. the domestic price of rice will increase to equal the world price of rice. c. at the world price, the total quantity of rice supplied by rice producers in Fiauce falls short of the quantity of rice demanded by domestic consumers in Fiauce. d. the rest of the world has a comparative advantage relative to Fiauce in the production of rice.

B

When a tax is placed on the buyers of hockey skates, the size of the hockey skate market a. and the price paid by buyers both decrease. b. decreases, but the price paid by buyers increases. c. and the price paid by buyers both increase. d. increases, but the price paid by buyers decreases.

B

. The notion that similar taxpayers should pay similar amounts of taxes is known as a. vertical equity. b. the benefits principle. c. horizontal equity. d. taxpayer efficiency.

C

A binding minimum wage a. alters both the demand for and supply of labor. b. affects only the demand for labor; it does not affect the supply of labor. c. alters both the quantity demanded of labor and the quantity supplied of labor. d. affects only the supply of labor; it does not affect the demand for labor.

C

A tax on an imported good is called a. a quota b. an import limit c. a tariff d. an import penalty

C

According to the article (from CNBC) we read and discussed in class, which of the following statements correctly reflects Bill Gates view of tax reform? a. He favors a more progressive tax system b. The tax system should not focus primarily on income but tax reform should focus on estate taxes and capital taxes. c. Both of these statements reflect Bill Gates view of tax reform. d. Neither of these statements reflects Bill Gates view of tax reform.

C

European countries tend to rely on which type of tax more so than the United States does? a. an income tax b. a lump-sum tax c. a value-added tax d. a corrective tax

C

If an allocation of resources is efficient, then a. consumer surplus is maximized. b. producer surplus is maximized. c. total surplus is maximized. d. all of the above are correct

C

Industries in which a country has a comparative advantage a. will no longer exist with free trade, since no country will have a comparative advantage. b. will be destroyed if free trade is enacted. c. will have jobs available for workers displaced by free trade. d. will have fewer jobs for workers displaced by free trade.

C

When the government places a tax on a product, the cost of the tax to buyers and sellers a. is less than the revenue raised from the tax by the government. b. is equal to the revenue raised from the tax by the government. c. exceeds the revenue raised from the tax by the government. d. Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

C

A deadweight loss is a consequence of a tax on a good because the tax a. increases buyers' willingness to pay, but sellers are not willing to supply more. b. causes a shortage in the market. c. decreases sellers' cost of production, but buyers are not willing to buy more. d. induces buyers to consume less, and sellers to produce less.

D

A government-mandated maximum price that is set below the market equilibrium price is a a. nonbinding price floor that results in an equilibrium quantity. b. binding price floor that results in a surplus. c. nonbinding price ceiling that results in an equilibrium quantity. d. binding price ceiling that results in a shortage.

D

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that a. Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will export coffee. b. Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will import coffee. c. other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will export coffee. d. other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee.

D

In 2014, which category represented the largest source of receipts for the U.S. federal government? a. Medicare b. Social Security c. corporate income taxes d. individual income taxes

D

In which of the following cases is it most likely that an increase in the size of a tax will increase tax revenue? a. The size of the tax before the increase was medium relative to the size of the market. b. An increase in the size of a tax will always increase tax revenue. c. The size of the tax before the increase was large relative to the size of the market. d. The size of the tax before the increase was small relative to the size of the market.

D

Rent control is an example of a price a. floor; in cities with rent control prices are used to ration housing. b. floor; in cities with rent control mechanisms other than price are used to ration housing. c. ceiling; in cities with rent control prices are used to ration housing. d. ceiling; in cities with rent control mechanisms other than price are used to ration housing

D

Suppose consumer income decreases. If carnations are an inferior good, the equilibrium price of carnations will a. decrease, and producer surplus in the industry will increase. b. increase, and producer surplus in the industry will decrease. c. increase, and producer surplus in the industry will increase. d. decrease, and producer surplus in the industry will decrease.

D

Suppose the country of Ubait enacts a policy that allows free trade of strawberries. Regardless of whether Ubait becomes an exporter or importer of strawberries, which of the following results does economic analysis predict to occur? a. The quantity of strawberries demanded by consumers in Ubait decreases. b. deadweight loss must occur. c. strawberry producers in Ubait receive a lower price for strawberries. d. The total surplus in the domestic market for strawberries will increase

D

The U.S. federal income tax a. has average tax rates that decrease as income increases. b. has marginal tax rates that increase as income increases. c. is progressive. d. b and c are correct e. a, b, and c are correct

D

What are the two largest sources of tax revenue for the U.S. federal government? a. Personal Income and consumption taxes b. Social insurance taxes and tariffs c. Social insurance and corporate income taxes d. Personal income and social insurance taxes

D

What assumption do we make so that we can treat a given country as a price-taker when participating in international trade? a. The country is primarily an importer. b. The country's currency is strong relative to other currencies. c. The country imposes no tariffs or quotas. d. The country is small relative to the world market.

D

Who pays the corporate income taxes? a. Workers b. Customers c. Nobody, corporations are not legally responsible for paying any taxes. d. a and b are correct

D