Micro Exam 2 Yuan Quizzes plus study guide

Figure 7-2 Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by $800 $200 $600 $400

$600

Refer to Table 10-3. Taking into account private and external benefits, the total surplus to society at the socially efficient quantity is $18 $38 $62.5 $43.5

$62.5

Refer to Figure 9-4. Total surplus in this market after trade is A+B A+B+C A+B+C+D B+C+D

A+B+C+D

Refer to Figure 9-6. Government revenue raised by the tariff is represented by the area E. B+E. D+E+F B+D+E+F

E.

In which of the following cases is the Coase theorem most likely to solve the externality? Ed is allergic to his roommate's cat. Chemicals from manufacturing plants in the Midwest are causing acid rain in Canada. Polluted water runoff from farms is making residents of a nearby town sick. Polluted water runoff from farms is making residents of a nearby town sick.

Ed is allergic to his roommate's cat

Refer to Figure 10-4, Graph (b) and Graph (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point Q2 Q3 Q4 Q5

Q2

Refer to Figure 10-4, Graph (b) and Graph (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, a government policy that internalized the externality would move the quantity of antibiotics used from point Q2 to point Q3 Q3 to point Q2 Q4 to point Q5 Q5 to point Q4

Q3 to point Q2

Refer to Figure 10-2. This market is characterized by government intervention a positive externality a negative externality a price control

a negative externality

Refer to Figure 9-6. The tariff decreases producer surplus by the area C, decreases consumer surplus by the area C + D + E, and decreases total surplus by the area D + F. increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F. creates government revenue represented by the area B + E and decreases total surplus by the area D + E + F. increases producer surplus by the area C + G and creates government revenue represented by the area D + E + F.

increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F.

Refer to Figure 9-3. When the tariff is imposed, domestic consumers lose surplus of $400. lose surplus of $450. gain surplus of $50. gain surplus of $800.

lose surplus of $450.

Refer to Figure 9-3. The size of the tariff on roses is $4 $3 $2 $1

$1

Refer to Table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is $1,150 $1,400 $700 $950

$1,150

Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the wall calendar? $9 $5 $10 $8

$10

Refer to Figure 9-3. With trade and without a tariff, the domestic price is equal to the world price. roses are sold at $4 in this market. there is a shortage of 400 roses in this market. this country imports 200 roses.

the domestic price is equal to the world price.

Refer to Figure 8-3. As a result of the tax, consumer surplus decreases from $200 to $80. consumer surplus decreases from $200 to $80. the market experiences a deadweight loss of $80. total surplus increases from $180 to $200.

the market experiences a deadweight loss of $80.

Refer to Figure 8-2. Total surplus without the tax is $7.5, and total surplus with the tax is $10. $10, and total surplus with the tax is $7.5. $6, and total surplus with the tax is $1.5. $1.5, and total surplus with the tax is $6.

$10, and total surplus with the tax is $7.5.

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is $2.5 $6 $4 $5

$2.5

Refer to Figure 8-2. The amount of the tax on each unit of the good is $1 $3 $5 $2

$5

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? Calvin Calvin and Sam Calvin, Sam, and Andrew All the above

Calvin, Sam, and Andrew

When a country allows trade and becomes an exporter of silk, which of the following is not a consequence? The price paid by domestic consumers of silk increases. The price received by domestic producers of silk increases. The price paid by domestic consumers of silk decreases. The gains of domestic producers of silk exceed the losses of domestic consumers of silk.

The price paid by domestic consumers of silk decreases.

Which of the following is not an advantage of corrective taxes? They raise revenues for the government. They enhance economic efficiency. They subsidize the production of goods with positive externalities. They move the allocation of resources closer to the social optimum.

They subsidize the production of goods with positive externalities.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as T/Q T+Q TxQ (TxQ)/Q

TxQ

The Social Security tax is a tax on capital labor land savings

labor

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be $16 $18 $24 $26

$18

Refer to Figure 8-2. The per-unit burden of the tax on buyers is $1 $3 $4 $6

$3

Refer to Figure 9-3. Without trade, the equilibrium price of roses is $4 and the equilibrium quantity is 300 roses. $3 and the equilibrium quantity is 200 roses. $3 and the equilibrium quantity is 400 roses. $2 and the equilibrium quantity is 500 roses.

$4 and the equilibrium quantity is 300 roses.

Refer to Figure 8-2. Producer surplus without the tax is $4, and producer surplus with the tax is $1. $1, and producer surplus with the tax is $4. $6, and producer surplus with the tax is $1.5. $1.5, and producer surplus with the tax is $6.

$4, and producer surplus with the tax is $1.

Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market? $0 $300 $400 $700

$400

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is $24 $36 $42 $48

$48

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is $150 $425 $500 $850

$500

Refer to Figure 8-2. Consumer surplus without the tax is $1.5, and consumer surplus with the tax is $6. $4, and consumer surplus with the tax is $1. $6, and consumer surplus with the tax is $1.5. $1, and consumer surplus with the tax is $4.

$6, and consumer surplus with the tax is $1.5.

Refer to Table 10-3. The market equilibrium quantity of output is 3 units 4 units 5 units 6 units

3 units

Question 8Correct on previous attempt(s)1 / 1 point You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? 0$ 10$ 40$ 50$

40$

Refer to Table 10-3. The socially optimal quantity of output is 3 units 4 units 5 units 6 units

5 units

Refer to Figure 9-4. Total surplus in this market before trade is A+B A+B+C A+B+C+D B+C+D

A + B + C.

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach? A multilateral approach can reduce trade restrictions abroad as well as at home. A multilateral approach has the potential to result in freer trade. A multilateral approach requires the agreement of two or more nations. A multilateral approach may have political advantages.

A multilateral approach requires the agreement of two or more nations.

Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area A. A+B+C. D+H+F. A+B+C+D+H+F.

ABC

Refer to Figure 7-4. Which area represents producer surplus when the price is P2? ACH BCG ABGD DGH

ACH

Refer to Figure 9-6. The deadweight loss created by the tariff is represented by the area B. D+F D+E+F B+D+E+F

D + F.

Which of the following statements is not correct? A patent is a way for the government to encourage the production of a good with technology spillovers. A patent is a way for the government to encourage the production of a good with technology spillovers. A tax that accurately reflects external costs produces the socially optimal outcome. Government policies cannot improve upon private market outcomes.

Government policies cannot improve upon private market outcomes.

Refer to Figure 10-4. Which graph represents a market with a negative externality? Graph (b) only Graph (c) only Graph (a) Graph (b) and (c)

Graph (b) only

Assume, for India, that the domestic price of copper without international trade is lower than the world price of copper. This suggests that, in the production of copper, India has a comparative advantage over other countries and India will import copper. India has a comparative advantage over other countries and India will export copper. other countries have a comparative advantage over India and India will import copper. other countries have a comparative advantage over India and India will export copper.

India has a comparative advantage over other countries and India will export copper.

Refer to Figure 10-2. If all external costs were internalized, then the market's output would be Q1 Q2 Q3 Q4

Q2

Refer to Figure 10-2. The socially optimal quantity would be Q1 Q2 Q3 Q4

Q2

Which of the following is NOT a way of internalizing technology spillovers? Subsidies Patent protection Industrial policy Taxes

Taxes

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

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

Which of the following is an example of a positive externality? A college student buyers a new car when she graduates. Your neighbor plants a nice garden in front of his house. Your neighbor plants a nice garden in front of his house. Your neighbor plants a nice garden in front of his house.

Your neighbor plants a nice garden in front of his house.

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke. Zaria pays Hannah $16 so that Zaria can smoke. Zaria pays Hannah $14 so that Zaria can smoke. Hannah offers Zaria $15 not to smoke. Zaria accepts and does not smoke.

Zaria pays Hannah $16 so that Zaria can smoke.

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of an opportunity cost an implicit cost a sunk cost a transaction cost

a transaction cost

Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus decreases by an amount equal to C. decreases by an amount equal to A+B. decreases by an amount equal to A+C. increases by an amount equal to A+B.

decreases by an amount equal to A+B.

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.

eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.

Refer to Figure 9-3. When a tariff is imposed in the market, domestic producers gain $200 of producer surplus. gain $150 of producer surplus. gain $50 of producer surplus. gain $100 of producer surplus.

gain $150 of producer surplus.

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began importing televisions and the price of a television in Paraguay decreased to $300. importing televisions and the price of a television in Paraguay remained at $350. exporting televisions and the price of a television in Paraguay decreased to $300. exporting televisions and the price of a television in Paraguay remained at $350.

importing televisions and the price of a television in Paraguay decreased to $300.

The deadweight loss from a tax per unit of good will be smallest in a market with inelastic supply and elastic demand. inelastic supply and inelastic demand. elastic supply and elastic demand. elastic supply and inelastic demand.

inelastic supply and inelastic demand

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it maximizes both the total revenue for firms and the quantity supplied of the product. maximizes the combined welfare of buyers and sellers. minimizes costs and maximizes output. minimizes the level of welfare payments.

maximizes the combined welfare of buyers and sellers

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market decreases increases may increase, decrease, or remain unchanged is unchanged

may increase, decrease, or remain unchanged

As a result of a decrease in price, new buyers enter the market, decreasing consumer surplus. new buyers enter the market, increasing consumer surplus. existing buyers exit the market, increasing consumer surplus. existing buyers exit the market, decreasing consumer surplus.

new buyers enter the market, increasing consumer surplus

An externality is the uncompensated impact of society's decisions on the well-being of society a person's actions on the well-being of a bystander society's decisions on the poorest person in the society.

one person's actions on the well-being of a bystander.

The size of a tax and the deadweight loss that results from the tax are positively related. negatively related. independent of each other. equal to each other.

positively related

According to the Coase theorem, private parties can solve the problem of externalities if property rights are clearly defined. the cost of bargaining is large. the cost of bargaining is large. the initial distribution of legal rights favors the person causing the negative externality.

property rights are clearly defined.

When a tax is levied on a good, the buyers and sellers of the good share the burden, provided the tax is levied on the sellers. provided the tax is levied on the buyers. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. regardless of how the tax is levied.

regardless of how the tax is levied.

Cost is a measure of the seller's willingness to sell. seller's producer surplus. producer shortage. seller's willingness to buy.

seller's willingness to sell

When positive externalities are present in a market private benefits will be greater than social benefits. social benefits will be greater than private benefits. only government regulation will solve the problem. the market will not be able to generate an equilibrium.

social benefits will be greater than private benefits.

Scenario 10-1The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 200th gallon of gasoline entails the following: a private cost of $3.03; a social cost of $3.23; a value to consumers of $3.39. Refer to Scenario 10-1. From the given information, it is apparent that the production of gasoline involves a negative externality, so the market will produce a smaller quantity of gasoline than is socially desirable. the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable. the production of gasoline involves a positive externality, so the market will produce a smaller quantity of gasoline than is socially desirable. the production of gasoline involves a positive externality, so the market will produce a larger quantity of gasoline than is socially desirable.

the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable.

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that both the value of tablets to consumers and the cost of producing tablets has increased. both the value of tablets to consumers and the cost of producing tablets has decreased. the value of tablets to consumers has decreased, and the cost of producing tablets has increased. the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

The maximum price that a buyer will pay for a good is called consumer surplus producer surplus efficiency willingness to pay.

willingness to pay