test 2

When a good is taxed,

both buyers and sellers of the good are made worse off

Two types of private solutions to the problem of externalities are

charities and the Golden Rule

Goods that are rival in consumption include both

common resources and private goods

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

increase tax revenue and decrease the deadweight loss

An externality is the uncompensated impact of

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

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.

The provision of a public good generates a

positive externality and the use of a common resource generates a negative externality

Which of the following is NOT a way of internalizing technology spillovers

Taxes

If marginal cost is rising,

marginal product must be falling

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

will import almonds

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

−$3,875.

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000.

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

$110

Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

$18,000

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

$2,250

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?

$4,000

A traffic light at an intersection is

. not rival and not excludable in consumption

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

16 units of output

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

16.

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8 units of output.

The town of Isle is on a small island connected to Big City by a single bridge. Most of the residents of Isle work in Big City. As a result, the bridge becomes very congested for two hours each day at the typical morning and evening commute times. Which of the following policies considered by the mayor of Isle would likely be most efficient in alleviating the congestion?

A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

At the current output level, the marginal social benefit exceeds the marginal private benefit.

Which of the following is not a characteristic of a public good?

Because it is a free good, there is no opportunity cost

Which of the following statements is not correct

Corrective taxes require the government to set a target level of pollution.

Who among the following is a free rider?

Ernie listens to National Public Radio, but does not contribute to any fundraising efforts.

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Moldova is a price taker

Which of the following is usually true about government-provided goods?

People do not have to pay an explicit fee to enjoy these goods.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

The cost of the steel that is used in producing automobiles

Which of the following quantities decrease in response to a tax on a good?

The equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

Suppose Yolanda needs a dog sitter so that she can travel to her sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax

The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda

Which of the following is an example of an implicit cost?

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

What happens to the total surplus in a market when the government imposes a tax?

Total surplus decreases.

Which of the following is not a typical solution to the "Tragedy of the Commons?"

Turning the common resource into a club good

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?

Zaria pays Hannah $16 so that Zaria can smoke

Average total cost is very high when a small amount of output is produced because

average fixed cost is high.

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except

each dish would be both excludable and rival in consumption.

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

economies of scale

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

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

The failure of markets to adequately protect the environment can be viewed either as a problem of

externalities or as a problem of common resources.

If the Korean steel industry subsidizes the steel that it sells to the United States, the

harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.

If the labor supply curve is very elastic, a tax on labor

has a large deadweight loss

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

if Wheatland were to allow trade, it would import corn

Private decisions about consumption of common resources and production of public goods usually lead to an

inefficient allocation of resources and external effects.

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand

The infant-industry argument

is based on the belief that protecting industries when they are young will pay off later.

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution

is less costly to society

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient.

A textbook is a

private good and the knowledge that one gains from reading the book is a public good.

Goods that are excludable include both

private goods and club goods

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

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

The "unfair-competition" argument might be cited by an American who believes that

the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.

The overuse of a common resource relative to its economically efficient use is called

the Tragedy of the Commons

According to the Coase theorem, private parties can solve the problem of externalities if

the cost of bargaining is small.

Representative Vazquez cites the "jobs argument" when he argues before Congress in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Representative Vazquez's reasoning is that he ignores the fact that

the gains from trade are based on comparative advantage

If a sawmill creates too much noise for local residents

the government can raise economic well-being through noise-control regulations

Concerning the labor market and taxes on labor, economists disagree about

the size of the deadweight loss of the tax on labor.

Producers have little incentive to produce a public good because

there is a free-rider problem

Private companies are most likely to invest in medical research if

they will produce a specific product for which they may receive a patent.

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable

A cost-benefit analysis of a highway is difficult to conduct because analysts

will have difficulty estimating the value of the highway.