question
Negative externalities lead markets to produce
a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficientoutput levels
.b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels.
d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficientoutput levels
.b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels.
d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
answer
c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels.
question
A public good is
a. excludable and not rival.
b. excludable and rival.
c. not excludable and rival.
d. not excludable and not rival.
a. excludable and not rival.
b. excludable and rival.
c. not excludable and rival.
d. not excludable and not rival.
answer
d. not excludable and not rival.
question
A tax on a good with a negative externality
a. will create a shortage of that good.
b. cannot raise revenue for the government.
c. will always cause deadweight loss.
d. can increase economic efficiency.
a. will create a shortage of that good.
b. cannot raise revenue for the government.
c. will always cause deadweight loss.
d. can increase economic efficiency.
answer
d. can increase economic efficiency.
question
if a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
c. the country cannot benefit from international trade in that good.
d. a tariff is need to protect domestic producers of the good.
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
c. the country cannot benefit from international trade in that good.
d. a tariff is need to protect domestic producers of the good.
answer
a. the country will be an exporter of the good.
question
Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to the state with the understanding that the land will be used as a state beach that anyone may use without paying any fees. This state beach
a. may tend to be overused because it is nonexcludable.
b. is a common resource when it becomes crowded on sunny summer weekends.
c. is rival in consumption when it becomes crowded on sunny summer weekends.
d. all of the above are correct.
a. may tend to be overused because it is nonexcludable.
b. is a common resource when it becomes crowded on sunny summer weekends.
c. is rival in consumption when it becomes crowded on sunny summer weekends.
d. all of the above are correct.
answer
*d. all of the above are correct.
question
Producers have little incentive to produce a public good because
a. the social benefit is less than the private benefit.
b. the social benefit is less than the social cost.
c. there is a free-rider problem.
d. there is a Tragedy of the Commons.
a. the social benefit is less than the private benefit.
b. the social benefit is less than the social cost.
c. there is a free-rider problem.
d. there is a Tragedy of the Commons.
answer
c. there is a free-rider problem.
question
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?
a. At the current output level, the marginal social benefit exceeds the marginal private benefit.
b. The current output level is inefficiently low.
c. A per-shot subsidy could turn an inefficient situation into an efficient one.
d. all of the above are correct.
a. At the current output level, the marginal social benefit exceeds the marginal private benefit.
b. The current output level is inefficiently low.
c. A per-shot subsidy could turn an inefficient situation into an efficient one.
d. all of the above are correct.
answer
*d. all of the above are correct.
question
When a country allows trade and becomes an exporter of a good,
a. both domestic producers and domestic consumers become better off.
b. domestic producers become better off, and domestic consumers become worse off.
c. domestic producers become worse off, and domestic consumers become better off.
d. both domestic producers and domestic consumers become worse off.
a. both domestic producers and domestic consumers become better off.
b. domestic producers become better off, and domestic consumers become worse off.
c. domestic producers become worse off, and domestic consumers become better off.
d. both domestic producers and domestic consumers become worse off.
answer
b. domestic producers become better off, and domestic consumers become worse off.
question
A major difference between tariffs and import quotas is that
a. tariffs create deadweight losses, but import quotas do not.
b. tariffs help domestic consumers, and import quotas help domestic producers.
c. tariffs raise revenue for the government, but import quotas do not.
d. all of the above are correct.
a. tariffs create deadweight losses, but import quotas do not.
b. tariffs help domestic consumers, and import quotas help domestic producers.
c. tariffs raise revenue for the government, but import quotas do not.
d. all of the above are correct.
answer
c. tariffs raise revenue for the government, but import quotas do not.
question
The study of how the allocation of resources affects economic well-being is called
a. home economics.
b. financial economics.
c. welfare economics.
d. efficiencyeconomics.
a. home economics.
b. financial economics.
c. welfare economics.
d. efficiencyeconomics.
answer
c. welfare economics.
question
If a market is allowed to move freely to its equilibrium price and quantity, then an increase in demand will
a. increase producersurplus
.b. reduce producersurplus
.c. not affect producersurplus.
d. may increase, decrease, or not affect consumer surplus depending on the elasticity of supply.
a. increase producersurplus
.b. reduce producersurplus
.c. not affect producersurplus.
d. may increase, decrease, or not affect consumer surplus depending on the elasticity of supply.
answer
a. increase producersurplus
question
Which of the following statements is correct?
a. A decrease in the size of a tax always decreases the tax revenue raised by that tax.
b. In the absence of externalities, a decrease in the size of a tax always decreases the deadweight loss of that tax.
c. Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
d. An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.
a. A decrease in the size of a tax always decreases the tax revenue raised by that tax.
b. In the absence of externalities, a decrease in the size of a tax always decreases the deadweight loss of that tax.
c. Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
d. An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.
answer
b. In the absence of externalities, a decrease in the size of a tax always decreases the deadweight loss of that tax.
question
Goods that are not excludable include both
a.private goods and public goods.
b.natural monopolies and common resources.
c.common resources and public goods.
d.private goods and natural monopolies.
a.private goods and public goods.
b.natural monopolies and common resources.
c.common resources and public goods.
d.private goods and natural monopolies.
answer
c.common resources and public goods.
question
The Tragedy of the Commons maybe corrected by
a.conducting a cost-benefit analysis.
b.assigning property rights to individuals.
c.providing government subsidies for the resource.
d.making certain everyone in the economy has access to the resource.
a.conducting a cost-benefit analysis.
b.assigning property rights to individuals.
c.providing government subsidies for the resource.
d.making certain everyone in the economy has access to the resource.
answer
b.assigning property rights to individuals.
question
If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,
a.the country will be an exporter of the good.
b.the country will be an importer of the good.
c.the country will be neither an exporter nor an importer of the good.
d.Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.
a.the country will be an exporter of the good.
b.the country will be an importer of the good.
c.the country will be neither an exporter nor an importer of the good.
d.Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.
answer
b.the country will be an importer of the good.
question
In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that
a.Moldova can only import goods; it cannot export goods.
b.Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
c.only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
d.Moldova is a price taker
a.Moldova can only import goods; it cannot export goods.
b.Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
c.only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
d.Moldova is a price taker
answer
d.Moldova is a price taker
question
Suppose due to favorable weather conditions, this year's corn crop sets a new record high for production. What happens to consumer surplus in the market for corn?
a.Consumer surplus increases.
b.Consumer surplus decreases.
c.Consumer surplus is not affected by this change in market forces.
d.We would have to know whether the demand for cornis elastic or inelastic to make this determination.
a.Consumer surplus increases.
b.Consumer surplus decreases.
c.Consumer surplus is not affected by this change in market forces.
d.We would have to know whether the demand for cornis elastic or inelastic to make this determination.
answer
a.Consumer surplus increases.
question
Which of the following ideas is the most plausible?
a.Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
b.Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
c.Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
d.Decreasing a tax rate can never increase tax revenue.
a.Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
b.Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
c.Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
d.Decreasing a tax rate can never increase tax revenue.
answer
a.Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
question
If the current allocation of resources in the market for hammers is inefficient, then it must be the case that
a.producer surplus exceeds consumer surplus in the market for hammers.
b.consumer surplus exceeds producer surplus in the market for hammers.
c.the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
d.the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.
a.producer surplus exceeds consumer surplus in the market for hammers.
b.consumer surplus exceeds producer surplus in the market for hammers.
c.the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
d.the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.
answer
c.the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
question
The deadweight loss of a tax measures the loss
a.in surplus in a market to buyers and sellers that is not offset by an increase in government revenue.
b.in revenue to the government when buyers choose to buy less of the product because of the tax.
c.of equality in a market due to government intervention.
d.of total revenue to business firms due to the price wedge caused by thetax.
a.in surplus in a market to buyers and sellers that is not offset by an increase in government revenue.
b.in revenue to the government when buyers choose to buy less of the product because of the tax.
c.of equality in a market due to government intervention.
d.of total revenue to business firms due to the price wedge caused by thetax.
answer
a.in surplus in a market to buyers and sellers that is not offset by an increase in government revenue.
question
Other things equal, the deadweight loss of a tax
a.decreases as the size of the tax increases.
b.increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax.
c.increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
d.increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.
a.decreases as the size of the tax increases.
b.increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax.
c.increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
d.increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.
answer
c.increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
question
"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the
a.national-security argument.
b.infant-industry argument.
c.unfair-competition argument.
d.jobs argument.
a.national-security argument.
b.infant-industry argument.
c.unfair-competition argument.
d.jobs argument.
answer
b.infant-industry argument.
question
Consumer surplus is
a.the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b.the amount a buyer is willing to pay for a good minus the cost of producing the good.
c.the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
d.a buyer's willingness to pay for a good plus the price of the good.
a.the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b.the amount a buyer is willing to pay for a good minus the cost of producing the good.
c.the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
d.a buyer's willingness to pay for a good plus the price of the good.
answer
a.the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
question
Compared to several decades ago, the economy of the United States is
a. less dependent on international trade.
b. more likely to run a trade surplus with the rest of the world.
c. more dependent on international trade.
d. less likely to be affectedby foreign economic crises.
a. less dependent on international trade.
b. more likely to run a trade surplus with the rest of the world.
c. more dependent on international trade.
d. less likely to be affectedby foreign economic crises.
answer
c. more dependent on international trade.
question
The demand for milk is more elastic than the demand for water. Suppose the government levies an equivalent tax on milk and water. The deadweight loss would be larger in the market for
a.milk than water because the quantity of milk would fall by more than the quantity of water.
b.milk than water because the quantity of water would fall by more than the quantity of milk.
c.water than milk because the quantity of milk would fall by more than the quantity of water.
d.water than milk because the quantity of water would fall by more than the quantity of milk.
a.milk than water because the quantity of milk would fall by more than the quantity of water.
b.milk than water because the quantity of water would fall by more than the quantity of milk.
c.water than milk because the quantity of milk would fall by more than the quantity of water.
d.water than milk because the quantity of water would fall by more than the quantity of milk.
answer
a.milk than water because the quantity of milk would fall by more than the quantity of water.
question
Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's
a.total revenue.
b.implicitcosts.
c.explicit costs.
d.marginal costs.
a.total revenue.
b.implicitcosts.
c.explicit costs.
d.marginal costs.
answer
b.implicitcosts.
question
When a firm's longrun average total costs do not vary as output increases, the firm exhibits
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.average returns to scale.
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.average returns to scale.
answer
b.constant returns to scale.
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