eco 202

eco 202

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1. The decrease in total surplus that results from a market distortion, such as a tax, is called a a. revenue loss. b. consumer surplus loss. c. deadweight loss. d. wedge loss. c. deadweight loss.
1. The marginal tax rate on labor income for many workers in the United States is almost a. 65 percent. b. 50 percent. c. 30 percent. d. 40 percent. d. 40 percent.
1. Deadweight loss is thea. decline in total surplus that results from a tax.b. decline in government revenue when taxes are reduced in a market.d. decline in consumer surplus when a tax is placed on buyers. decline in total surplus that results from a tax.
1. When a tax is levied on the buyers of a good, thea. demand curve shifts to the right by the horizontal distance of the tax. b. quantity supplied increases for all conceivable prices of the good.c. supply curve shifts upward by the amount of the t d. buyers of the good will send tax payments to the government
1. The loss in total surplus resulting from a tax is called a. deadweight loss. b. a deficit. c. inefficiency. d. economic loss. a. deadweight loss.
1. The Laffer curve relatesa. government welfare payments to the birth rate.b. the price elasticity of supply to the deadweight loss of the tax.c. the tax rate to the deadweight loss of the tax.d. the tax rate to tax revenue raised by the tax. d. the tax rate to tax revenue raised by the tax.
1. The Laffer curve illustrates thata. deadweight loss rises by the square of the increase in a tax.b. deadweight loss rises exponentially as a tax increasesc. tax revenue first rises, then falls as a tax increases. c. tax revenue first rises, then falls as a tax increases.
When a tax is levied on the buyers of a good, the b. buyers of the good will send tax payments to the government.
1. A negative externality arises when a person engages in an activity that has a. an adverse effect on a bystander who is not compensated by the person who causes the effect.b. a beneficial effect on a bystander who does not pay the person who causes a. an adverse effect on a bystander who is not compensated by the person who causes the effect.
1. When technology spillover occurs,a. firms invest in the latest production technology and the cost of that technology "spills over" to the prices consumers must pay for the product.b. those firms engaged in technology research should be taxed by the d. a firm's research yields technological knowledge that can then be used by society as a whole.
1. A positive externality a. causes the product to be overproduced. b. benefits consumers because it results in a lower equilibrium price. c. provides an additional benefit to market participants. d. is a benefit to a market bystander. d. is a benefit to a market bystander.
1. An externality exists whenevera. markets are not able to reach equilibrium.b. the economy cannot benefit from government intervention.c. Bobbi engages in an activity that influences the well-being of Rosa and yet Bobbi neither pays nor receives p c. Bobbi engages in an activity that influences the well-being of Rosa and yet Bobbi neither pays nor receives payment for that influence.
1. Government intervention that aims to promote technology-enhancing industries is called a. intervention policy. b. industrial technology assistance. c. industrial policy. d. assisted technology. c. industrial policy.
QUESTION 61. Which of the following is not a necessary condition for the Coase theorem? a. Property rights are clearly defined. b. The government intervenes to internalize the externality. c. There are only a few parties involved. d. The b. The government intervenes to internalize the externality.
1. A command-and-control policy is another term for a a. pollution permit. b. government regulation. c. corrective tax. d. Both a and b are correct. b. government regulation.
1. Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called a. input costs. b. transaction costs. c. private costs. d. corrective costs. b. transaction costs.
1. Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole? a. internalization of an externality b. technology spillover c. opportunity cost of technology d. social co b. technology spillover
1. A negative externality a. is a cost to the buyer. b. exists with all market transactions. c. is a cost to the seller. d. is a cost to a bystander. d. is a cost to a bystander.
A positive externality arises when a person engages in an activity that has a. an adverse effect on a bystander who is not compensated by the person who causes the effect. b. a beneficial effect on a bystander who pays the person who causes the ef d. a beneficial effect on a bystander who does not pay the person who causes the effect.
The Coase theorem states that a. government intervention cannot lead to an efficient outcome when an externality is present. b. only negative externalities can be resolved using government intervention. c. government intervention is always req d. under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present.
What is the difference between command-and-control policies and market-based policies toward externalities? Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decisionmakers to change their behavior.
A corrective tax is also known as: a. a Pigovian tax. b. a command-and-control regulation. c. a Coase tax. d. a Smithian tax. a. a Pigovian tax.
An externality is the impact of one person's actions on the well-being of a bystander.
A positive externality is a benefit to someone other than the producer and consumer of the good.
Technology spillover occurs when a firm's research yields technical knowledge that is used by society as a whole.
A command-and-control policy is another term for a government regulation.
1. Excludability is the property of a good whereby a. a good is private, not public. b. a person can be prevented from using it. c. a good is public, not private. d. one person's use diminishes other peoples’ use. b. a person can be prevented from using it.
he Tragedy of the Commons results when a good is a. rival in consumption and not excludable. b. neither rival in consumption nor excludable. c. excludable and not rival in consumption. d. both rival in consumption and excludable. a. rival in consumption and not excludable.
1. When a good is rival in consumption, a. one person's use of the good diminishes another person's ability to use it. b. people can be prevented from using the good. c. everyone will be excluded from obtaining the good. d. an unlimited nu a. one person's use of the good diminishes another person's ability to use it.
1. Which of the following goods is both excludable and rival in consumption? a. efforts to fight poverty b. fire protection in a small town c. a wristwatch d. fish in the ocean . a wristwatch
f people can be prevented from using a certain good, then that good is called a. a common resource. b. excludable. c. a public good. d. rival in consumption. b. excludable.
1. When a good is excludable, a. everyone will be excluded from using the good. b. people can be prevented from using the good. c. no more than one person can use the good at the same time. d. one person's use of the good diminishes anothe b. people can be prevented from using the good.
1. If one person's use of a good diminishes another person's enjoyment of it, the good is a. normal. b. excludable. c. rival in consumption. d. exhaustible. c. rival in consumption.
1. If the use of a common resource is not regulated, a. it will be overused. b. no one can enjoy it. c. property rights will be clearly defined. d. it will tend to be underused. a. it will be overused.
1. A good is excludable if a. the government can regulate its availability. b. people can be prevented from using it. c. it is not a normal good. d. one person's use of the good diminishes another person's enjoyment of it. b. people can be prevented from using it.
1. The Tragedy of the Commons occurs because a. a common resource is rival in consumption. b. a common resource is underutilized. c. common resources are subject to exclusionary rules. d. crimes are committed in public places. a. a common resource is rival in consumption.
A free rider is a person who receives the benefit of a good but avoids paying for it.
The overuse of a common resource relative to its economically efficient use is calledthe Tragedy of the Commons. the Tragedy of the Commons.
1. A person's marginal tax rate equals a. the increase in taxes if her average tax rate were to rise by 1%. b. the increase in taxes she would pay as a percentage of the rise in her income. c. her tax obligation divided by her income. d. h b. the increase in taxes she would pay as a percentage of the rise in her income.
1. A family's income tax liability is a. based on total income. b. determined by wage income rather than dividend and interest income. c. constant from year to year. d. a standard percentage of all income earned. a. based on total income.
1. Vertical equity in taxation refers to the idea that people a. should pay taxes based on the benefits they receive from the government. b. should pay a proportional tax rather than a progressive tax. c. in equal conditions should pay equal t d. in unequal conditions should be treated differently
1. The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for a. employer-provided health benefits. b. Social Security and Medicare. c. employer-provided pensions. d. job loss and train b. Social Security and Medicare.
1. Taxes on specific goods such as gasoline and alcoholic beverages are called a. excise taxes. b. payroll taxes. c. sales taxes. d. social insurance taxes. a. excise taxes.
1. The argument that each person should pay taxes according to how well the individual can shoulder the burden is called a. regressive. b. the ability-to-pay principle. c. the benefits principle. d. the equity principle. b. the ability-to-pay principle.
1. Horizontal equity in taxation refers to the idea that people a. in unequal conditions should be treated differently. b. in equal conditions should pay equal taxes. c. should receive government benefits according to how much they have been t b. in equal conditions should pay equal taxes.
1. Tax incidence refers to a. the dollar value of the tax revenues. b. who bears the tax burden. c. what sector of the economy is most affected by the tax. d. what product or service the tax is levied on. b. who bears the tax burden.
1. A budget deficit a. occurs when government receipts are less than spending. b. occurs when government spending is less than receipts. c. occurs when government receipts are equal to spending. d. is the accumulation of years of governmen a. occurs when government receipts are less than spending.
Total taxes paid divided by total income is called the average tax rate.
If Vermont imposed a tax on butter of 50 cents per pound, it would be an excise tax.
The average tax rate measures thefraction of income paid in taxes. fraction of income paid in taxes.
The two taxes that together provide the U.S. federal government with approximately 85 percent of its revenue areindividual income taxes and payroll taxes. individual income taxes and payroll taxes.
The typical state spends the most oneducation. education.
The government taxes corporate income on the basis ofprofit. profit.
1. Foregone investment opportunities are an example of a. an explicit cost. b. an implicit cost. c. revenues. d. profits. b. an implicit cost.
1. Which of the following is not a property of a firm's cost curves? a. Average total cost is U-shaped. b. Marginal cost must eventually rise as a result of diminishing marginal product. c. Economies of scale will exist when average total cost d. Average total cost will cross marginal cost at the minimum of marginal cost.
1. Marginal cost equals2. a. the slope of the total cost curve. b. total cost divided by quantity of output produced. c. the slope of the line drawn from the origin to the total cost curve. d. total output divided by the change in total a. the slope of the total cost curve.
QUESTION 41. The marginal product of labor is equal to the a. increase in labor necessary to generate a one unit increase in output. b. incremental cost associated with a one unit increase in labor. c. incremental profit associated with a on a. increase in labor necessary to generate a one unit increase in output.
1. Average total cost is equal to a. total cost – total quantity of output. b. output/total cost. c. total cost/output. d. average variable cost + total fixed cost. c. total cost/output.
1. Economists in the field of industrial organization study how a. firms’ decisions about prices and quantities depend on market conditions. b. externalities and public goods affect the environment. c. firms’ demand for labor and individuals’ a. firms’ decisions about prices and quantities depend on market conditions.
1. Accounting profit is equal to a. average revenue minus the average cost of producing the last unit of a good or service. b. marginal revenue minus marginal cost. c. total revenue minus the opportunity cost of producing goods and services. d. total revenue minus the explicit cost of producing goods and services.
1. Industrial organization is the study of how a. labor unions organize workers in industries. b. profitable firms are in organized industries. c. firms' decisions regarding prices and quantities depend on the market conditions they face. c. firms' decisions regarding prices and quantities depend on the market conditions they face.
1. The amount by which total cost rises when the firm produces one additional unit of output is called a. variable cost. b. average cost. c. marginal cost. d. fixed cost. c. marginal cost.
1. Constant returns to scale occur when a firm’s a. marginal costs are constant as output increases. b. long-run average total costs are increasing as output increases. c. long-run average total costs do not vary as output increases. d. lo c. long-run average total costs do not vary as output increases.
Economies of scale occur whenlong-run average total costs fall as output increases. long-run average total costs fall as output increases.
Profit is defined asSelected Answer: a. total revenue minus total cost. total revenue minus total cost.
Marginal cost is equal toSelected Answer: a. ?TC/?Q. ?TC/?Q.
Marginal cost equalsCorrect Answer: b. the slope of the total cost curve. the slope of the total cost curve.
Total revenue minus only implicit costs is calledCorrect Answer: d. None of the above is correct. None of the above is correct.
To an economist, the field of industrial organization answers which of the following questions? How does the number of firms affect prices and the efficiency of market outcomes? How does the number of firms affect prices and the efficiency of market outcomes?
The cost of producing the typical unit of output is the firm'sCorrect Answer: c. average total cost. average total cost.
When the marginal product of an input declines as the quantity of that input increases, the production function exhibitsdiminishing marginal product. diminishing marginal product.
A production function is a relationship between inputs andquantity of output. quantity of output.
1. For a competitive firm, a. average revenue equals marginal revenue. b. total cost equals marginal revenue. c. total revenue equals marginal revenue. d. total revenue equals average revenue. a. average revenue equals marginal revenue.
1. Which of the following represents the firm's long-run condition for exiting a market? a. exit if P < ATC b. exit if P < FC c. exit if MR < MC d. exit if P < MC a. exit if P < ATC
1. Which of the following represents the firm's short-run condition for shutting down? a. shut down if TR < FC b. shut down if TR < VC c. shut down if P < ATC d. shut down if TR < TC b. shut down if TR < VC
1. Which of the following expressions is correct for a competitive firm? a. average total cost = total variable cost/quantity of output b. profit = (quantity of output) x (price – average total cost) c. marginal revenue = (change in total reve b. profit = (quantity of output) x (price – average total cost)
1. In a perfectly competitive market, the market supply curve is a. the marginal cost curve above average total cost for a representative firm. b. always a horizontal line. c. the vertical sum of all the individual firms’ supply curves. d. d. the horizontal sum of all the individual firms' supply curves.
1. A firm has market power if it can a. maximize profits. b. hire as many workers as it needs at the prevailing wage rate. c. minimize costs. d. influence the market price of the good it sells. d. influence the market price of the good it sells.
1. In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is a. equal to the industry profits. b. the market supply curve. c. zero. d. a horizontal line. b. the market supply curve.
1. Total profit for a firm is calculated as a. marginal revenue minus average total cost. b. average revenue minus average total cost. c. marginal revenue minus marginal cost. d. (price minus average cost) times quantity of output. d. (price minus average cost) times quantity of output.
1. One of the defining characteristics of a perfectly competitive market is a. a similar product. b. a small number of sellers. c. significant advertising by firms to promote their products. d. a large number of buyers and a small number o a. a similar product.
1. Which of these curves is the competitive firm's short-run supply curve? a. the average variable cost curve above marginal cost b. the marginal cost curve above average variable cost c. the average total cost curve above marginal cost d. b. the marginal cost curve above average variable cost
The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above averageCorrect Answer: c. total cost. total cost.
A firm that has little ability to influence market prices operates in acompetitive market. competitive market.
When buyers in a competitive market take the selling price as given, they are said to beCorrect Answer: b. price takers. price takers.
In the short-run, a firm's supply curve is equal to theCorrect Answer: a. marginal cost curve above its average variable cost curve. marginal cost curve above its average variable cost curve.
The short-run market supply curve in a perfectly competitive industryCorrect Answer: c. shows the total quantity supplied by all firms at each possible price. shows the total quantity supplied by all firms at each possible price.

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