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POST ECO202 MIDTERM EXAM

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Question;Question 12 out of 2 pointsA well-designed tax system should attempt to avoidcorporate income taxes.;lump-sum taxes. deadweight losses and administrative burdens. Question 22 out of 2 pointsSuppose that some firms in a competitive industry are;earning negative profits in the short run. If there is no change in the firms;costs or the market price, in the long run these firms will shut down, thereby;reducing the number of firms in the industry.Question 32 out of 2 pointsThe Coase Theorem states thatefficient outcomes can be accomplished by private parties;even when externalities are present, as long as there are no bargaining;costs. there are costs to negotiating externalities. the government cannot solve externality problems without the;intervention of private parties. it is impossible to solve externality problems without the;aid of government. Question 42 out of 2 pointsA general lesson learned from the Tragedy of the Commons is;that when one person uses a common resource, other people's enjoyment of the;common resource is unaffected.Question 52 out of 2 pointsPublic goods are goods that are both excludable and rival in;consumption.Question 62 out of 2 pointsSellers will bear the greater burden of a tax when supply is;more elastic than demand.Question 70 out of 2 pointsSuppose the government levies a $1 per unit tax on a;product. Which of the following statements is correct?If the tax is imposed on the buyers of the product, the;buyers will always bear the greater burden of the tax.If the tax is imposed on the sellers of the product, the;sellers will always bear the greater burden of the tax.How the burden of the tax is shared between the buyers and;the sellers does not depend on whether the tax is imposed on the buyers or on;the sellers. I only III only I, II, and III I and II only Question 80 out of 2 pointsThe decrease in the total surplus in the market without a;tax and the total surplus in the market with a tax is referred to as the;deadweight loss of the tax.Response Feedback: See section: The Deadweight Loss of Taxation.Question 92 out of 2 pointsBeyond the gains in total surplus that result from allowing;free trade, free trade also has the benefit of providing consumers with an;increased variety of goods from which to choose.Question 100 out of 2 pointsGoods with more close substitutes tend to have a more;inelastic price elasticity of demand.Question 112 out of 2 pointsThe largest source of revenue for the federal government is;corporate income taxes.2 out of 2 pointsIf supply were to increase in a market, lowering the;equilibrium price, total consumer surplus in the market would increase.Question 130 out of 2 pointsWhen a tax is imposed on a market, if the tax is imposed on;the buyers in the market, total consumer surplus will fall and total producer;surplus will rise.Question 142 out of 2 pointsWhen average total costs are increasing in the long run, the;firm is experiencing diseconomies of scale.Question 152 out of 2 pointsWhen a country allows free trade of a good, if the world;price is higher than the domestic price, the country will become an exporter of;that good.Question 162 out of 2 pointsWhich of the following can be used to calculate total surplus?I.total consumer surplus plus total producer surplusII.value to buyers minus cost to sellers Both I and II II only Neither I nor II I only Question 172 out of 2 pointsRent controls lead to a shortage in the housing market and;as a result, landlords have less incentive to maintain their apartments.Question 182 out of 2 pointsIf the cross-price elasticity of demand between two goods is;positive then the two goods are substitutes.Question 192 out of 2 pointsGoods that are neither excludable nor rival in consumption;are calledclub goods. common resources. public goods. private goods. Question 202 out of 2 pointsIn a perfectly competitive market, only one producer supplies the product to the market. the sellers have the ability to influence the market price;by increasing or decreasing their level of production. the products available for sale vary widely from seller to;seller. the number of buyers and sellers is so large that no;individual buyer or seller has any influence over the price. Question 212 out of 2 pointsThe law of demand states that, other things equal, when the;price of a good rises, the quantity demanded of the good falls.Question 220 out of 2 pointsSuppose your local coffee shop offers free wireless internet;service to all customers who make a purchase. The coffee shop has a powerful;wireless signal, so the speed of the service does not fall when additional;customers enter the shop and connect to the service. What type of good is the;wireless internet service in this case? club good common resource public good private good Response Feedback: Question 232 out of 2 pointsWhich of the following would we expect to shift the supply;curve for a product to the left?a decrease in the prices of the inputs used to produce the;good an expectation that the price of the good will be higher in;the future than it is today an increase in the number of suppliers in the market an improvement in the technology used to produce the;good Question 242 out of 2 pointsIn a market that starts out in equilibrium, if supply were;to increase at the same time that demand were to decrease we would expect the;equilibrium price to fall.Question 252 out of 2 pointsA firm in a competitive industry should consider both sunk;costs and non-sunk costs when choosing how much output to produce.Question 262 out of 2 pointsWhich of the following would you expect to have the most;inelastic price elasticity of demand?The demand for natural gas six months after a price;increase. The demand for natural gas one year after a price;increase. The demand for natural gas the day of a price increase. The demand for natural gas one month after a price;increase. Question 272 out of 2 pointsMarkets with positive externalities do not trade the optimal;quantity becauseproducers fail to consider the external cost in their decision-making;process. consumers fail to consider the external benefit in their;decision-making process. bystanders are not important members of society. the government fails to provide markets with all the;information needed for an efficient outcome.;Question 282 out of 2 pointsTaxes enacted to deal with the effects of negative;externalities are called corrective taxes or, sometimes, Pigovian taxes.Question 292 out of 2 pointsWhen the cross-price elasticity of demand between two goods;is negative we know that the two goods aresubstitutes. complements. normal goods. inferior goods. Question 300 out of 2 pointsWhen the world price is below the domestic price, if the;country allows trade but implements a tariff to reduce the quantity of imports,the domestic quantity demanded will increase as a result of;the tariff. consumer surplus will increase as a result of the;tariff. total surplus will increase as a result of the tariff. the tariff will cause a deadweight loss. Question 310 out of 2 pointsWhen the size of a tax in a market is increased, tax revenue;will always increase as well.Question 320 out of 2 pointsWhich of the following would be an example of an opportunity;cost to an airline?the cost of the jet fuel;the rent that could be earned on an aircraft that is owned;by the airline the salaries paid to the pilots All of these choices are correct. Question 332 out of 2 pointsIn a competitive market, the market equilibrium is;efficient.Question 342 out of 2 pointsFor a firm in a competitive industry, marginal revenue and;average revenue are equal to price.Question 352 out of 2 pointsA tax for which high-income taxpayers pay a smaller fraction;of their income than do low-income taxpayers is called a marginal tax progressive tax. proportional tax. regressive tax. Question 360 out of 2 pointsWhich of the following statement/s is correct?I.Producer surplus is the difference between the price of;the good and the producer's cost.II.Total producer surplus is the area that lies below the;price and above the supply curve.III.A decrease in the market price will increase producer;surplus. I, II, and III II and III only I and II only I only Question 370 out of 2 pointsA firm in a competitive industry maximizes profits by;choosing an output level where marginal revenue exceeds marginal cost by the;greatest amount.Question 382 out of 2 pointsWhich of the following is not a characteristic of a;perfectly competitive market?. Answers: Correct Each firm can set its price.;There are many buyers.;Each firm sells an identical product. There are many sellers.;Question 390 out of 2 pointsIf demand is inelastic, thenraising price will lower total revenue lowering the price may increase or decrease total revenue.;We would need additional information to know for sure. lowering price will increase total revenue. raising price will increase total revenue. Question 400 out of 2 pointsWhen the domestic price of a good is below the world price;of a good, we know thatallowing free trade will reduce total surplus. the country will likely be an importer of the good if the;country allows free trade. the country has a comparative advantage in the production of;the good. implementing tariffs will increase total surplus. Question 412 out of 2 pointsWhich of the following would be an example of an implicit;cost to an airline?the cost of the jet fuel;the costs of materials and labor to maintain the;airplanes the rent that could be earned on an aircraft that is owned;by the airline the salaries paid to the pilots Question 420 out of 2 pointsAccording to the Coase theorem, even if private parties can;bargain over the allocation of resources at no cost, the private market cannot;solve the problem of externalities and allocate resources efficiently.ebook: Private Solutions to ExternalitiesQuestion 432 out of 2 pointsIf a firm's production function reflects diminishing;marginal product, its total cost curve will be relatively steep.Question 442 out of 2 pointsIn which of the following cases would the buyers most likely;bear the greater burden of a tax?A market in which demand is very elastic and supply is very;elastic. A market in which demand is very elastic and supply is very;inelastic. A market in which demand is very inelastic and supply is;very inelastic. A market in which demand is very inelastic and supply is;very elastic. Question 450 out of 2 pointsDiminishing marginal product of labor occurs when each;additional worker hiredreduces the total costs of the firm. contributes a smaller increase in output than;previously-hired workers. contributes a smaller increase in total costs than;previously-hired workers. reduces the total output produced by the firm. Question 462 out of 2 pointsThe benefits principle of taxation states that people should;pay taxes based on the benefits they receive from government services.Question 472 out of 2 pointsThe free-rider problem refers to theabuse of power by some firms when they increase their prices;to unreasonable levels. excessive consumption that occurs when goods are given for;free during promotional campaigns. fact that when public goods are provided there is no way of;preventing people from using them, even if they do not pay for them. under-use of common resources. Question 480 out of 2 pointsIf the world price is below the domestic price of a good in;a country, allowing free trade will lower total surplus in the country.Question 490 out of 2 pointsIn which of the following cases would you expect the;deadweight loss from a tax to be the smallest? Elastic demand and inelastic supply Inelastic demand and elastic supply Elastic demand and elastic supply Inelastic demand and inelastic supply Response Feedback: See section: The Determinants of Deadweight Loss. The;greater the elasticities of demand and supply, the greater the deadweight loss;of a tax. Therefore, we would expect the deadweight loss to be smallest in a;market with inelastic demand and inelastic supply.Question 500 out of 2 pointsSuppose a tax in a market is increased from $3 to $6. As a;result, we would expect the deadweight loss to increase by a factor of 3429;="msonormal">

 

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