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Micro Exam 2
| Question | Answer |
|---|---|
| Tax incidence is the | division of the burden of a tax between the buyer and the seller. |
| Suppose the government imposes on sellers a $1 per gallon tax on a gallon of gasoline. As a result, the ____ curve shifts ____. | Supply; leftward. |
| The Demand curve for pizza is downward sloping and the supply curve is upward sloping. If the government imposes a $2 tax on a pizza, ____ pay the tax. | Both producers and consumers. |
| Neither the demand nor the supply of automobiles is perfectly elastic or inelastic. If the government imposes a $1,000 tax on automobiles, then the price of an automobile | increases by less than $1,000. |
| Neither the demand nor the supply of sugar is perfectly elastic or inelastic. If the government imposes a 5 percent tax on sugar, the | price of sugar increases by less than 5 percent. |
| For a given supply elasticity, the more inelastic the demand for a good, the larger the share of the tax on a product paid by the | buyers. |
| Suppose the price elasticity of demand for Oklahoma-Nebraska football tickets is extremely inelastic. If the state of Oklahoma passes a tax of $20 per ticket on this event, then ticket | buyers pay the largest share of the tax but there is neither a surplus nor a shortage of tickets. |
| If the consumer pays more of a tax than does the producer | supply is more elastic than demand. |
| For a given elasticity of demand, the more inelastic the supply, the | larger the share of a tax paid by the sellers. |
| A tax | (a.) places a wedge between the price paid by the buyers and the price received by the sellers. (b.) reduces consumer and producer surplus. Both answers a and b are correct. |
| When a product is taxed, | (a.)part of the initial consumer surplus becomes a dead weight loss. (b.)part of the initial consumer surplus goes to the government as revenue. Both answers a and b are correct. |
| The Dead weight loss from a tax | is called the excess burden. |
| The excess burden of a tax refers to the fact that | the dead weight loss created by the tax exceeds the tax revenue. |
| The fed govt pays airlines 2 service small cities in the US thru a subsidy prog called Essential Air Service which was estab in 78 when the airline indust was deregulated. Most subsidies cant exceed $200 per passenger. What isnt an effect of this subsidy? | An increase in price and an increase in quantity produced. |
| The fed govt pays airlines to service small cities in the US through a subsidy prog called Essential Air Service which was estab in 1978 when the airline industry was deregulated. Most subsidies cant exceed $200 per passenger. W/o this subsidy, what is T? | There would be higher prices and fewer flights. |
| Fed govt pays airlines 2 service small cities in the US thru a subsidy prog called EAS which was estab in 78 when the airline indust was deregulated. Most subsidies cant exceed $200 per passenger. Whatd happen if the govt increased the subsidy 2 $400 pp? | There would be a fall in price and increase in quantity produced. |
| The Volumetric Ethanol Excise Tax Credit is a tax credit for registered ethanol gasoline blenders. Qualified blenders receive $.51 for each gallon of pure ethanol they blend into gasoline. What statement is true? | With a subsidy, the price paid by consumers will be lower than without a subsidy. |
| Rent control leads to quantity supplied being ____ quantity demanded. | less than |
| In the case of rent control, a maximum price will cause ____ and ____ the total surplus of the market. | excess demand; reduce |
| If the government imposes a maximum price in a market that is below the equilibrium price: | total surplus in the market decreases. |
| If the government imposes a maximum price on rental apartments that is below the equilibrium price, we can expect to see all of the following EXCEPT: | new apartment units being built. |
| Since rent control ___ the total surplus of the market, the policy generates a ____. | decreases; dead weight loss. |
| If government sets a minimum price above the equilibrium price: | some producers gain at the expense of consumers and the total surplus decreases. |
| Since rent control outlaws transactions they would make both the consumer and supplier better off, then rent control: | (B.)causes inefficiency (c.)decreases total surplus Both b and c are correct. |
| A maximum price set below the equilibrium price will: | cause excess demand and decrease total surplus. |
| Which of the following is a way of controlling the quantity of a particular product? | business licenses. |
| An electrician licensing program in the state of North Carolina requires each electrician to obtain a license and renew it each year. Which of the following is a result of having the licensing program in NC? | all of the above are a result of the licensing program. |
| Why does the medallion policy cause inefficiency? | (a.)it decreases the total surplus of the taxi market. (b.)it prevents riders and drivers from doing mutually beneficial transactions. A and B are correct. |
| Farmers face a short-run good/bad paradox because the: | demand curve for their products is relatively inelastic. |
| A leftward shift in the supply of agricultural output will most likely cause agricultural prices to: | rise proportionately more than the decline in quantity demanded. |
| Consumers would be expected to oppose farm price supports because they: | increase the price consumers must pay and reduce the quantity consumed. |
| If government pays farmers a high price for their goods and sells the output to consumers for a much lower price: | consumers and farmers are better off, but taxpayers much ultimately foot the bill. |
| Government has four alternative methods of price support. These include all of the following except: | paying farmers to produce more. |
| Of the four options for supporting farm prices, the one that costs government the MOST is: | subsidies on sale. |
| Of the four options for supporting farm prices, the one that harms taxpayers the LEAST is: | regulation. |
| The option for supporting farm prices that can provide farmers with additional income for using land for other purposes is: | economic incentives to reduce supply. |
| The purpose of government's land bank program is to: | support prices by giving farmers economic incentives to reduce supply. |
| In a price support system: | there are persistent surpluses. |
| Total product is equal to the | total quantity produced in a given time period. |
| The marginal product of labor | equals the change in total product divided by the increase in the quantity of labor. |
| Marginal product is defined as the change in | total output from employing one more worker. |
| The change in the total product that results from a one-unit increase in the quantity of labor employed is known as | marginal product. |
| When the marginal product of an additional worker is less than the marginal product of the previous worker what is taking place? | decreasing marginal returns. |
| The law of decreasing returns states that as a firm uses more of a | variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases. |
| Derived demand means that the demand for a factor of production is derived from the | demand for the good or service that the resource is used to produce. |
| The demand for a resource is derived from the | demand for the good or service that the resource is used to produce. |
| In the labor market, | firms demand labor. |
| Which of the following represents a derived demand? Demand for.. | a grocery clerk by the local Safeway. |
| The value of the marginal product is equal to | marginal product product price. |
| If UPS hires another worker, UPS will be able to deliver an additional 20 packages an hour. The price of each package is $5. The value of this worker's marginal product is equal to | $100 |
| The value of the marginal product of labor | declines as more workers are hired. |
| When hiring labor, to maximize profit a firm hires labor | until the value of the marginal product equals the wage rate. |
| The rule for employing a profit-maximizing amount of labor is to continue to hire additional workers as long as the additional worker's value of marginal product is | equal to the wage rate. |
| If the value of the marginal product of the 10th worker is $30, then the | quantity of labor demanded when the wage rate is $30 will be 10 workers. |
| If a firm finds itself at the point where the value of the marginal product of labor is greater than its wage rate, then the firm | increases the number of workers it hires. |
| The demand curve for labor is the same as the firm's | value of marginal product curve. |
| A firm's demand for labor curve shifts when there is a change in | technology. |
| If the price of movie tickets increases, there is | an increase in the demand for actors and actresses. |
| As a result of the proliferation of ATM machines, the demand for bank tellers has | decreased. |
| The market supply of labor curve for a particular job | shows the quantity of labor supplied by all households. |
| If the wage rate increases, then | there is a movement upward along the supply of labor curve. |
| Goods and services that the United States buys from other nations are called | imports. |
| When a country exports a good because the world price is higher than the no-trade domestic price, domestic purchases of the good ___ and domestic production of the good ___. | decrease; increases |
| The United States imports t-shirts from Asia. As a result, U.S. consumers pay a ___ price than otherwise and Asian producers receive a ___ price than otherwise. | lower; higher |
| If the world price of a good is below the no-trade domestic price, a counrtry | will benefit from importing the good. |
| Most t-shirts bought by Americans are made in Asia. U.S. consumers of t-shirts win from trade with Asia by paying ___ price than they would pay if t-shirts were produced in the United States. | a lower. |
| Most t-shirts bought by Americans are made in Asia. Workers in Asia making t-shirts win from trade with America by receiving ___ price than they would receive from another buyer. | a higher |
| Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production of t-shirts in America has | decreased. |
| After a nation starts importing a good from overseas, the domestic price of the good | falls. |
| After a nation starts importing a good from overseas, the domestic consumption of the good | increases. |
| When a nation starts importing a good or service, domestic employment in that industry | decreases. |
| When a nation starts importing a good or service, the domestic production of the good or serivce | decreases. |
| When a nation exports a good or service, employment in that industry | increases. |
| When a nation exports a good or service, production of the good or service | increases. |
| A tariff is | a tax imposed on imports. |
| After a tariff is imposed, consumers must pay | the world market price plus the tariff. |
| Which of the following chain of events occurs when a tariff is imposed on a good? | Domestic prices rise, decreasing the quantity demanded and increasing the quantity supplied. |
| The imposition of tariffs on Korean steel will be expected to led to ___ the supply of Korean steel in America. | a decrease in |
| U.S. tariffs on Canadian lumber have led to ___ production of lumber within the United States. | an increase in |
| Imposing a tariff on a good leads to a ___ in the price of the product and a ____ in imports. | rise; decrease |
| If the government decides to impose a new tariff on orange juice from Brazil, the tariff would lead to ___ the tariff revenue collected by the U.S. government. | an increase in |
| A specified maximum amount of the good that may be imported in a given period of time is a | quota. |
| The imposition of a quota results in | domestic production increasing while imports and domestic purchases decrease. |
| As a result of quotas on the amount of sugar Haiti can sell the United States, the supply of sugar in the United States is ___ it would be without the quota. | less than |
| Which of the following is the national security argument against free trade? | A country must protect industries that produce defense equipment and armaments. |
| The infant-industry argument is used by those who assert they want to | limit imports to protect new industries. |
| Dumping is defined as the situation in which | foreign producers sell a product at a price below the cost of production. |
| Which of the following is NOT a major argument for restricting international trade? | the promotion of dumping in America. |
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