Econ Multiple Choice

60 terms by jen471234 

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In a market economy government intervention
a. may improve market outcomes in the presence of externalities
b. its necessary yo control individual greed
c. reduces efficiency in the presence of externalities
d. will always improve market outcomes
e. will never improve market outcomes

a

a cost imposed on someone who is neither the consumer nor the producer is called a
a. sunk cost
b. negative externality
c. positive externality
d. command and control policy
e. corrective tax

b

since restored historic buildings convey a positive externality, local governments may choose to
a. increase property taxes in historic areas
b. provide tax breaks to owners who restore them
c. regulate the demolition of them
d. both a and c are correct
e. both a and b are correct

e

which of the following statements is not correct
a. a negative externality is an example of a market
b. government policies may improve the market's allocation of resources when positive externalities are present
c. a positive externality is an example of a market failure
d. government policies may improve the market's allocation of resources when negative externalities are present
e. without government intervention the market will tend to undersupply products that produce negative externalities

e

which of the following is an example of a positive externality
a. mary not catching the flu from sue because sue got a flu vaccine
b. sue catching the flu because she got a flu vaccine
c. mary catching the flu because she did not get a flu vaccine
d. mary catching the flu from sue because sue did not get a flu vaccine
e. sue not catching the flu because she got a flu vaccine

a

6.The following table shows the private value, private cost, and social value for a market with a positive externality.
what is the socially-optimal level of output in this market?
a. 6 units
b. 3 units
c. 2 units
d. 4 units
e. 5 units

e

7. What is the socially-optimal quantity of output in this market?
a. 10 units
b. between 8 and 10 units
c. more than 10 units
d. less than 8 units
e. 8 units

a

an optimal tax on pollution would result in which of the following?
a. producers will internalize the cost of the pollution
b. producers will maximize production
c. the value to consumers at market equilibrium will exceed the social cost of production
d. producers will maximize profits
e. producers will choose not to produce any pollution

a

9. which price and quantity combination represents the social and optimum
a. P2 and Q0
b. P1 and Q0
c. P3 and Q0
d. P0 and Q1
e. P2 and Q1

e

10. what is the equilibrium quantity of output in the market
a. 3 units
b. 6 units
c. 2 units
d. 4 units
e. 5 units

a

11. how large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome
a. 9
b. 10
c. 3
d. 5
e. 2

e

12. this market is characterized by
a. market efficiency
b. a positive externality
c. governments intervention
d. a negative externality
e. none of the above is correct

d

13. if this market is currently production at Q2 then total economic well-being would increase if output
a. decreased to Q1
b. increased Q3
c. decreased to less than Q1
d. increased beyond Q4
e. stayed at Q2

e

14. externalities in this market could be internalized if
a. markets were allowed to work
b. production was stopped
c. the coase theorem failed
d. there was a subsidy for the product
e. there was a tax on the product

e

which of the following statements is correct
a. government should tax goods with positive or negative externalities
b. government should tax goods with positive externalities and subsidize goods with negative externalities
c. government should tax goods with either positive or negative externalities
d. government should tax goods with negative externalities and subsidize goods with positive externalities
e. government should subsidize goods with either positive or negative externalities

d

suppose that smoking creates a negative externality. if the government imposes a per-cigarette tax equal to the per-cigarette externality then
a. the after-tax equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked.
b. the after-tax equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked
c. the after-tax equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked
d. there is not enough information to answer the question
e. the before-tax equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked

b

Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, what price will the firm charge per unit of plastic?
a. $3.50
b. $3.00
c. $2.50
d. $8.00
e. $5.00

a

private markets fail to account for externalities because
a. sellers inclue costs associated with externalities in the price of their product
b. they sometimes do not achieve equilibrium
c. the government cannot easily estimate the optimal quantity of pollution
d. decision makers in the markets fail to include the costs of their behavior to third parties
e. externalities don't occur in private markets

d

the supply curve for a product reflects the
a. willingness to pay of the marginal buyer
b. value to sellers of the product
c. cost to sellers of producing the product
d. quantity buyers will ultimately purchase of the product
e. seller's profit from producing the product

c

the difference between social cost and private cost is a measure of the
a. cost incurred by the government when it intervenes in the market
b. cost reduction when the negative externality is eliminated
c. cost of an externality
d. sunk cost
e. loss in profit to the seller as the result of a negative externality

c

when goods do not have a price which of the following primarily ensures that the good is produced
a. buyers
b. sellers
c. government
d. foreigners
e. the market

c

The Massachusetts Turnpike is a tolled freeway running through the state of Massachusetts. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?
a. public good
b. natural monopoly
c. common resource
d. private good
e. common good

d

an ice cream cone is
a. excludable in consumption and excludable in production
b. not excludable and not rival in consumption
c. not excludable and rival i consumption
d. excludable and not rival in consumption
e. excludable and rival in consumption

e

an am radio transmission of a baseball game is
a. not excludable and not rival in consumption
b. excludable and rival in consumption
c. excludable in consumption and not excludable in production
d. excludable and not rival in consumption
e. not excludable and rival in consumption

a

goods that are rival in consumption and excludable would be considered
a. natural monopolies
b. common resources
c. common goods
d. private goods
e. public goods

d

when a good is rival in consumption
a. everyone will be excluded from obtaining the good
b. one person's use of the good has no effect on another person's ability to use it
c. people can be prevented from using the good
d. one person's use of the good diminishes another person's ability to use it
no more than one person can use the good at the same time

d

most goods in the economy are
a. public goods
b. common resources
c. private goods
d. not excludable
e. natural monopolies

c

suppose the town of Podunk is considering hiring an additional police officer. the reduction in crime is estimated to be worth $10 for each of Podunk's 4500 residents. What should they do?
a. do not hire the police officer because the costs exceed the benefits
b. hire the police officer if the cost of the new officer is less than $45000
c. hire the police officer because additional safety if priceless
d. hire the police officer only if the benefit to the residents exceeds $4500
e. do not hire the police officer as additional police officers will not deter crime

b

a lighthouse might be considered a private good if
a. there is a second lighthouse nearby, thus preventing a monopoly
b. it is built by a private company and not the government
c. the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse
d. ships are able to enjoy the benefits of the lighthouse without paying for the benefit
e. a nearby port authority is able to avoid paying any fees to the lighthouse owner

c

people have little incentive to produce a public good because
a. the social benefit is less than the private benefit
b. there is a tragedy of the commons
c. there is a free-rider problem
d. the social benefit is less than the social cost
e. the social benefit is equal to the social cost

c

when a free-rider problem exists
a. the market will devote too many resources to the production of the good
b. the cost of the good will always be more than the benefit of the good
c. the market will devote too few resources to the production of the good
d. entrepreneurs will eventually find a way to make free-riders pay their share
e. the good will not be produced

c

which of the following quotations illustrates the Tragedy of the Commons
a. "there ain't no such thing as a free lunch"
b. "what is common to many is taken less care of for all men have greater regard for what is their own than for what they possess in common with others"
c. "anyone who is not a socialist before he is 30 has no heart. anyone who is still a socialist after he is 30 had no head"
d. " the only difference between the rich and other people is that the rich have more money"
e. "a bird in the hand is worth two in the bush"

b

On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. An overcrowded picnic area is an example of
a. a natural monopoly
b. an adverse good
c. a tragedy of the commons
d. a private good
e. a public good

c

which of the following is an example of government intervention to solve a tragedy of the commons problem
a. cost-benefit analysis
b. building lighthouses
c. eliminating user fees
d. toll charges on congested roads
e. subsidizing basic research

d

it is common knowledge that many US national parks have become overused. one possible solution to this problem is to
a. decrease camping permit fees
b. increase entrance fees
c. require all visitors to register upon entering the park
d. sell the land that the parks currently occupy
e. hire more park rangers

b

governments can grant private property rights over resources that were previously viewed as public such as fish or elephants. why would governments want to do so?
a. to fight poverty
b. to prevent overuse
c. to increase consumption
d. to be able to collect taxes
e. to decrease taxes

b

when property rights are not well established
a. markets fail to allocate resources efficiently
b. the distribution of private goods is unfair
c. government resources are used efficiently
d. private goods become public goods
e. government resources are used inefficiently

a

because public goods are
a. not excludable people have an incentive to be free riders
b. excludable people do not have an incentive to be free riders
c. rival people do not have an incentive to be free riders
d. not excludable people do not have an incentive to be free riders
e. excludable people have an incentive to be free riders

a

most lighthouses are operated by the government because
a. shipping companies would not be able to afford maintenance fees for lighthouses
b. lighthouses are no longer valued by society
c. most lighthouses are only tourist attractions in state and national parks
d. they provide a necessary service
e. of the free-rider problem

e

elephants are endangered but cows are not because
a. cows are not valuable as elephants
b. there is more meat on an elephant than on a cow and therefore it is more valuable
c. it is legal to kill cows but not elephants
d. elephants are a common resource while cows are private goods
e. cows are a common resource while elephants are private goods

d

the U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest
a. individual income taxes, social insurance taxes, corporate income taxes
b. social insurance taxes, individual income taxes, corporate income taxes
c. individual income taxes, corporate income taxes, social insurance taxes
d. corporate income taxes, individual income taxes, social insurance taxes

a

the government taxes corporate income on the basis of
a. total revenue
b. the amount the firm receives for the goods or services it sells
c. the number of employees
d. profit
e. all of the above

d

when government receipts exceed total government spending during a fiscal year the difference is
a. a budget deficit
b. the national debt
c. a budget surplus
d. automatically refunded
e. a balances budget

c

44. if Andrea has $85000 in taxable income her tax liability is
a. 8,500
b. 21,250
c.18,170
d. 12,750
e. 23,800

c

45. if andrea has $85000 in taxable income, her marginal tax rate is
a. 28%
b. 15%
c. 35%
d. 25%
e. 33%

a

with a lump-sum tax the
a. average tax rate is always less than the marginal tax rate
b. marginal tax rate is always less than the average tax rate
c. marginal tax rate rises as income rises
d. marginal tax rate remains constant
e. marginal tax rate falls as income rises

b

one advantage of a lump-sum tax over other taxes is that
a. is both equitable and efficient
b. would cost less to administer
c. would place a larger tax burden on the rich
d. would raise more revenues
e. doesn't cause deadweight loss

e

48. if the government imposes $3000 lump-sum tax, the marginal tax rate for Charles would be
a. 0 percent
b. 15 percent
c. 6.7 percent
d. 5 percent
e. 10 percent

a

a consumption tax is a tax on
a. services but not on goods
b. the amount of income that people save
c. the amount of income that people spend
d. goods but not on services
e. the amount of income that people earn

c

under a progressive tax system the marginal tax rate could be equal to the average tax rate only when a taxpayer
a. invests in a retirement plan
b. has a very low income
c. is self-employed
d.earn dividend income
e. had a very low high income

b

if your income is 50000 your income tax liability is 10000 and you paid .25 in taxes on the last dollar you earned your
a. average tax rate is 25 percent
b. marginal tax rate is 20 percent
c. marginal tax rate is 20 percent
d. total tax rate is 25 percent
e. average tax rate is 5 percent

c

if we went to gauge how much the income tax system distorts incentives, we should use the
a. total tax rate
b. marginal tax rate
c. total tax revenue collected
d. average tax rate
e. ability-to-pay principle

b

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) two people with the same total income would pay taxes of the same amount, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following tax systems could achieve both goals?
a. a proportional tax
b. a flat tax
c. a progressive tax
d. a lump-sum tax
e. a regressive tax

c

the argument that each person should pay taxes according to how much use they receive from a government program is called
a. the benefits principle
b. the ability-to-pay principle
c. the regressive effect
d. the progressive
e. the equity principle

a

goals of efficiency and equity in tax policy are
a. compatible
b. easier to achieve when tax codes are complex.
c. often in conflict in most countries
d. complementary in most countries
e. necessary for application of the ability-to-pay principle

c

56. which tax schedules are regressive
a. tax schedule A and tax schedule B
b. tax schedule C and tax schedule D
c. tax schedule B and tax schedule C
d. tax schedule A and tax schedule D
e. non of the tax schedules are regressive

c

57. which tax schedule could be considered a lump-sum tax
a. tax schedule B and tax schedule C
b tax schedule D only
c. tax schedule C only
d. tax schedule B only
e. none of the tax schedules could be considered a lump-sum tax

e

in recent years, which category represented the largest category of spending for the U.S. federal government
a. medicare
b. foreign aid
c. national defense
d. net interest
e. social security

e

by far the largest single expenditure item for state and local governments is for
a. police and fire protection
b. transfer payments to poor people
c. highways
d. national defense
e. education

e

corporate profits are
a. taxed twice one as profit and once as dividends
b.the largest source of revenue for the federal government
c. taxed to pay for medicare
d. exempt from taxes
e. included in payroll taxes

a

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