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46 terms

Economics Last Exam

The addition of government to the circular-flow model illustrates that government:
-purchases resources in the resource market.
-provides services to businesses and households.
-purchases goods in the product market.
does all of these.
The opportunity cost of borrowing funds to finance government deficits is:
greatest when the economy is doing well.
The marginal tax rate is:
the percentage of an increment of income that is paid in taxes.
One difference between sales and excise taxes is that:
sales taxes are calculated as a percentage of the price paid, while excise taxes are levied on a per-unit basis.
The Federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements. This tax is consistent with the:
benefits-received principle of taxation.
In 2006, the top 1 percent of all taxpayers in the United States paid what percent of the Federal income tax?
39.1 percent
In which of the above market situations will the largest portion of an excise tax of a specified amount per unit of output be borne by producers?
Which of the following taxes is most likely to be shifted?
a general sales tax
The efficiency loss of a tax is:
the net value of sacrificed output caused by the tax.
(Consider This) Proponents of a value-added tax (VAT) claim that a VAT:
penalizes consumption and encourages savings and investment.
Where there is asymmetric information between buyers and sellers.
markets can produce inefficient outcomes.
Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the:
moral hazard problem.
An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of Senators and representatives in Congress on that legislation would fit within the subcategory of economics called:
public choice theory.
Answer the next question on the basis of this table showing the marginal benefit a particular public project will provide to each of the three members of a community. No vote trading is allowed.

If the tax cost of this proposed project is $600 per person, a majority vote will:
pass this project and resources will be overallocated to it.
The median-voter model implies that:
many people will be dissatisfied with the size of government in the economy.
Answer the next question(s) on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size. All figures are in millions of dollars.

Refer to the above table. Based on cost-benefit analysis, the city should:
build stadium D.
"Vote for my special local project and I will vote for yours." This political technique:
often accompanies pork-barrel politics.
When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the:
idea of limited and bundled choice.
(Consider This) Subsidies for mohair production illustrate:
why special-interest effects are often characterized by concentrated benefits and diffuse costs.
(Last Word) In their effort to provide disaster relief after Hurricane Katrina, the Federal Emergency Management Agency (FEMA) made payouts on as many as 900,000 claims with invalid Social Security numbers or false names and addresses. This example illustrates:
bureaucracy inefficiency.
Which of the following is least likely to violate the Sherman Act or the Clayton Act?
Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers.
Tying agreements:
obligate a purchaser of product X to also buy product Y from the same seller.
The antitrust laws are based on the:
idea that competition leads to greater economic efficiency than does monopoly.
The "rule of reason" indicated that:
only contracts and combinations that unreasonably restrain trade violate the antitrust laws.
The Alcoa case:
supported the structuralist approach to antitrust.
Which one of the following is most likely to increase the Herfindahl index of a particular industry?
a horizontal merger
Critics of the regulation of natural monopolies contend that:
the industry may "capture" or control the regulatory commission.
Overall, economists believe that deregulation of industries formerly subjected to industrial regulation:
has produced large net benefits for consumers and society.
Defenders of social regulation point out that:
critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that the regulations produce.
(Consider This) The Consider This box "Of Catfish and Art (and Other Things in Common)" lists examples of recent antitrust cases involving:
price fixing.
The United States' most important trading partner quantitatively is:
Answer the next question(s) on the basis of the following production possibilities data for Gamma and Sigma. All data are in tons.
Gamma's production possibilities:

On the basis of the above information:
Gamma should export tea to Sigma and Sigma should export pots to Gamma.
Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of:
constant costs.
Answer the next question(s) on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size.

Refer to the above data. The domestic opportunity cost of:
producing a ton of chips in Beta is 6 tons of fish.
Refer to the above diagram pertaining to two nations and a specific product. Lines FC and GD are:
import demand curves for two countries.
Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n):
import quota.
Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect:
employment to decrease in the U.S. bicycle industry.
Studies show that:
costs of trade barriers exceed their benefits, creating an efficiency loss for society.
As it relates to international trade, dumping:
is the practice of selling goods in a foreign market at less than cost.
(Consider This) According to Dallas Federal Reserve economist W. Michael Cox, taken to its extreme, the logic of "buying American" implies that:
people should only consume what they can produce themselves.
Government's role in the circular flow model shows how it can alter distribution of income, reallocate resources, and change the level of economic activity in the economy.
Local governments rely heavily of which of the following taxes?
Property tax
A tax that has its average rate decline as income increases is called a
regressive tax.
In general,
the more inelastic the demand, the more the sales tax is paid by the consumers.
If the elasticity of demand is 1 and the elasticity of supply is 0.45, the tax will be paid mostly by consumers.
Before the imposition of a tax, the demand curve equation was P = 10 - 0.2Q and the supply curve equation was P = 1 + 0.01Q. Quantity is in units and price is in dollars.

After a $3 per unit tax is imposed on buyers, what is the total amount (including the tax) that buyers will pay for the good?