1) Which of the following is a difference between corrective taxes and tradable
pollution permits?
a.Corrective taxes are a market-based solution while tradable pollution permits are a
command-and-control policy.
b.With a corrective tax the government sets the price of pollution; with tradable
pollution permits, demand and supply set the price of pollution.
c.With corrective taxes firms pay for pollution; with tradable pollution permits firms do
not.
d.Corrective taxes internalize the pollution externality while tradable pollution permits
do not.
2) Table 16-1
The following table shows the percentage of output supplied by the top eight firms in
four different industries.
What is the concentration ratio in Industry C?
a. 13%
b.32%
c.52%
d.84%
3) One property of Kenneth Arrow’s “perfect” voting system is that the ranking between
any two outcomes A and B should not depend on whether some third outcome C is also
available. Arrow called this property
a.transitivity.
b.pairwise perfection.
c.independence of irrelevant alternatives.
d.irrelevance of social choices.
4) The long-run supply curve for a competitive industry may be upward sloping if
a.there are barriers to entry.
b.firms that enter the industry are able to do so at lower average total costs than the
existing firms in the industry.
c.some resources are available only in limited quantities.
d.accounting profits are positive.
5) Both the production of goods and services and the unemployment rate are used to
measure
a.the business cycle.
b.productivity.
c.the interest rate.
d.inflation.
6) The slope of an upward-sloping line is positive, and the slope of a downward-sloping
line is negative.
a.True
b.False
7)
Which demand curve is perfectly elastic?
a.A
b.B
c.C
d.D
8) Figure 8-10
Suppose the government imposes a tax that reduces the quantity sold in the market after
the tax to Q2. With the tax, the total surplus is
a. [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
b. [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
c. (P2-P8) x Q2.
d. 1/2 x (P2-P8) x (Q5-Q2).
9) When the total surplus lost as a result of a tax is less than the amount of tax revenue
collected by the government there is a deadweight loss.
a.True
b.False
10) Suppose that electricity producers create a negative externality equal to $6 per unit.
Further suppose that the government imposes a $8 per-unit tax on the producers. What
is the relationship between the after-tax equilibrium quantity and the socially optimal
quantity of electricity to be produced?
a.They are equal.
b.The after-tax equilibrium quantity is greater than the socially optimal quantity.
c.The after-tax equilibrium quantity is less than the socially optimal quantity.
d.There is not enough information to answer the question.