If three people vote pair-wise between thin, intermediate, and thick, then there will not
be a clear
winner if one person’s preferences have a ____.
A. single-valley
B. double-valley
C. single-peak
D. double-peak
Answer:
A progressive tax ___ and causes ____.
A. decreases inequality; efficiency
B. increases inequality; efficiency
C. decreases inequality; inefficiency
D. increases inequality; inefficiency
Answer:
Assume there is no externality. A tax on a good results in
A. too little of the good.
B. too much of the good.
C. the right quantity of the good.
D. the right price for the good.
Answer:
Figure 1 shows the supply and demand diagram for steel. Environmental damage per
unit produced is $60.
Refer to Figure 2.1. The MPC of production from the 200th unit is ____.
A. $200
B. $240
C. $300
D. $360
Answer:
Under fee for service, doctors have a financial incentive to do ____; under capitation,
doctors have a financial incentive to do ___.
A. too little; the optimal amount
B. too much; the optimal amount
C. too little; too much
D. too much; too little
Answer:
Refer to Figure 3.1. The optimal quantity of a private good is the quantity at which
A. ΣMB = ΣMC
B. ΣMB = MC
C. MB = MC
D. MB = ΣMC
Answer:
With no policy, each firm emits 120 tons of carbon. As H reduces its emissions from
120 to 0, its marginal abatement cost (MAC) rises from $0 to $480; as L reduces its
emissions from 120 to 0, its MAC rises from $0 to $120. The MD of a ton of carbon is
$96. The tax per ton is T.
Refer to Figure 2.2. Society gains by reducing an emission whenever MAC is less than
___ and a firm gains by reducing an emission whenever MAC is less than ___.
A. MD; MD
B. MD; T
C. T; MD
D. T; T
Answer:
The ___ tax raises about 35% of federal revenue.
A. personal income
B. corporate income
C. payroll
D. sales
Answer:
The consumption tax rate is set so that it raises the same total revenue from the two
persons as the 15% income tax ($30,000).
Refer to Table 9.1. In the bottom block, the consumption tax rate must be set at _____.
A. 40%
B. 43%
C. 50%
D. 60%
Answer:
Using a diagram, explain what happens to the price of homes if a property tax is levied
and the local government (A) completely wastes the revenue and (B) uses the revenue
to provide good quality schools, police, and fire protection.
Answer:
A recent rough estimate of a VSL is __.
A. $8 billion
B. $8 million
C. $800,000
D. $80,000
Answer:
Refer to Table 11.1. What is the state trying to accomplish with this grant?
A. The state is trying to induce most districts to spend more on education, and reduce
inequality among districts.
B. The state is trying to induce most districts to spend more on education, but not
reduce inequality among districts.
C. The state is trying to not induce most districts to spend more on education but to
reduce inequality among districts.
D. The state is trying to not induce most districts to spend more on education and to not
reduce inequality among districts.
Answer:
In response to a pollution price,
A. consumers will stop buying.
B. consumers will buy the same.
C. consumers with good substitutes will cut back least.
D. consumers with good substitutes will cut back most.
Answer:
If a city government levies high taxes on city business firms, then
A. firms may move to the suburbs but commuters won’t find suburban jobs.
B. commuters may find suburban jobs but firms won’t move to the suburbs.
C. firms won’t move to the suburbs and commuters won’t find suburban jobs.
D. firms may move to the suburbs and commuters may find suburban jobs.
Answer:
Domestic clothing manufacturers lobby ___ a tariff on clothing because the tariff will
have a ___ effect on their revenues.
A. against; small
B. against; large
C. for; small
D. for; large
Answer:
Economically advanced countries on average spend about ___ of GDP on medical care.
A. 5%
B. 10%
C. 15%
D. 20%
Answer:
The consumption tax rate is set so that it raises the same total revenue from the two
persons as the 15% income tax ($30,000).
Refer to Table 9.1. In the bottom block, person C’s tax must be _____.
A. $0
B. $10,000
C. $15,000
D. $30,000
Answer:
A property tax causes more of _____ problem for _____ than an income tax or sales
tax.
A. an administrative; local governments
B. an enforcement; local governments
C. a cash-flow; retirees
D. a cash-flow; middle-age workers
Answer:
For a family with two children, the maximum EITC is _____ which occurs when the
family’s wage income reaches ____.
A. $4,800; $12,000
B. $4,800; $24,000
C. $2,400; $12,000
D. $2,400; $24,000
Answer:
If all government assistance were counted, the poverty rate would be about ___ of the
official poverty rate (___% instead of ___%).
A. half; 6%; 12%
B. two-thirds; 8%; 12%
C. half; 12%; 24%
D. one-third; 4%; 12%
Answer:
See your figure from question 1.
a) What tax per unit of steel would achieve the social optimum? $______.
b) This tax will shift the S curve (up, down), so the price of steel will (increase,
decrease) and the quantity of steel will (increase, decrease).
c) Give the letters of the area that shows the environmental benefit: _______ ; the
environmental benefit is $_______.
d) Give the letters of the area that shows the loss to society (ignoring the environmental
gain) from the (increase, decrease) in steel: ______; the loss is $_______.
e) Give the letters of the area that shows the net gain to society (the environmental
benefit minus the loss from less steel): _______; the net gain is $_______.
Answer:
Insurance reduces the ___ of medical care to patients below its ___.
A. effectiveness; optimum
B. safety; optimum
C. price; cost
D. price; benefit
Answer:
Though the federal government has the power to ____ ____, such a solution would be
____.
A. raise taxes; recessionary
B. raise taxes; inflationary
C. print money; recessionary
D. print money; inflationary
Answer:
If the government borrows today instead of taxing, today’s taxpayers bear less burden,
and __________ bear ____ burden.
Answer:
If a city government levies high taxes on city business firms, then firms may _____.
Answer:
After a ____, the government may find it difficult to borrow because _____ will be
wary.
Answer:
Producing a given quantity of a good at minimum cost is called ____ efficiency.
Answer:
Consumers ____ a tariff on clothing because the tariff will have a ___ effect on each
consumer’s budget.
Answer: