Answer Key – Unit 5

1. d. A + B + C + D + E + F.

2. b. A + B.

3. d. P₂, Q₃.

4. b. P₁, Q₄.

5. a. G.

6. c. D + F.

7. b. C + G.

8. a. E.

9. c. (i) and (iii) only.

10. b. P₂.

11. d. a + b + c.

12. b. As long as the value to consumers of concerts exceeds the cost of concerts (including the external costs) the permit should be issued.

13. c. the social cost of producing the last concert.

14. b. the cost of spillover effects from the concert (e.g., noise and traffic).

15. b. P₂ Q₀

16. a. it takes into account the external costs imposed on society by the concert organizers.

17. c. decreases, decreases

18. c. a surplus for import license holders.

19. b. Q₃ minus Q₂.

20. c. D + F.

21. d. P₂, Q₃.

22. a. the price of pineapple in the U.S. will increase.

23. a. total well-being in the U.S. will increase.

24. a. the reduction in total surplus that results from a tax.

25. b. People cannot be prevented from using a public good.

26. b. the social cost of production is less than the private cost.

27. a. the price elasticity of demand and supply.

28. c. neglect the external effects of their actions and the market equilibrium is not efficient.

29. b. Q₂ minus Q₁.

30. c. both price and quantity of the good sold will change.

31. b. The losses of domestic producers exceed the gains of domestic consumers.

32. a. the country will become an exporter of the good.

33. b. the seller who would leave the market first if the price were any lower.

34. b. P₂.

35. c. P₃.

36. c. D + E.

37. b. B + C.

38. b. B + D.

39. c. total surplus is maximized.

40. a. the benefit received by those people who gain from government’s expenditure of the tax revenue.

41. d. the maximum amount that a buyer will pay for a good.

42. b. increases.

43. b. It decreases.

44. a. raises the price buyers pay and lowers the price sellers receive.

45. c. raises the price of the imported good above the world price.

46. c. excludable and rival.

47. b. the amount a seller is paid less the cost of production.

48. d. All of the above are correct.

49. a. buyers and sellers share the burden of the tax regardless of which it is levied on.

50. b. less.

51. c. self-interested paper producers will not consider the full cost of the dioxin pollution they create.

52. b. the country will become an importer of the good.

53. c. protect domestic producers.

54. a. seller’s willingness to sell.

55. c. A + B + D.

56. a. the United States has a comparative advantage in producing cars, and Switzerland has a comparative advantage in producing cheese.

57. b. decrease.

58. c. the greater the deadweight loss of a tax.

59. c. C + B + D.

60. c. the supply curve shifts left (up) by an amount equal to the tax.

61. b. maximizes the total benefits received by buyers and sellers.

62. b. the world price is higher than its domestic price.

63. d. Both b and c are correct.

64. d. Both b and c are correct.

65. b. willingness to pay is greater than willingness to sell.

66. d. All of the above are correct.

67. b. domestic producers are better off, and domestic consumers are worse off.

68. d. cost of the marginal seller.

69. d. the ability of buyers to obtain the quantity they desire.

70. d. Q₂ minus Q₁.

71. c. tariffs raise revenue for the government, but import quotas create a surplus for import license holders.

72. b. the cost to sellers is greater than the value to buyers.

73. b. to make normative judgments about the desirability of market outcomes.

74. c. the people who pay the taxes are often not the same people who benefit from the government spending of tax funds.

75. c. the total value to buyers of the goods less the costs to sellers of providing those goods.

76. a. something of value has no price attached to it.

77. b. willingness to pay of the marginal buyer.

78. a. it is impossible to prevent any single person from enjoying the benefit of national defense.

Date: 2015-12-24; view: 828