1. Once tradable pollution permits have been allocated to firms,
a the government controls the price of permits.
b. firms that can reduce pollution only at high cost will be willing to pay the most for the pollution
permits.
c. the value of pollution-saving technology will be lower than the market value of a pollution permit.
d. the Coase theorem is no longer applicable as a solution to reducing pollution.
2.The free-rider problem
a. forces the supply of a public good to exceed its demand.
b. results in common resources becoming natural monopolies.
c. explains why many local governments supply public goods.
d. results in public goods becoming private goods.
3. One economically efficient way to eliminate the Tragedy of the Commons is to
a. tax the owners of the resource.
b. prevent anyone from using the resource.
c reduce the marginal social benefit of the resource.
d. establish private ownership of the resource.
4. Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except
a. each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost.
b. there is an externality associated with eating the food on the table.
c. when one person eats, he may not take into account how his choice affects his friends.
d. each dish would be both excludable and rival in consumption.
5. Stacy places a $20 value on a bottle of wine, and Andrea places a $17 value on it. The equilibrium price for a bottle of wine is $15. Suppose the government levies a tax of $3 on each bottle of wine, and the equilibrium price of a bottle of wine increases to $18. Because total consumer surplus has
a. fallen by more than the tax revenue, the tax has a deadweight loss
b. fallen by less than the tax revenue, the tax has no dead weight loss.
c. fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.
d. increased by less than the tax revenue, the tax has a deadweight loss.
6. If your income is $40,000 and your income tax liability is $5,000, your
a. marginal tax rate is 8 percent.
b. average tax rate is 8 percent.
c. marginal tax rate is 12.5 percent.
d. average tax rate is 12.5 percent.
7. Which of the following is not a way that a corporate tax on the income of U.S. car companies will affect markets?
a The price of cars will rise.
b The wages of auto workers will fall.
c Owners of car companies (stockholders) will receive less profit.
d Less deadweight loss will occur since corporations are entities and not people who respond to incentives.
8. An example of an opportunity cost that is also an implicit cost is a lease payment.
a. the cost of raw materials.
b. the value of the business owner’s time.
c. All of the above are correct.
9.. When a firm's only variable input is labor, then the slope of the production function measures the
a. quantity of labor.
b quantity of output.
c total cost.
d marginal product of labor.
10. The cost of producing the typical unit of output is the firm's
a average total cost.
b opportunity cost.
c variable cost.
d marginal cost.
11. Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
a $50
b $90
c $120
d $150
12. Diseconomies of scale occur when
a average fixed costs are falling.
b average fixed costs are constant.
c long-run average total costs rise as output increases.
d long-run average total costs fall as output increases.
a the government controls the price of permits.
b. firms that can reduce pollution only at high cost will be willing to pay the most for the pollution
permits.
c. the value of pollution-saving technology will be lower than the market value of a pollution permit.
d. the Coase theorem is no longer applicable as a solution to reducing pollution.
2.The free-rider problem
a. forces the supply of a public good to exceed its demand.
b. results in common resources becoming natural monopolies.
c. explains why many local governments supply public goods.
d. results in public goods becoming private goods.
3. One economically efficient way to eliminate the Tragedy of the Commons is to
a. tax the owners of the resource.
b. prevent anyone from using the resource.
c reduce the marginal social benefit of the resource.
d. establish private ownership of the resource.
4. Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except
a. each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost.
b. there is an externality associated with eating the food on the table.
c. when one person eats, he may not take into account how his choice affects his friends.
d. each dish would be both excludable and rival in consumption.
5. Stacy places a $20 value on a bottle of wine, and Andrea places a $17 value on it. The equilibrium price for a bottle of wine is $15. Suppose the government levies a tax of $3 on each bottle of wine, and the equilibrium price of a bottle of wine increases to $18. Because total consumer surplus has
a. fallen by more than the tax revenue, the tax has a deadweight loss
b. fallen by less than the tax revenue, the tax has no dead weight loss.
c. fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.
d. increased by less than the tax revenue, the tax has a deadweight loss.
6. If your income is $40,000 and your income tax liability is $5,000, your
a. marginal tax rate is 8 percent.
b. average tax rate is 8 percent.
c. marginal tax rate is 12.5 percent.
d. average tax rate is 12.5 percent.
7. Which of the following is not a way that a corporate tax on the income of U.S. car companies will affect markets?
a The price of cars will rise.
b The wages of auto workers will fall.
c Owners of car companies (stockholders) will receive less profit.
d Less deadweight loss will occur since corporations are entities and not people who respond to incentives.
8. An example of an opportunity cost that is also an implicit cost is a lease payment.
a. the cost of raw materials.
b. the value of the business owner’s time.
c. All of the above are correct.
9.. When a firm's only variable input is labor, then the slope of the production function measures the
a. quantity of labor.
b quantity of output.
c total cost.
d marginal product of labor.
10. The cost of producing the typical unit of output is the firm's
a average total cost.
b opportunity cost.
c variable cost.
d marginal cost.
11. Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
a $50
b $90
c $120
d $150
12. Diseconomies of scale occur when
a average fixed costs are falling.
b average fixed costs are constant.
c long-run average total costs rise as output increases.
d long-run average total costs fall as output increases.