In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario:
Because of international trade, poorer countries are able to learn about technolo
An enhanced flow of ideas
When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls.
Which of the following describes the situation?
-Domestic production of coffee rises, and Ectenia becomes a coffee importer.
-Domestic produc
Domestic production of coffee falls, and Ectenia becomes a coffee importer.
Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade?
-The increase of a tariff in an importing country
-The reduction of a tariff in an importing country
-Starting to allow trade when the world p
Starting to allow trade when the world price is greater than the domestic price
The main difference between imposing a tariff and handing out licenses under an import quota is that a tariff increases
-consumer surplus.
-producer surplus.
-international trade.
-government revenue.
government revenue
When the government levies a tax on a good equal to the external cost associated with the good's production, it ________ the price paid by consumers and makes the market outcome ________ efficient.
-increases, more
-increases, less
-decreases, more
-decre
increases, more
Which of the following statements about corrective taxes is generally not true?
-Economists prefer them to command-and-control regulation.
-They raise government revenue.
-They cause deadweight losses.
-They reduce the quantity sold in a market.
They cause deadweight losses.
Public goods are
-efficiently provided by market forces.
-underprovided in the absence of government.
-overused in the absence of government.
-a type of natural monopoly.
underprovided in the absence of government.
Common resources are
-efficiently provided by market forces.
-underprovided in the absence of government.
-overused in the absence of government.
-a type of natural monopoly.
overused in the absence of government.
Aiden gives piano lessons. He has an opportunity cost of $50 per lesson and charges $60. He has two students: Brandon, who has a willingness to pay of $70, and Chloe, who has a willingness to pay of $90.
When the government puts a $20 tax on piano lessons
$20, $20
If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns $50,000 has an average tax rate of _____ percent and a marginal tax rate of _____ percent.
-15, 25
-25, 15
15, 25
Diminishing marginal product explains why, as a firm's output increases,
-the production function and total cost curve both get steeper.
-the production function and total cost curve both get flatter.
-the production function gets steeper, while the total
the production function gets flatter, while the total cost curve gets steeper.
A firm is producing 1,000 units at a total cost of $5,000.
If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm?
-Marginal cost is $5, and average variable cost is $8.
-M
Marginal cost is $8, and average total cost is $5.
A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve.
-average total, marginal
-average variable, marginal
-marginal, average total
-marginal, average variable
marginal, average variable
If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will
-keep producing in the short run but exit the market in the long run.
-shut down in the short run but
keep producing in the short run but exit the market in the long run.
In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P
P , marginal cost MC, and average total cost ATC ?
P=MC and P=ATC
Pretzel stands in New York City are a perfectly competitive industry in long-run equilibrium. One day, the city starts imposing a $100 per month tax on each stand.
How does this policy affect the number of pretzels consumed in the short run and the long r
no change in the short run, down in the long run
For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR , and marginal cost MC?
P>MR and MR=MC
Compared to the social optimum, a monopoly firm chooses
-a quantity that is too low and a price that is too high.
-a quantity that is too high and a price that is too low.
-a quantity and a price that are both too high.
-a quantity and a price that are bo
a quantity that is too low and a price that is too high.
The deadweight loss from monopoly arises because
-the monopoly firm makes higher profits than a competitive firm would.
-some potential consumers who forgo buying the good value it more than its marginal cost.
-consumers who buy the good have to pay more
some potential consumers who forgo buying the good value it more than its marginal cost
When a monopolist switches from charging a single price to perfect price discrimination, it reduces
-the quantity produced.
-the firm's profit.
-consumer surplus.
-total surplus.
consumer surplus.