When a tax is levied on a good, the buyers and sellers of the good share the burden

regardless of how the tax is levied

provided the tax is levied on the sellers.

provided the tax is levied on the buyers.

provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers

raises the price that buyers effectively pay and lowers the price that sellers effectively receive

raises the price that buyers effectively pay and raises the price that sellers effectively receive

lowers the price that buyers effectively pay and raises the price that sellers effectively receive.

lowers the price that buyers effectively pay and lowers the price that sellers effectively receive

What happens to the total surplus in a market when the government imposes a tax?

Total surplus increases by the amount of the tax

Total surplus increases but by less than the amount of the tax

Total surplus is unaffected by the tax.

both buyers and sellers of the good are made worse off.

only buyers are made worse off, because they ultimately bear the burden of the tax.

only sellers are made worse off, because they ultimately bear the burden of the tax

neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy

A tax levied on the sellers of a good shifts the

supply curve upward (or to the left).

supply curve downward (or to the right).

demand curve upward (or to the right).

demand curve downward (or to the left).

If a tax shifts the supply curve upward (or to the left), we can infer that the tax was levied on

both buyers and sellers of the good.

We cannot infer anything because the shift described is not consistent with a tax

When a tax is imposed on the buyers of a good, the demand curve shifts

downward by the amount of the tax.

upward by the amount of the tax.

downward by less than the amount of the tax

upward by more than the amount of the tax

A tax placed on buyers of tires shifts the

demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to decrease

demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to increase

supply curve for tires upward, decreasing the effective price paid by buyers of tires and causing the quantity of tires to increase.

supply curve for tires upward, increasing the effective price paid by buyers of tires and causing the quantity of tires to decrease

It does not matter whether a tax is levied on the buyers or the sellers of a good because

buyers and sellers will share the burden of the tax.

sellers always bear the full burden of the tax

buyers always bear the full burden of the tax.

None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

tax reduces the welfare of both buyers and sellers.

size of the market is unchanged.

price the seller effectively receives is higher.

supply curve for the good shifts upward by the amount of the tax.

When a tax is levied on buyers of a good,

a wedge is placed between the price buyers pay and the price sellers effectively receive.

government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax.

there is an increase in the quantity of the good supplied.

the effective price to buyers decreases because the demand curve shifts leftward.

Deadweight loss measures the loss

in a market to buyers and sellers that is not offset by an increase in government revenue.

in revenue to the government when buyers choose to buy less of the product because of the tax.

of equality in a market due to government intervention.

of total revenue to business firms due to the price wedge caused by the tax.

When can two countries gain from trading two goods?

Two countries could gain from trading two goods under all of the above conditions.

when the first country can only produce the first good and the second country can only produce the second good

when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost

when the first country is better at producing both goods and the second country is worse at producing both goods

Assume for the United States that the opportunity cost of each airplane is 100 cars. Then which of these pairs of points could be on the United States' production possibilities frontier?

(300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)

(200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)

(200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars)

(300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Shawn has an absolute advantage in the production of donuts.

Shawn has a comparative advantage in the production of donuts.

Sue has a comparative advantage in the production of donuts.

Sue has an absolute advantage in the production of donuts

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible?

Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks

Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks

Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks.

has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats.

Which of the following is not correct?

The gains from specialization and trade are based not on comparative advantage but on absolute advantage

The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good.

The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X.

The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland.

100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in Teeveeland.

200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in Teeveeland.

300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in Teeveeland

Trade between countries

allows each country to consume at a point outside its production possibilities fron

limits a country’s ability to produce goods and services on its own.

must benefit both countries equally; otherwise, trade is not mutually beneficial.

can best be understood by examining the countries’ absolute advantages.

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

the United States should produce more pork than what it requires and export some of it to Mexico.

the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico.

the United States should refrain altogether from producing pork and import all of what it requires from Mexico.

Mexico has nothing to gain from importing United States pork

A country has a comparative advantage in a product if the world price is

higher than that country’s domestic price without trade.

lower than that country’s domestic price without trade.

equal to that country’s domestic price without trade.

not subject to manipulation by organizations that govern international trade.

When a country allows trade and becomes an importer of a good,

the gains of the winners exceed the losses of the losers.

everyone in the country benefits.

the losses of the losers exceed the gains of the winners

Both tariffs and import quotas

decrease the quantity of imports and raise the domestic price of the good.

increase the quantity of imports and raise the domestic price of the good.

increase the quantity of imports and lower the domestic price of the good.

decrease the quantity of imports and lower the domestic price of the good.

The nation of Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Zelzar’s new free-trade policy has

decreased consumer surplus in the steel market and increased total surplus in the incense market.

increased consumer surplus and producer surplus in the incense market.

increased consumer surplus in the steel market and left producer surplus in the rug market unchanged

decreased consumer surplus in both the steel and rug markets.

Section 4 & 5

Authored by Hoang Nga

Business

University

Used 3+ times

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35 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Consumer surplus equals the

value to buyers minus the amount paid by buyers.

value to buyers minus the cost to sellers.

amount received by sellers minus the cost to sellers

amount received by sellers minus the amount paid by buyers

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Total surplus is

the total cost to sellers of providing the good minus the total value of the good to buyers.

the total value of the good to buyers minus the cost to sellers of providing the good

the difference between consumer surplus and sellers’ cost

always smaller than producer surplus

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Producer surplus equals the

value to buyers minus the amount paid by buyers.

value to buyers minus the cost to sellers.

amount received by sellers minus the cost to sellers.

amount received by sellers minus the amount paid by buyers.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following equations is not valid?

Consumer surplus = Value to buyers - Amount paid by buyers

Producer surplus = Amount received by sellers - Cost to sellers

Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers

Total surplus = Value to sellers - Cost to sellers

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

Which of the following is correct?

Consumer surplus refers to a situation in which there are more buyers than sellers in a market

Producer surplus refers to a situation in which there are more sellers than buyers in a market

Total surplus is measured as the area below the demand curve and above the supply curve

All of the above are correct

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

We can say that the allocation of resources is efficient if

producer surplus is maximized

consumer surplus is maximized

total surplus is maximized

sellers’ costs are minimized

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

Inefficiency exists in an economy when a good is

not being consumed by buyers who value it most highly

not distributed fairly among buyers

not produced because buyers do not value it very highly.

being produced with less than all available resources

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Section 4 & 5

Consumer surplus equals the

Total surplus is

Producer surplus equals the

Which of the following equations is not valid?

Which of the following is correct?

We can say that the allocation of resources is efficient if

Inefficiency exists in an economy when a good is

When a tax is levied on a good, the buyers and sellers of the good share the burden

A tax on a good

The government’s benefit from a tax can be measured by

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