Mid2a_201_W01 - Cal Poly Pomona EC 201 Bruce Brown NAME...

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Cal Poly Pomona, EC 201 - Bruce Brown NAME_______________________________ Midterm II, February 22, 2001 (please clearly print your family name with all capital letters) - Mark your answers on this exam (only this exam will be returned, not your scantron forms) - You may use an ordinary language dictionary (not electronic or economics dictionary). Use of a calculator is also allowed, but can not be shared by students. You may leave when finished. - Hand in both this exam and your scantron form when you are done. - Clearly fill in the bubble on your scantron form which corresponds to the best answer Use the following system of income tax for the following 3 problems : Income (in thousands of $) Marginal Tax Rate (MTR) 0-10 10% 10-30 30% 30 + 40% 1) What is the tax liability (in dollars) of someone earning $50 thousand per year? a) 15 thousand $ b) 12 thousand $ c) 9 thousand $ d) 8 thousand $ 2) What is the average tax rate ( ATR ) for this person? a) 40% b) 30% c) 32% d) 26% 3) If a different individual who was earning $20,000 initially earns an additional $1000 the additional tax liability will be: a) $ 600 b) $ 400 c) $ 300 d) $ 260 4) By definition, Pure Public Goods : a) are produced by the government. b) are financed by government purchases. c) may be consumed by more than one person. d) are free to society. 5) Which of the following will result from rent controls that reduce rents below market equilibrium? a. The quality of existing apartments will deteriorate. b. The future supply of rental housing will decrease. c. Discrimination against minorities or those with characteristics that managers dislike (noisy young students?) will be more likely in the housing market. d. All of the above are correct. 6) Which of the following is NOT an efficiency-based reason for government intervention in a market? a. A lack of competition, or sellers with “monopoly power.” b. Income inequality (ignore the possibility that citizens consider equality a “public good”) c. Markets for goods where it is not possible to exclude some people from consuming. d. Markets where external benefits or costs exist.
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2 The graph below depicts the effect of a 10 cent per unit tax. Use it to answer the following six questions: 7. How much tax revenue is collected by government? a. $9.00 b.$10.00 c.$11.00 d.$50.00 8. By how much does consumer surplus shrink because of the tax? a. $2.70 b. $2.85 c. $3.00 d. $9.00 9. By how much does producer surplus shrink because of the tax? a. $6.30 b. $6.65 c. $7.00 d. $9.00 10. What is the Deadweight Loss (or “excess burden:) of this tax? a. $0.50 b. $2.70 c. $6.30 d. $10.00 11. Which of the following is true? a. Demand was more elastic than supply at the initial equilibrium.
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Mid2a_201_W01 - Cal Poly Pomona EC 201 Bruce Brown NAME...

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