EconExam2a - 1) A farmer uses M units of machinery and L...

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1) A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L0.5 + M0.75. This production function exhibits D) decreasing returns to scale for all output levels. 2) Which of the following is NOT a reason for average costs to fall according to the learning curve? C) Competing firms leave the industry as the learning firm becomes more efficient. Yachts are produced by a perfectly competitive industry in Dystopia. Industry output (Q) is currently 30,000 yachts per year. The government, in an attempt to raise revenue, places a $20,000 tax on each yacht. Demand is highly, but not perfectly, elastic. 3) Refer to Scenario 8.2. The result of the tax in the long run will be that D) Q falls from 30,000; P rises by less than $20,000. 4) Refer to Figure 9.7. After the policy was implemented, the quantity traded became D) 2000. 5) In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true? A) Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium. 6) The benefit of a subsidy accrues mostly to consumers C) if Ed/Es is small. 7) Refer to Figure 9.2. At price 0H and quantity Q1, consumer surplus is the area D) HFGB. 8) A specific tax will be imposed on a good. The supply and demand curves for the good are shown in the diagram below. Given this information, the burden of the tax: B) falls mostly on producers. 9) Refer to Figure 9.8. In order to eliminate international trade in sugar altogether, this country would have to impose a tariff of. E) $75. 10) Where Es is the elasticity of supply and Ed is the own price elasticity of demand, the fraction of the tax passed on to consumers in the form of higher prices is B) Es/(Es- Ed). 11) The deadweight loss of a specific tax will be a small share of the tax revenue collected if: C) supply and demand are both inelastic. 12) Which of the following is unlikely to occur as a result of a price support program? E) A reduction in producer surplus 13) Which of the following is NOT true about price floors? A) Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost. 14) Refer to Figure 9.4. If the government establishes a price floor of $40 and government purchases the surplus over quantity demanded, producer surplus will A) rise by $500. 15) Refer to Figure 9.3. If the government establishes a price ceiling of $1.00, producer surplus will B) fall by $300. 16) The Clinton administration has recommended an increase in the tax on yachts to help pay for government programs. Which of the following is true? B) The sales of yachts will decrease.
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This note was uploaded on 07/27/2009 for the course ECN 302 taught by Professor Brady during the Spring '09 term at Cleveland State.

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EconExam2a - 1) A farmer uses M units of machinery and L...

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