Q2W10 - Name Test Form A Economics 1 Quiz 2 1 If the supply...

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Name Test Form A Economics 1 Quiz 2 February 12, 2010 1. If the supply curve for a good is upward sloping and the demand curve for the good is elastic, a per-unit tax on the good paid by sellers will decrease the total amount buyers spend on the good. 2. If the supply curve for a good is perfectly elastic and buyers pay a tax for each unit of the good they buy, an increase in that tax will not change the equilibrium price of the good. 3. The deadweight loss of a tax is the reduction in the profits of buyers and sellers because of the tax minus the revenue raised by the tax 4. When there are negative externalities from the production of a good, all buyers and sellers of the good will be better off if that good is taxed. 5. Under a system of marketable pollution permits, polluters with a high marginal cost of reducing emissions will reduce emissions less than will polluters with a low marginal cost of reducing emissions. Multiple Choice Questions 6. The demand curve for a good is given by the linear function Q = 30 - P, where P is the price buyers pay for the good and Q is the quantity of the good demanded. The supply curve for the good is given by the linear function Q = 2 P, where P is the price sellers receive for the good and Q is the quantity of the good supplied. If a tax of $3 per unit is levied on sellers of the good, what will happen to the competitive equilibrium price of the good? (a) The price will rise by $2. (b) The price will rise by $3. (c) The price will rise by $1. (d) The price will not change. (e) The price will fall by $2.
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