Q2W11 - Name Test Form A Economics 1 Quiz 2 February 11,...

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Unformatted text preview: Name Test Form A Economics 1 Quiz 2 February 11, 2011 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. If the supply curve for a good is perfectly inelastic, a sales tax on that good will have no excess burden. 2. If the supply curve shifts out (more supplied at every price) and the total revenue of suppliers decreases, the demand curve must be elastic. 3. If the production and sale of a good imposes external costs on members of a community, the total profits of community members will be increased if trade in the good is banned. 4. If the supply curve for a good is perfectly elastic, a tax on buyers of the good will not change the price sellers receive for the good. 5. According to the assigned reading in Timothy Taylors Principles of Microeconomics, studies conducted to date have failed to find that the benefits of the Clean Air Act justify the large costs imposed on industry because of that Act. Multiple Choice Questions Economics 1 2 6. Many households in the Northeast heat their homes in the winter with furnaces that burn heating oil. To offset the effect of higher oil prices on low-income households, the federal government is proposing to subsidize the price of heating oil. Under the plan, each household would receive a payment from the government of $0.50 for each gallon of heating oil it purchases. Assuming the demand curve for heating oil is downward sloping and the supply curve is perfectly elastic, what would you expect to happen to the price and quantity of heating oil purchased in the Northeast this winter? (a) The price received by sellers of heating oil would rise, and the quantity of heating oil sold would also rise. (b) The price received by sellers of heating oil would not change, and the quantity of heating oil sold would rise. (c) The price received by sellers of heating oil would fall, and the quantity of heating oil sold would rise. (d) The price received by sellers of heating oil would not change, and the quantity of heating oil sold would not change. (e) The price received by sellers of heating oil would fall, and the quantity of heating oil sold would also fall. 7. In the market for apples, there are 20 sellers and 30 buyers. Each seller has one bushel of apples to sell if the price is high enough. Each buyer is willing to buy a bushel of apples if the price is low enough. Every seller has a seller cost of $10. Fifteen buyers have a buyer value of $15, and 15 buyers have a buyer value of $30. What is the excess burden of a sales tax of $15 per bushel levied on sellers of apples in this market? (a) $25 (b) $75 (c) $200 (d) $225 (e) $0 8. The economic recession of 2008 reduced the incomes of many households and reduced their demand for goods and services. Families ate out in restaurants less often, and the number of meals served by restaurants declined by 10 percent. The average price of a restaurant meal also declined. It was 5 percent less than the previous year. From this, we can conclude that (a)...
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This note was uploaded on 12/12/2011 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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Q2W11 - Name Test Form A Economics 1 Quiz 2 February 11,...

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