eco3 - Economics 304K EXAM II Helen Schneider Spring 2007...

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Economics 304K EXAM II Helen Schneider Spring 2007 SOLUTIONS
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Part I. Multiple Choice. Do the following 15 multiple choice questions: Read each question carefully and CIRCLE the best answer. THERE IS ONLY ONE ANSWER TO EACH QUESTION. It often helps to jot down a quick graph or do some work next to the question before searching for the answer. 2
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1. Producer surplus is the a. area under the supply curve to the left of the amount sold. b. amount a seller is paid less the cost of production. c. amount represented by the area under the supply curve. d. cost to sellers of participating in a market. 2. According to the graph, the total surplus after the tax is represented by area a. A + F. b. B + D. c. A + B + D + F . d. A + B + D + F + C + E. 3. Assume that the demand for salt is relatively inelastic and that the demand for orange juice is relatively elastic. Compared to the deadweight loss from the same percentage tax on orange juice, the deadweight loss from imposing a tax on salt would be a. greater. b. less. c. neither greater nor less. d. either greater or less. 3
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4. When a country is on the downward-sloping side of the Laffer curves, cutting tax rates will a. lower tax revenues and increase deadweight loss. b. lower both tax revenues and deadweight loss. c. increase tax revenues and decrease deadweight loss. d. increase both tax revenues and deadweight loss. 5. A positive externality a. causes the product to be overproduced. b. provides an additional benefit to market participants.
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This note was uploaded on 01/23/2012 for the course CH 210C taught by Professor Fetland during the Spring '07 term at University of Texas at Austin.

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eco3 - Economics 304K EXAM II Helen Schneider Spring 2007...

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