Exam 2 Solutions - Economics 304K EXAM II Helen Schneider Spring 2008 SOLUTIONS Part I Multiple Choice Do the following 15 multiple choice

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Economics 304K EXAM II Helen Schneider Spring 2008 SOLUTIONS 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. 1. Consumer surplus equals the a. Value to buyers – Amount paid by buyers. b. Amount received by sellers – Costs of sellers. c. Value to buyers – Costs of sellers. d. Value to buyers – Amount paid by buyers + Amount received by sellers – Costs of sellers.
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2. Refer to Figure 1 . When a tax is imposed in this market, producer surplus is a.$450. b. $600. c.$900. d.$1,500. Figure 1 3. If Roberta sells a shirt for $30, and her producer surplus from the sale is $21, her cost must have been a. $51. b. $30. c. $21. d. $9. 4. Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a.larger is the price elasticity of demand. b. smaller is the price elasticity of supply. c.larger is the amount of the tax. d.All of the above are correct. 5. If education produces positive externalities we would expect 2
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a. government to tax education. b. government to subsidize education. c. people to realize the benefits and therefore cause demand for education to increase. d. colleges to relax admission requirements. 6. When negative externalities are present in a market a. private costs will be greater than social costs. b. social costs will be greater than private costs. c. government regulation to resolve the problem is necessary. d. the market will not be able to reach any equilibrium situation. 7. According to the Coase theorem, private parties can solve the problem of externalities if a. the cost of bargaining is small. b. the initial distribution of rights favors the person being adversely affected by the
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This note was uploaded on 04/08/2008 for the course ECON 304K taught by Professor Ledyard during the Spring '08 term at University of Texas at Austin.

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Exam 2 Solutions - Economics 304K EXAM II Helen Schneider Spring 2008 SOLUTIONS Part I Multiple Choice Do the following 15 multiple choice

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