100%(2)2 out of 2 people found this document helpful
This preview shows page 2 - 3 out of 3 pages.
9. Deadweight loss is defined as A) the burden of having excess supply in a market. B) the difference between the revenue raised by a tax and the lump-sum tax an individual would be willing to pay to avoid the tax. C) the benefit of a tax. D) the trade-off between efficiency and equity. 10. What kind of a make up class do you want?
Answers D A D D B A B A B 5. By definition 6. A Pareto improvement happens when you can make some one happy without making anyone else unhappy. If a rich guy is better off and a poor guy is unaffected, it increases inequality and is also a Pareto improvement. 7. This is a tough question. Social indifference curves in general may have a different shape and the shape shows the attitude towards equity. A) describes a “specific” social indifference curve. When it is a flat line, it means that the society does not care about inequality but just the sum of the utilities of the people. 8. Also a tough question. Taxing beer is a redistribution of wealth from people who drink to those who don’t. This creates dead weight loss so efficiency is sacrificed. 9. By definition Score Distribution (average 7.0) ScorePeople9 3 8 4 7 7 6 4 below 2