1. If a government wants to tax a good so that there is maximum revenue generated and the least dead weight loss, it should tax a good with relatively _______________ demand and it should tax ___________ side of the market to achieve the most efficient results.
a. Inelastic, the demand
b. Inelastic, either
c. Elastic, the demand
d. Elastic, the supply
2. When a negative externality is present in a market
a. Marginal social cost is greater than marginal social benefit
b. Marginal social cost is less than marginal social benefit
c. The market will push prices up to the efficient level
d. There is too little produced from an efficiency standpoint
3. What is the main reason why a tiger is near extinction but chickens are nowhere near extinction?
a. Chickens are a source of food and tigers are not
b. Tigers are larger and require more resources to keep alive
c. Tigers and tiger habitat are non-excludable but chickens and chicken habitat are excludable
d. Consuming chickens is non-rival but consuming tigers is not
4. Consumers can make costly mistakes when not enough information is available. Which of the following represents a market solution to obtaining costly information?
a. Franchises
b. Advertising
c. Third party verification
d. All of the above
5. Select the scenarios that result in lower prices if they were to occur in isolation?
a. Higher technology, fall in the price of a substitute, decrease in the price of a complement
b. Higher productivity, lower taxes on corporations, lower expected future prices
c. Higher income for inferior goods, higher subsidies for firms, increase in tastes and preferences
d. Lower costs of production; fall in the price of substitute, reduction in consumer
6. When we say the cost of production is $50, what is meant according to economic principles?
a. A firm had to spend $50 in order to purchase the resources required to make the good or service.
b. A value to society of this good or service was $50, so its cost is said to be $50.
c. A firm could have made something else with the resources that were worth $50 in the market.
d. $50 represents the maximum willingness to pay from market participants.