1. If an externality is present in a market, what may enhance economic efficiency? a. government intervention b. increased competition c. better informed market participants d. more defined property rights 2. Which concept best defines efficiency? a. absolute fairness b. equal distribution c. maximum benefits from resources d. consumer satisfaction Suppose a nation is currently producing at a point inside its production possibilities frontier. What do we know? a. The nation is producing beyond its capacity, and inflation will occur. b. The nation is not using all available resources and is inefficient. c. The nation needs improved technology in order to produce an efficient combination of goods. d. There will be a large opportunity cost if the nation tries to increase production. 4. What must we do to fully understand how taxes affect economic well-being? a. assume that economic well-being is not affected if all tax revenue is spent on goods and services for the Canadian public b. know the dollar amount of all taxes raised in the country each year c. compare the reduced welfare of buyers and sellers to the amount of government revenue raised d. compare the expenditures of the federal government to its tax revenue 5. How does a tax affect the equilibrium quantity and price of a good? a. The quantity of the good sold will decrease but the price of the good sold will not change. b . The price of the good sold will increase but the quantity of the good sold will not change. c. The quantity of the good sold will decrease but the price of the good sold will increase. d. The price of the good sold will decrease but the quantity of the good sold will increase . 6. If a tax is imposed on the buyer of a product, what is the effect on the demand curve? a . It shifts downward by the amount of the tax . b . It shifts upward by the amount of the tax . C . It shifts downward by less than the amount of the tax . d. It shifts upward by more than the amount of the tax. 7. What effect does a tax levied on buyers of a product have? a. It shifts demand upward, causing both the price received by sellers and the equilibrium quantity to fall . b. It shifts demand downward, causing both the price received by sellers and the equilibrium quantity to fall. c. It shifts supply downward, causing the price received by sellers to fall and equilibrium quantity to rise. d. It shifts supply upward, causing the price received by sellers to rise and equilibrium quantity to fall