1. A per-unit tax on a good with relatively inelastic demand will result in

a. less tax revenue than if demand were elastic

b. a lower tax burden on consumers than on producers

c. more deadweight loss than if demand were elastic

d. a higher tax burden on consumers than on producers

e. a tax burden that is equally distributed between consumers and producers

2.Why do private businesses underproduce public goods?

a. They are non-excludable, and so it is difficult to earn profits by producing the good.

b. They are rivalrous, and so only one producer can supply the good.

c. They are excludable, and so there are too few consumers available to buy the good.

d. They are non-rivalrous, and so market power will limit output of the good.

e. They are non-affordable, and so there are no consumers willing to purchase the good.

3.Which of the following is an effective government response to a natural monopoly's tendency to produce less output at a higher cost than the socially optimal quantity?

a. A per-unit subsidy

b. A patent

c. A lump-sum subsidy and price ceiling

d. Antitrust legislation

e. A per-unit tax

4.Which of the following scenarios could describe a market experiencing a negative production externality?

a. Optimal social quantity will be less than the private unregulated quantity, and the optimal social price will be greater than the private price.

b.Optimal social quantity will equal private quantity, and social price will equal private price.

c.Optimal social quantity will be less than the private unregulated quantity, and social price will be less than private price.

d. Optimal social quantity will be greater than the private unregulated quantity, and social price will be less than private price.

e. Optimal social quantity will be greater than the private unregulated quantity, and social price will be greater than private price.

5.If Country S has greater income inequality than Country T, which of the following must be true?

a.Country S will have greater wealth overall.

b. Country T will have greater wealth overall.

c.Country S will have a higher Gini coefficient than Country T.

d. Country S will have a lower Gini coefficient than Country T.

e. Country S will have more people in poverty than Country T.

6.Consider a situation in which there is overproduction, as in the case of pollution, or underproduction, as in the case of vaccinations. What type of policy should a government enact to produce the socially optimal quantity in the most economically efficient way?

a. Private provision

b. Per-unit taxes and subsidies

c. Environmental deregulation

d. Strict enforcement of property rights

e. Ensure property rights are not transferable

7.Which of the following is a reason for increased income inequality?

a. Market forces lead to highly diverse marginal revenue products based on the goods and services provided by laborers.

b. There is a decrease in the productive capacity of capital so that wages and salaries are instead paid to an improving labor force.

c. Taxes on earnings are collected each year and the amount per worker is based on a progressive calculation.

d. Market wages are rising, and so the unemployed are incentivized to find a job.

e. The structure of the labor union is reorganized such that their bargaining power is increased significantly.