Question- Suppose a pet owner refill her cat's prescription every month, buying exactly 30 pills, no more and

no less disregarding how many days in a month, and regardless of the price. If the government

eliminates all taxes on pet medications, who will benefit more?

a. Pet owner will receive the entire savings.

b. Pet owner and drug company would share the tax savings.

c. Drug company would receive the entire tax savings.

d. Neither pet owner nor drug company would see any savings.

e. More information is needed to answer this question.

Question- When negative externalities are present, the private market output level will be:

a. Too low.

b. Too high.

c. Socially optimal.

d. At the intersection of demand and marginal social cost.

e. At the point that minimizes the marginal external cost.

Question- Supposethere are only two goods, food and clothing, with food measured on the

vertical axis. If the price of clothing changes, holding all else constant,

a. the budget line undergoes a parallel shift to the right

b. the budget line undergoes a parallel shift to the left

c. a new point of utility maximization will be reached

d. the budget line becomes flatter

e. the slope of the budget line remains constant

Question- A manufacturer is less likely to offer warranties for its products if:

a. Consumer misuse is a likely source of failure and difficult to detect.

b. Its products are of higher quality than its competitors.

c. Its products are of lower quality than its competitors.

d. Choicesa andb.

e. Choicesa andc.