Worksheet On The American Revolution
Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. In 1776, the American Revolution was sparked by anger over a.the extravagant lifestyle of British royalty.b.the crimes of British soldiers stationed in the American colonies.c.British taxes imposed on the American colonies.d.the failure of the British to protect American colonists from attack by hostile Native Americans. ____ 2. When a tax is levied on a good, the buyers and sellers of the good share the burden, a.provided the tax is levied on the sellers.b.provided the tax is levied on the buyers.c.provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.d.regardless of how the tax is levied. ____ 3.
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A tax levied on the sellers of a good shifts the a.supply curve upward (or to the left).b.supply curve downward (or to the right).c.demand curve upward (or to the right).d.demand curve downward (or to the left). ____ 4. A tax levied on the buyers of a good shifts the a.supply curve upward (or to the left).b.supply curve downward (or to the right).c.demand curve downward (or to the left).d.demand curve upward (or to the right). Figure 8-1 ____ 5. Refer to Figure 8-1. When the market is in equilibrium, producer surplus is represented by area a.A.b.B.c.C.d.D. ____ 6. A 2.00 tax placed on the sellers of potting soil, for every bag of potting soil they sell, will shift the supply curve a.downward by exactly 2.00.b.downward by less than 2.00.c.upward by exactly 2.00.d.upward by less than 2.00. ____ 7. Suppose a tax of 5 per unit is imposed on a good. The supply curve and the demand curve are straight lines. The tax decreases consumer surplus by 10,000 and it decreases producer surplus by 15,000. The deadweight loss of the tax is 2,500. From this information it follows that the tax decreased the equilibrium quantity of the good ____ 9. For a good that is taxed, the area on the relevant supply-and-demand graph that represents governments tax revenue is a a.triangle.b.rectangle.c.trapezoid.d.None of the above is correct governments tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers. ____ 10. Taxes cause deadweight losses because they a.lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.b.distort incentives to both buyers and sellers.c.prevent buyers and sellers from realizing some of the gains from trade.d.All of the above are correct. ____ 11. Taxes a.distort incentives and this distortion causes markets to allocate resources inefficiently.b.distort incentives and this distortion results in an inequitable allocation of resources.c.do not distort incentives, but they do cause markets to allocate resources inefficiently.d.do not distort incentives, but they do result in an inequitable allocation of resources. ____ 12. The supply curve and the demand curve for a good are straight lines. When the good is taxed, the area on the relevant supply-and-demand graph that represents a.governments tax revenue is a rectangle.b.the deadweight loss of the tax is a triangle.c.the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle.d.All of the above are correct. ____ 13. A tax of 10 per unit is imposed on a certain good. The supply curve and the demand curve are straight lines. The tax reduces the equilibrium quantity in the market by 200 units. The deadweight loss from the tax is a.2,000.b.,1000.c.500.d.250. ____ 14. The supply curve and the demand curve for widgets are straight lines. Suppose the equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of 5 per widget is imposed. The price paid by buyers increases by 2 and the after-tax price received by sellers falls by 3. The government is able to raise 750 per month in revenue from the tax. The deadweight loss from the tax is a.250.b.125.c.75.d.50. ____ 15. The supply curve and the demand curve for cigars are straight lines. Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax. Then a tax of 0.50 per cigar is imposed. The effective price paid by buyers increases from 1.50 to 1.90 and the effective price received by sellers falls from 1.50 to 1.40. The governments tax revenue amounts to 475 per month. Which of the following statements is correct a.The demand for cigars is less elastic than the supply of cigars. b.The tax causes a decrease in consumer surplus of 390 and a decrease in producer surplus of 97.50.c.The deadweight loss of the tax is 12.50.d.All of the above are correct. Figure 8-2 ____ 16. Refer to Figure 8-2. The price that buyers effectively pay after the tax is imposed is a.P1.b.P2.c.P3.d.impossible to determine from the figure. ____ 17. Refer to Figure 8-2. The amount of deadweight loss associated with the tax is equal to a.P3 A C P1.b.A B C.c.P2 A D P3.d.P1 D C P2. ____ 18. Refer to Figure 8-2. Which of the following equations is valid for the loss in consumer surplus caused by the tax a.Loss of consumer surplus (1/2)(P3 - P2)(Q1 - Q2).b.Loss of consumer surplus (1/2)(P3 - P2)(Q1 Q2).c.Loss of consumer surplus (1/2)(P3 P2)(Q1 - Q2).d.Loss of consumer surplus (1/2)(P3 P2)(Q1 Q2). ____ 19. Refer to Figure 8-2. Which of the following equations is valid for the tax revenue that the tax provides to the government a.Tax revenue (P2 - P1)Q1b.Tax revenue (P3 - P1)Q1c.Tax revenue (P3 - P2)Q1d.Tax revenue (P3 - P1)Q2 ____ 20. Refer to Figure 8-2. Which of the following equations is valid for the deadweight loss of the tax a.Deadweight loss (1/2)(P2 - P1)(Q2 Q1)b.Deadweight loss (1/2)(P3 - P1)(Q2 Q1)c.Deadweight loss (1/2)(P3 - P2)(Q2 - Q1)d.Deadweight loss (1/2)(P3 - P1)(Q2 - Q1) Figure 8-3 ____ 21. Refer to Figure 8-3. The per-unit burden of the tax on sellers is a.16.b.14.c.8.d.6. Figure 8-4 ____ 22. Refer to Figure 8-4. After the tax is levied, producer surplus is represented by area a.A.b.A B C.c.D E F.d.F. ____ 23. Refer to Figure 8-4. The total surplus (consumer, producer, and government) with the tax is represented by area a.C E.b.A B C.c.D E F.d.A B D F. Figure 8-5 ____ 24. Refer to Figure 8-5. Without a tax, consumer surplus in this market is a.1,500.b.2,400.c.3,000.d.3,600. ____ 25. Refer to Figure 8-5. Without a tax, total surplus in this market is a.3,000.b.4,800.c.6,000.d.7,200. ____ 26. Refer to Figure 8-5. When a tax is imposed in this market, consumer surplus is a.600.b.900.c.1,500.d.3,000. ____ 27. Refer to Figure 8-5. When a tax is placed on this good, the quantity sold a.is 600 and buyers effectively pay 10.b.is 300 and buyers effectively pay 10.c.is 600 and buyers effectively pay 16.d.is 300 and buyers effectively pay 16. ____ 28. Refer to Figure 8-5. Total surplus with the tax in place is a.1,500.b.3,600.c.4,500.d.6,000. ____ 29. Refer to Figure 8-5. The tax results in a deadweight loss that amounts to a.600.b.900.c.1,500.d.1,800. Figure 8-6 ____ 30. Refer to Figure 8-6. Before the tax is imposed, a.the equilibrium price is 16 and the equilibrium quantity is 15.b.the equilibrium price is 12 and the equilibrium quantity is 25.c.the equilibrium price is 12 and the equilibrium quantity is 25.d.the equilibrium price is 8 and the equilibrium quantity is 15. ____ 31. Refer to Figure 8-6. As a result of the tax, a.buyers effectively pay 16 for each unit of the good and sellers effectively receive 12 for each unit of the good.b.buyers effectively pay 16 for each unit of the good and sellers effectively receive 8 for each unit of the good.c.buyers effectively pay 12 for each unit of the good and sellers effectively receive 8 for each unit of the good.d.buyers effectively pay 14 for each unit of the good and sellers effectively receive 10 for each unit of the good. ____ 32. Refer to Figure 8-6. The deadweight loss associated with this tax amounts to a.60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.b.60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.c.40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.d.40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. Figure 8-7 The graph below represents a 10 per unit tax on a good. On the graph, Q represents quantity and P represents price. ____ 33. Refer to Figure 8-7. The tax causes consumer surplus to decrease by the area a.A.b.B C.c.A B C.d.A B C D F. ____ 34. Refer to Figure 8-7. The tax causes producer surplus to decrease by the area a.D F.b.D F G.c.D F J.d.D F G H. ____ 35. Refer to Figure 8-7. After the tax goes into effect, producer surplus is the area a.D F G H J.b.D F G H.c.D F J.d.J. ____ 36. Refer to Figure 8-7. One effect of the tax is to a.reduce consumer surplus by 36.b.reduce producer surplus by 24.c.create a deadweight loss of 20.d.All of the above are correct. Scenario 8-1 Ryan would be willing to pay as much as 100 per week to have his house cleaned. Tammys opportunity cost of cleaning Ryans house is 70 per week. ____ 37. Refer to Scenario 8-1. If Ryan pays Tammy 80 to clean his house, Ryans consumer surplus is a.100.b.80.c.70.d.20. ____ 38. Refer to Scenario 8-1. Assume Ryan is required to pay a tax of 40 when he hires someone to clean his house for a week. Which of the following is correct a.Ryan will now clean his own house.b.Tammy will continue to clean Ryans house but her producer surplus will decline.c.Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.d.Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline. Scenario 8-2 Tom mows Stephanies lawn for 25. Toms opportunity cost of mowing Stephanies lawn is 20, and Stephanies willingness to pay Tom to mow her lawn is 28. ____ 39. Refer to Scenario 8-2. Stephanies consumer surplus as a result of hiring Tom to mow her lawn is a.3.b.5.c.8.d.25. ____ 40. The amount of deadweight loss from a tax depends upon a.the price elasticity of demand.b.the price elasticity of supply.c.the amount of the tax per unit.d.All of the above are correct. ____ 41. Suppose a tax of 1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, a.the smaller is the response of quantity supplied to the tax.b.the larger is the tax burden on sellers relative to the tax burden on buyers.c.the larger is the deadweight loss of the tax.d.All of the above are correct. ____ 42. Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about a.the size of labor taxes.b.the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.c.the elasticity of labor supply.d.the elasticity of labor demand. ____ 43. Taxes on labor have the effect of encouraging a.workers to work more hours.b.the elderly to postpone retirement.c.second earners within a family to take a job.d.unscrupulous people to take part in the underground economy. ____ 44. Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a larger deadweight loss a.Market Ab.Market Bc.The deadweight loss will be the same in both markets.d.There is not enough information to answer the question. ____ 45. Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a.larger is the price elasticity of demand.b.smaller is the price elasticity of supply.c.larger is the amount of the tax.d.All of the above are correct. ____ 46. Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a.less elastic is the demand.for the good.b.less elastic is the supply of the good.c.smaller is the amount of the tax.d.All of the above are correct. ____ 47. Assume the price of gasoline is 2.40 per gallon and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss a.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent and the tax on gasoline amounts to 0.40 per gallon.b.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent and the tax on gasoline amounts to 0.40 per gallon.c.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent and the tax on gasoline amounts to 0.35 per gallon.d.There is insufficient information to make this determination. ____ 48. Since the amount of land is fixed, the total supply of land is a.relatively elastic.b.perfectly elastic.c.perfectly inelastic.d.relatively inelastic. ____ 49. A tax on raw land causes a.a large deadweight loss.b.no deadweight loss.c.landlords to bear none of the burden of the tax.d.the generation of such a large amount of tax revenue that all other taxes could be eliminated. ____ 50. Todays property tax a.taxes only raw land.b.is exactly the same as Henry Georges single-tax proposal.c.taxes land and the improvements to land.d.has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners surplus. ____ 51. When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will a.decrease tax revenue and decrease the deadweight loss.b.decrease tax revenue and increase the deadweight loss.c.increase tax revenue and decrease the deadweight loss.d.increase tax revenue and increase the deadweight loss. ____ 52. The higher a countrys tax rates, the more likely that country will be a.at the top of the Laffer curve.b.on the positively sloped part of the Laffer curve.c.on the negatively sloped part of the Laffer curve.d.experiencing small deadweight losses. ____ 53. Which of the following ideas is the most plausible a.Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.b.Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.c.Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.d.Reducing a tax rate can never increase tax revenue. ____ 54. Suppose the tax on gasoline is raised from 0.50 per gallon to 2.50 per gallon. As a result, a.tax revenue necessarily increases.b.the deadweight loss of the tax necessarily increases.c.the supply curve for gasoline necessarily becomes steeper.d.All of the above are correct. ____ 55. Suppose the tax on liquor is increased so that the tax goes from being a medium tax to being a large tax. As a result, it is likely that a.tax revenue increases and the deadweight loss increases.b.tax revenue increases and the deadweight loss decreases.c.tax revenue decreases and the deadweight loss increases.d.tax revenue decreases and the deadweight loss decreases. ____ 56. The price of a good that prevails in a world market is called the a.absolute price.b.relative price.c.comparative price.d.world price. ____ 57. If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a.the country will be an exporter of the good.b.the country will be an importer of the good.c.the country will be neither an exporter nor an importer of the good.d.Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither. ____ 58. Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that, in the production of beef, a.the U.S. has a comparative advantage over other countries and the U.S. will export beef.b.the U.S. has a comparative advantage over other countries and the U.S. will import beef.c.other countries have a comparative advantage over the U.S. and the U.S. will export beef.d.other countries have a comparative advantage over the U.S. and the U.S. will import beef. ____ 59. Suppose Haiti has a comparative advantage over other countries in producing sugar, but other countries have an absolute advantage over Haiti in producing sugar. If trade in sugar is allowed, Haiti a.will import sugar.b.will export sugar.c.will either export sugar or export sugar, but it is not clear from the given information.d.would have nothing to gain either from exporting or importing sugar. ____ 60. When, in our analysis of the gains and losses of international trade, we assume that a country is small, we are in effect assuming that the country a.cannot experience significant gains or losses by trading with other countries.b.cannot have a significant comparative advantage over other countries.c.cannot affect world prices by trading with other countries.d.All of the above are correct. ____ 61. When a country allows trade and becomes an exporter of a good, a.consumer surplus and producer surplus both increase.b.consumer surplus and producer surplus both decrease.c.consumer surplus increases and producer surplus decreases.d.consumer surplus decreases and producer surplus increases. ____ 62. For any country that allows free trade, a.domestic quantity demanded is equal to domestic quantity supplied at the world price.b.domestic quantity demanded is greater than domestic quantity supplied at the world price.c.both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported.d.the domestic price is equal to the world price. ____ 63. The world price of a simple electronic calculator is 5.00. Before Singapore allowed trade in calculators, the price of a calculator there was 4.00. Once Singapore began allowing trade in calculators with other countries,Singapore began a.importing calculators and the price of a calculator in Singapore increased to 5.00.b.importing calculators and the price of a calculator in Singapore remained at 4.00.c.exporting calculators and the price of a calculator in Singapore increased to 5.00.d.exporting calculators and the price of a calculator in Singapore remained at 4.00. ____ 64. The world price of a pound of T-bone steak is 9.00. Before Guatemala allowed trade in beef, the price of a pound of T-bone steak there was 12.00. Once Guatemala began allowing trade in beef with other countries, Guatemala began a.exporting T-bone steak and the price per pound in Guatemala remained at 12.00.b.exporting T-bone steak and the price per pound in Guatemala decreased to 9.00.c.importing T-bone steak and the price per pound in Guatemala remained at 12.00.d.importing T-bone steak and the price per pound in Guatemala decreased to 9.00. Figure 9-1 ____ 65. Refer to Figure 9-1. Without trade, consumer surplus is a.210.b.245.c.455.d.490. Figure 9-2. The domestic country is China. ____ 66. Refer to Figure 9-2. With trade, producer surplus in China is a.800.b.1,200.c.1,800.d.2,700. Scenario 9-1 The before-trade domestic price of tomatoes in the United States is 500 per ton. The world price of tomatoes is 600 per ton. The U.S. is a price-taker in the tomatoes market. ____ 67. Refer to Scenario 9-1. If trade in tomatoes is allowed, U.S. producers of tomatoes a.will be better off.b.will be worse off.c.will be unaffected.d.will experience a decrease in their collective producer surplus. Figure 9-4 ____ 68. Refer to Figure 9-4. With trade, this country a.exports 20 wagons.b.exports 50 wagons.c.imports 30 wagons.d.imports 50 wagons. ____ 69. Refer to Figure 9-4. If this country allows free trade in wagons, a.consumers will gain more than producers will lose.b.producers will gain more than consumers will lose.c.producers and consumers will both gain equally.d.producers and consumers will both lose equally. ____ 70. The before-trade price of fish in Greece is 3.00 per pound. The world price of fish is 5.00 per pound. Greece is a price-taker in the fish market. If Greece allows trade in fish, then Greece will become an a.importer of fish and the price of fish in Greece will be 3.00.b.importer of fish and the price of fish in Greece will be 5.00.c.exporter of fish and the price of fish in Greece will be 3.00.d.exporter of fish and the price of fish in Greece will be 5.00. Figure 9-6. The figure applies to the nation of Wales and the good is cheese. ____ 71. Refer to Figure 9-6. With trade, the Welsh price of cheese and the Welsh quantity of cheese demanded are a.P1 and Q2.b.P1 and Q1.c.P0 and Q0.d.P3 and Q1. ____ 72. Refer to Figure 9-6. Which of the following is a valid equation for Welsh producer surplus with trade a.Producer surplus with trade (1/2)P0Q0.b.Producer surplus with trade (1/2)P1Q1.c.Producer surplus with trade (1/2)P1Q2.d.None of the above is correct. Figure 9-7. On the diagram below, Q represents the quantity of cars and P represents the price of cars. ____ 73. Refer to Figure 9-7. The price corresponding to the horizontal dotted line on the graph represents the price of cars a.after trade is allowed.b.before trade is allowed.c.that maximizes total surplus when trade is allowed.d.that minimizes the well-being of domestic car producers when trade is allowed. Figure 9-9. The figure applies to the nation of Kenya and the good is air conditioners. ____ 74. Refer to Figure 9-9. The price and quantity of air conditioners in Kenya before trade is a.P0 and Q0.b.P1 and Q1.c.P2 and Q2.d.P1 and Q0. ____ 75. Refer to Figure 9-9. When trade takes place, the quantity Q2 - Q1 is a.the number of air conditioners bought and sold in Kenya.b.the number of air conditioners produced in Kenya.c.the number of air conditioners exported by Kenya.d.the number of air conditioners imported by Kenya. ____ 76. Refer to Figure 9-9. Kenyas gains from trade are represented by the area that is bounded by the points a.(0, P0), (Q0, P0), (Q2, P1), and (0, P1).b.(0, P1), (0, P2), (Q0, P0), and (Q1, P1).c.(Q0, P0), (Q2, P1), and (Q1, P1).d.(0, P0), (0, P2), and (Q0, P0). ____ 77. Refer to Figure 9-9. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents a.Kenyas gains from trade.b.the amount by which Kenyas gain in consumer surplus exceeds its loss in producer surplus due to trade.c.Kenyas gain in total surplus due to trade.d.All of the above are correct. ____ 78. Refer to Figure 9-9. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents a.Kenyas gains from trade.b.the amount by which Kenyas gain in producer surplus exceeds its loss in consumer surplus due to trade.c.Kenyas loss in total surplus due to trade.d.All of the above are correct. Figure 9-10 ____ 79. Refer to Figure 9-10. The change in total surplus in this market because of trade is a.A, and this area represents a loss of total surplus.b.B, and this area represents a gain in total surplus.c.C, and this area represents a loss of total surplus.d.D, and this area represents a gain in total surplus. Figure 9-11 ____ 80. Refer to Figure 9-11. With trade, domestic production and domestic consumption, respectively, are a.600 and 400.b.800 and 400.c.400 and 600.d.400 and 800. ____ 81. Refer to Figure 9-11. Producer surplus after trade is a.4,800.b.5,600.c.6,400.d.7,000. ____ 82.
A tariff on a product makes a.domestic sellers better off and domestic buyers worse off.b.domestic sellers worse off and domestic buyers worse off.c.domestic sellers better off and domestic buyers better off.d.domestic sellers worse off and domestic buyers better off. ____ 83. A tariff is a tax placed on a.an exported good and it lowers the domestic price of the good below the world price.b.an exported good and it ensures that the domestic price of the good stays the same as the world price.c.an imported good and it lowers the domestic price of the good below the world price.d.an imported good and it raises the domestic price of the good above the world price. ____ 84. A tariff a.lowers the domestic price of the exported good below the world price.b.keeps the domestic price of the exported good the same as the world price.c.raises the domestic price of the imported good above the world price.d.lowers the domestic price of the imported good below the world price. Figure 9-14 ____ 85. Refer to Figure 9-14. Producer surplus with trade and without a tariff is a.G.b.C G.c.A C G.d.A B C G. ____ 86. Refer to Figure 9-14. Producer surplus with the tariff is a.G.b.C G.c.A C G.d.A B C G. Figure
9-15. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. ____ 87. Refer to Figure 9-15. Government revenue raised by the tariff is represented by the area a.E.b.B E.c.D E F.d.B D E F. ____ 88. Refer to Figure 9-15. The tariff a.decreases producer surplus by the area C and decreases consumer surplus by the area C D E F.b.decreases producer surplus by the area C D and decreases consumer surplus by the area D E F.c.increases producer surplus by the area C and decreases consumer surplus by the area C D E F.d.increases producer surplus by the area B C and decrease consumer surplus by the area D E F. ____ 89. Refer to Figure 9-15. The deadweight loss created by the tariff is represented by the area a.B.b.D F.c.D E F.d.B D E F. ____ 90. Workers displaced by trade eventually find jobs in a.another country.b.the government sector.c.the industries in which the country has a comparative advantage.d.a different company in the same industry. ____ 91. Which of the following is the most accurate statement a.Protection is necessary in order for young industries to grow up and be successful.b.Protection is not necessary for an industry to grow.c.Protection is necessary because if young industries are not protected, they may suffer losses.d.Protection may not always be necessary for infant industries, but it has proven to be useful in most cases. ____ 92. According to columnist George F. Will, a.the outsourcing of American jobs overseas will lead to significant economic problems for the United States in the long run.b.practices such as having X-rays analyzed in India are already starting to thwart economic growth in the United States.c.German labor laws give the United States a comparative advantage in producing automobiles.d.American labor laws give Germany a comparative advantage in producing automobiles. ____ 93. When a country takes a multilateral approach to free trade, it a.removes trade restrictions on its own.b.reduces its trade restrictions while other countries do the same.c.does not remove trade restrictions no matter what other countries do.d.is willing to trade with multiple countries at once. ____ 94. The rules established under GATT are enforced by the a.governments of the nations that are involved in GATT.b.North American Free Trade Association.c.World Trade Organization.d.European Union. ____ 95. Senator Blowhard represents a state in which many textile firms are located. He wants to impose tariffs on all imported textiles. Which of the following is the least likely consequence of such tariffs a.Domestic textile buyers will lose consumer surplus, have less variety, and will pay higher prices.b.Domestic textile sellers will gain producer surplus.c.Domestic textile sellers will have a higher rate of technological advance.d.Domestic textile sellers will have more market power. Short Answer 96. Using the graph shown, determine the value of each of the following a.equilibrium price before the taxb.consumer surplus before the taxc.producer surplus before the taxd.total surplus before the taxe.consumer surplus after the taxf.producer surplus after the taxg.total tax revenue to the governmenth.total surplus (consumer surplus producer surplus tax revenue) after the taxi.deadweight loss 97. John has been in the habit of mowing Willas lawn each week for 20. Johns opportunity cost is 15, and Willa would be willing to pay 25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement 98. Use the following graph shown to fill in the table that follows. WITHOUT TAXWITH TAXCHANGEConsumer surplusProducer surplusTax revenueTotal surplus 99. Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply. 100. Use the graph to answer the following questions about CDs. a.What is the equilibrium price of CDs before tradeb.What is the equilibrium quantity of CDs before tradec.What is the price of CDs after trade is allowedd.What is the quantity of CDs exported after trade is allowede.What is the amount of consumer surplus before tradef.What is the amount of consumer surplus after tradeg.What is the amount of producer surplus before tradeh.What is the amount of producer surplus after tradei.What is the amount of total surplus before tradej.What is the amount of total surplus after tradek.What is the change in total surplus because of trade 101. Using the graph below, answer the following questions about hammers. a.What is the equilibrium price of hammers before tradeb.What is the equilibrium quantity of hammers before tradec.What is the price of hammers after trade is allowedd.What is the quantity of hammers imported after trade is allowede.What is the amount of consumer surplus before tradef.What is the amount of consumer surplus after tradeg.What is the amount of producer surplus before tradeh.What is the amount of producer surplus after tradei.What is the amount of total surplus before tradej.What is the amount of total surplus after tradek.What is the change in total surplus because of trade 102. Using the graph, assume that the government imposes a 1 tariff on hammers. Answer the following questions given this information. a.What is the domestic price and quantity demanded of hammers after the tariff is imposedb.What is the quantity of hammers imported before the tariffc.What is the quantity of hammers imported after the tariffd.What would be the amount of consumer surplus before the tariffe.What would be the amount of consumer surplus after the tarifff.What would be the amount of producer surplus before the tariffg.What would be the amount of producer surplus after the tariffh.What would be the amount of government revenue because of the tariffi.What would be the total amount of deadweight loss due to the tariff 103. How does an import quota differ from an equivalent tariff 104. Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other 105. What are the arguments in favor of trade restrictions, and what are the counterarguments According to most economists, do any of these arguments really justify trade restrictions Explain. Review packet for Chapters 8 9 Test Answer Section MULTIPLE CHOICE 1. ANS C DIF 1 REF 8-0 TOP Taxes MSC Definitional 2. ANS D DIF 2 REF 8-1 TOP Tax burden MSC Interpretive 3. ANS A DIF 2 REF 8-1 TOP Tax, Supply curve MSC Interpretive 4. ANS C DIF 2 REF 8-1 TOP Tax, Demand curve MSC Interpretive 5. ANS C DIF 1 REF 8-1 TOP Producer surplus MSC Interpretive 6. ANS C DIF 2 REF 8-1 TOP Tax, Supply curve MSC Interpretive 7. ANS B DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Analytical 8. ANS D DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Analytical 9. ANS B DIF 2 REF 8-1 TOP Tax, Government MSC Interpretive 10. ANS D DIF 2 REF 8-1 TOP Deadweight losses MSC Interpretive 11. ANS A DIF 2 REF 8-1 TOP Taxes, Inefficiency MSC Interpretive 12. ANS D DIF 2 REF 8-1 TOP Deadweight losses MSC Interpretive 13. ANS B DIF 2 REF 8-1 TOP Deadweight losses MSC Applicative 14. ANS B DIF 3 REF 8-1 TOP Deadweight losses MSC Applicative 15. ANS D DIF 3 REF 8-1 TOP Deadweight losses, Elasticity MSC Applicative 16. ANS C DIF 2 REF 8-1 TOP Tax, Equilibrium price MSC Applicative 17. ANS B DIF 2 REF 8-1 TOP Deadweight losses MSC Applicative 18. ANS B DIF 3 REF 8-1 TOP Consumer surplus MSC Analytical 19. ANS B DIF 2 REF 8-1 TOP Tax, Government MSC Applicative 20. ANS D DIF 3 REF 8-1 TOP Deadweight losses MSC Analytical 21. ANS D DIF 2 REF 8-1 TOP Tax burden MSC Applicative 22. ANS D DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Applicative 23. ANS D DIF 2 REF 8-1 TOP Total surplus MSC Applicative 24. ANS D DIF 2 REF 8-1 TOP Consumer surplus MSC Interpretive 25. ANS C DIF 2 REF 8-1 TOP Total surplus MSC Interpretive 26. ANS B DIF 2 REF 8-1 TOP Tax, Consumer surplus MSC Applicative 27. ANS D DIF 2 REF 8-1 TOP Tax, Equilibrium price, Equilibrium quantity MSC Applicative 28. ANS C DIF 2 REF 8-1 TOP Tax, Total surplus MSC Applicative 29. ANS C DIF 3 REF 8-1 TOP Deadweight losses MSC Applicative 30. ANS B DIF 1 REF 8-1 TOP Equilibrium price, Equilibrium quantity MSC Interpretive 31. ANS B DIF 2 REF 8-1 TOP Tax, Equilibrium price MSC Applicative 32. ANS D DIF 3 REF 8-1 TOP Deadweight losses MSC Analytical 33. ANS B DIF 2 REF 8-1 TOP Tax, Consumer surplus MSC Interpretive 34. ANS A DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Interpretive 35. ANS D DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Interpretive 36. ANS D DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Applicative 37. ANS D DIF 1 REF 8-1 TOP Consumer surplus MSC Interpretive 38. ANS A DIF 2 REF 8-1 TOP Tax, Deadweight losses MSC Applicative 39. ANS A DIF 1 REF 8-1 TOP Consumer surplus MSC Interpretive 40. ANS D DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 41. ANS C DIF 3 REF 8-2 TOP Price elasticity of supply, Deadweight losses MSC Applicative 42. ANS C DIF 2 REF 8-2 TOP Taxes, Labor, Elasticity, Deadweight losses MSC Interpretive 43. ANS D DIF 2 REF 8-2 TOP Taxes, Labor MSC Interpretive 44. ANS B DIF 2 REF 8-2 TOP Deadweight losses MSC Applicative 45. ANS B DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 46. ANS D DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 47. ANS D DIF 3 REF 8-2 TOP Deadweight losses MSC Applicative 48. ANS C DIF 1 REF 8-2 TOP Perfectly inelastic supply MSC Interpretive 49. ANS B DIF 2 REF 8-2 TOP Land tax, Deadweight losses MSC Interpretive 50. ANS C DIF 2 REF 8-2 TOP Land tax MSC Definitional 51. ANS C DIF 2 REF 8-3 TOP Laffer curve MSC Applicative 52. ANS C DIF 2 REF 8-3 TOP Laffer curve MSC Interpretive 53. ANS B DIF 3 REF 8-3 TOP Tax rates, Laffer curve MSC Applicative 54. ANS B DIF 2 REF 8-3 TOP Deadweight losses MSC Applicative 55. ANS C DIF 2 REF 8-3 TOP Deadweight losses MSC Applicative 56. ANS D DIF 1 REF 9-1 TOP Price, World trade MSC Definitional 57. ANS B DIF 2 REF 9-1 TOP Prices, Imports MSC Interpretive 58. ANS A DIF 2 REF 9-1 TOP Comparative advantage, Prices MSC Applicative 59. ANS B DIF 2 REF 9-1 TOP Comparative advantage, Absolute advantage MSC Interpretive 60. ANS C DIF 2 REF 9-2 TOP Prices, International trade MSC Interpretive 61. ANS D DIF 2 REF 9-2 TOP Exports, Consumer surplus, Producer surplus MSC Interpretive 62. ANS D DIF 2 REF 9-2 TOP International trade, Prices MSC Interpretive 63. ANS C DIF 2 REF 9-2 TOP Exports, Prices MSC Applicative 64. ANS D DIF 2 REF 9-2 TOP Imports, Prices MSC Applicative 65. ANS B DIF 2 REF 9-2 TOP Consumer surplus MSC Applicative 66. ANS D DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 67. ANS A DIF 2 REF 9-2 TOP Producer surplus MSC Interpretive 68. ANS D DIF 2 REF 9-2 TOP Imports MSC Applicative 69. ANS A DIF 2 REF 9-2 TOP Economic welfare MSC Interpretive 70. ANS D DIF 2 REF 9-2 TOP Exports, Prices MSC Applicative 71. ANS B DIF 2 REF 9-2 TOP Trade, Equilibrium MSC Interpretive 72. ANS D DIF 3 REF 9-2 TOP Trade, Producer surplus MSC Analytical 73. ANS B DIF 1 REF 9-2 TOP Equilibrium price MSC Interpretive 74. ANS A DIF 1 REF 9-2 TOP Equilibrium price, Equilibrium quantity MSC Interpretive 75. ANS D DIF 2 REF 9-2 TOP Imports MSC Applicative 76. ANS C DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 77. ANS D DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 78. ANS A DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 79. ANS D DIF 2 REF 9-2 TOP Trade, Total surplus MSC Applicative 80. ANS B DIF 2 REF 9-2 TOP Trade, Equilibrium quantity MSC Applicative 81. ANS C DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 82. ANS A DIF 2 REF 9-2 TOP Tariffs MSC Interpretive 83. ANS D DIF 2 REF 9-2 TOP Tariffs, Prices MSC Interpretive 84. ANS C DIF 2 REF 9-2 TOP Tariffs, Prices MSC Interpretive 85. ANS A DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 86. ANS B DIF 2 REF 9-2 TOP Tariffs, Producer surplus MSC Applicative 87. ANS A DIF 2 REF 9-2 TOP Tariffs, Government MSC Applicative 88. ANS C DIF 2 REF 9-2 TOP Tariffs, Economic Welfare MSC Applicative 89. ANS B DIF 2 REF 9-2 TOP Tariffs, Deadweight losses MSC Applicative 90. ANS C DIF 1 REF 9-3 TOP Trade, Employment MSC Interpretive 91. ANS B DIF 2 REF 9-3 TOP Trade policy MSC Interpretive 92. ANS C DIF 2 REF 9-3 TOP Trade policy MSC Definitional 93. ANS B DIF 1 REF 9-3 TOP Trade policy MSC Definitional 94. ANS C DIF 1 REF 9-3 TOP GATT, WTO MSC Definitional 95. ANS C DIF 2 REF 9-3 TOP Tariffs, Technology MSC Applicative SHORT ANSWER 96. ANS a.10b.3600c.2400d.6000e.900f.600g.3000h.4500i.1500 DIF 3 REF 8-1 TOP Tax, Economic welfare MSC Applicative 97. ANS If the tax is less than 10, there will exist a price at which both John and Willa will still benefit from the lawn-mowing arrangement. If the tax is 10, a price can be set which will leave John and Willa neither better off nor worse off from the lawn-mowing arrangement. If the tax is greater than 10, all possible prices will leave at least one of the parties worse off from the lawn-mowing arrangement. DIF 2 REF 8-1 TOP Tax, Gains from trade MSC Applicative 98. ANS WITHOUT TAXWITH TAXCHANGEConsumer surplusA B CA(B C)Producer surplusD E FF(D E)Tax revenueNoneB D(B D)Total surplusA B C D E FA B D F(C E) DIF 2 REF 8-1 TOP Tax, Economic welfare MSC Applicative 99. ANS DIF 2 REF 8-2 TOP Deadweight losses, Elasticity MSC Applicative 100. ANS a.12b.50c.15d.30e.250f.122.50g.250h.422.50i.500j.545k.45 DIF 2 REF 9-2 TOP Exports, Economic welfare MSC Applicative 101. ANS a.14b.90c.10d.85e.360f.810g.405h.125i.765j.935k.170 DIF 2 REF 9-2 TOP Imports, Economic welfare MSC Applicative 102. ANS a.6, 84b.66c.44d.384e.294f.45g.80h.44i.11 DIF 2 REF 9-2 TOP Tariffs, Economic welfare MSC Applicative 103. ANS Both the import quota and the tariff raise the domestic price of the good, reduce the welfare of domestic consumers, increase the welfare of domestic producers, and cause deadweight losses. The only difference for the economy is that the tariff raises revenue for the government, while the import quota creates surplus for license holders. DIF 2 REF 9-2 TOP Tariffs, Import quotas MSC Interpretive 104. ANS A unilateral approach is when a country removes its trade restrictions on its own. A multilateral approach is when a country removes its trade restrictions while other countries do the same. A multilateral approach has two advantages. The first is that it has the potential to result in freer trade because it can reduce trade restrictions abroad as well as at home. If international negotiations fail, however, the result could be more restricted trade than under a unilateral approach. 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A tax levied on the sellers of a good shifts the a.supply curve upward (or to the left).b.supply curve downward (or to the right).c.demand curve upward (or to the right).d.demand curve downward (or to the left). ____ 4. A tax levied on the buyers of a good shifts the a.supply curve upward (or to the left).b.supply curve downward (or to the right).c.demand curve downward (or to the left).d.demand curve upward (or to the right). Figure 8-1 ____ 5. Refer to Figure 8-1. When the market is in equilibrium, producer surplus is represented by area a.A.b.B.c.C.d.D. ____ 6. A 2.00 tax placed on the sellers of potting soil, for every bag of potting soil they sell, will shift the supply curve a.downward by exactly 2.00.b.downward by less than 2.00.c.upward by exactly 2.00.d.upward by less than 2.00. ____ 7. Suppose a tax of 5 per unit is imposed on a good. The supply curve and the demand curve are straight lines. The tax decreases consumer surplus by 10,000 and it decreases producer surplus by 15,000. The deadweight loss of the tax is 2,500. From this information it follows that the tax decreased the equilibrium quantity of the good ____ 9. For a good that is taxed, the area on the relevant supply-and-demand graph that represents governments tax revenue is a a.triangle.b.rectangle.c.trapezoid.d.None of the above is correct governments tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers. ____ 10. Taxes cause deadweight losses because they a.lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.b.distort incentives to both buyers and sellers.c.prevent buyers and sellers from realizing some of the gains from trade.d.All of the above are correct. ____ 11. Taxes a.distort incentives and this distortion causes markets to allocate resources inefficiently.b.distort incentives and this distortion results in an inequitable allocation of resources.c.do not distort incentives, but they do cause markets to allocate resources inefficiently.d.do not distort incentives, but they do result in an inequitable allocation of resources. ____ 12. The supply curve and the demand curve for a good are straight lines. When the good is taxed, the area on the relevant supply-and-demand graph that represents a.governments tax revenue is a rectangle.b.the deadweight loss of the tax is a triangle.c.the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle.d.All of the above are correct. ____ 13. A tax of 10 per unit is imposed on a certain good. The supply curve and the demand curve are straight lines. The tax reduces the equilibrium quantity in the market by 200 units. The deadweight loss from the tax is a.2,000.b.,1000.c.500.d.250. ____ 14. The supply curve and the demand curve for widgets are straight lines. Suppose the equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of 5 per widget is imposed. The price paid by buyers increases by 2 and the after-tax price received by sellers falls by 3. The government is able to raise 750 per month in revenue from the tax. The deadweight loss from the tax is a.250.b.125.c.75.d.50. ____ 15. The supply curve and the demand curve for cigars are straight lines. Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax. Then a tax of 0.50 per cigar is imposed. The effective price paid by buyers increases from 1.50 to 1.90 and the effective price received by sellers falls from 1.50 to 1.40. The governments tax revenue amounts to 475 per month. Which of the following statements is correct a.The demand for cigars is less elastic than the supply of cigars. b.The tax causes a decrease in consumer surplus of 390 and a decrease in producer surplus of 97.50.c.The deadweight loss of the tax is 12.50.d.All of the above are correct. Figure 8-2 ____ 16. Refer to Figure 8-2. The price that buyers effectively pay after the tax is imposed is a.P1.b.P2.c.P3.d.impossible to determine from the figure. ____ 17. Refer to Figure 8-2. The amount of deadweight loss associated with the tax is equal to a.P3 A C P1.b.A B C.c.P2 A D P3.d.P1 D C P2. ____ 18. Refer to Figure 8-2. Which of the following equations is valid for the loss in consumer surplus caused by the tax a.Loss of consumer surplus (1/2)(P3 - P2)(Q1 - Q2).b.Loss of consumer surplus (1/2)(P3 - P2)(Q1 Q2).c.Loss of consumer surplus (1/2)(P3 P2)(Q1 - Q2).d.Loss of consumer surplus (1/2)(P3 P2)(Q1 Q2). ____ 19. Refer to Figure 8-2. Which of the following equations is valid for the tax revenue that the tax provides to the government a.Tax revenue (P2 - P1)Q1b.Tax revenue (P3 - P1)Q1c.Tax revenue (P3 - P2)Q1d.Tax revenue (P3 - P1)Q2 ____ 20. Refer to Figure 8-2. Which of the following equations is valid for the deadweight loss of the tax a.Deadweight loss (1/2)(P2 - P1)(Q2 Q1)b.Deadweight loss (1/2)(P3 - P1)(Q2 Q1)c.Deadweight loss (1/2)(P3 - P2)(Q2 - Q1)d.Deadweight loss (1/2)(P3 - P1)(Q2 - Q1) Figure 8-3 ____ 21. Refer to Figure 8-3. The per-unit burden of the tax on sellers is a.16.b.14.c.8.d.6. Figure 8-4 ____ 22. Refer to Figure 8-4. After the tax is levied, producer surplus is represented by area a.A.b.A B C.c.D E F.d.F. ____ 23. Refer to Figure 8-4. The total surplus (consumer, producer, and government) with the tax is represented by area a.C E.b.A B C.c.D E F.d.A B D F. Figure 8-5 ____ 24. Refer to Figure 8-5. Without a tax, consumer surplus in this market is a.1,500.b.2,400.c.3,000.d.3,600. ____ 25. Refer to Figure 8-5. Without a tax, total surplus in this market is a.3,000.b.4,800.c.6,000.d.7,200. ____ 26. Refer to Figure 8-5. When a tax is imposed in this market, consumer surplus is a.600.b.900.c.1,500.d.3,000. ____ 27. Refer to Figure 8-5. When a tax is placed on this good, the quantity sold a.is 600 and buyers effectively pay 10.b.is 300 and buyers effectively pay 10.c.is 600 and buyers effectively pay 16.d.is 300 and buyers effectively pay 16. ____ 28. Refer to Figure 8-5. Total surplus with the tax in place is a.1,500.b.3,600.c.4,500.d.6,000. ____ 29. Refer to Figure 8-5. The tax results in a deadweight loss that amounts to a.600.b.900.c.1,500.d.1,800. Figure 8-6 ____ 30. Refer to Figure 8-6. Before the tax is imposed, a.the equilibrium price is 16 and the equilibrium quantity is 15.b.the equilibrium price is 12 and the equilibrium quantity is 25.c.the equilibrium price is 12 and the equilibrium quantity is 25.d.the equilibrium price is 8 and the equilibrium quantity is 15. ____ 31. Refer to Figure 8-6. As a result of the tax, a.buyers effectively pay 16 for each unit of the good and sellers effectively receive 12 for each unit of the good.b.buyers effectively pay 16 for each unit of the good and sellers effectively receive 8 for each unit of the good.c.buyers effectively pay 12 for each unit of the good and sellers effectively receive 8 for each unit of the good.d.buyers effectively pay 14 for each unit of the good and sellers effectively receive 10 for each unit of the good. ____ 32. Refer to Figure 8-6. The deadweight loss associated with this tax amounts to a.60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.b.60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.c.40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.d.40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. Figure 8-7 The graph below represents a 10 per unit tax on a good. On the graph, Q represents quantity and P represents price. ____ 33. Refer to Figure 8-7. The tax causes consumer surplus to decrease by the area a.A.b.B C.c.A B C.d.A B C D F. ____ 34. Refer to Figure 8-7. The tax causes producer surplus to decrease by the area a.D F.b.D F G.c.D F J.d.D F G H. ____ 35. Refer to Figure 8-7. After the tax goes into effect, producer surplus is the area a.D F G H J.b.D F G H.c.D F J.d.J. ____ 36. Refer to Figure 8-7. One effect of the tax is to a.reduce consumer surplus by 36.b.reduce producer surplus by 24.c.create a deadweight loss of 20.d.All of the above are correct. Scenario 8-1 Ryan would be willing to pay as much as 100 per week to have his house cleaned. Tammys opportunity cost of cleaning Ryans house is 70 per week. ____ 37. Refer to Scenario 8-1. If Ryan pays Tammy 80 to clean his house, Ryans consumer surplus is a.100.b.80.c.70.d.20. ____ 38. Refer to Scenario 8-1. Assume Ryan is required to pay a tax of 40 when he hires someone to clean his house for a week. Which of the following is correct a.Ryan will now clean his own house.b.Tammy will continue to clean Ryans house but her producer surplus will decline.c.Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.d.Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline. Scenario 8-2 Tom mows Stephanies lawn for 25. Toms opportunity cost of mowing Stephanies lawn is 20, and Stephanies willingness to pay Tom to mow her lawn is 28. ____ 39. Refer to Scenario 8-2. Stephanies consumer surplus as a result of hiring Tom to mow her lawn is a.3.b.5.c.8.d.25. ____ 40. The amount of deadweight loss from a tax depends upon a.the price elasticity of demand.b.the price elasticity of supply.c.the amount of the tax per unit.d.All of the above are correct. ____ 41. Suppose a tax of 1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, a.the smaller is the response of quantity supplied to the tax.b.the larger is the tax burden on sellers relative to the tax burden on buyers.c.the larger is the deadweight loss of the tax.d.All of the above are correct. ____ 42. Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about a.the size of labor taxes.b.the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.c.the elasticity of labor supply.d.the elasticity of labor demand. ____ 43. Taxes on labor have the effect of encouraging a.workers to work more hours.b.the elderly to postpone retirement.c.second earners within a family to take a job.d.unscrupulous people to take part in the underground economy. ____ 44. Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a larger deadweight loss a.Market Ab.Market Bc.The deadweight loss will be the same in both markets.d.There is not enough information to answer the question. ____ 45. Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a.larger is the price elasticity of demand.b.smaller is the price elasticity of supply.c.larger is the amount of the tax.d.All of the above are correct. ____ 46. Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a.less elastic is the demand.for the good.b.less elastic is the supply of the good.c.smaller is the amount of the tax.d.All of the above are correct. ____ 47. Assume the price of gasoline is 2.40 per gallon and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss a.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent and the tax on gasoline amounts to 0.40 per gallon.b.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent and the tax on gasoline amounts to 0.40 per gallon.c.A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent and the tax on gasoline amounts to 0.35 per gallon.d.There is insufficient information to make this determination. ____ 48. Since the amount of land is fixed, the total supply of land is a.relatively elastic.b.perfectly elastic.c.perfectly inelastic.d.relatively inelastic. ____ 49. A tax on raw land causes a.a large deadweight loss.b.no deadweight loss.c.landlords to bear none of the burden of the tax.d.the generation of such a large amount of tax revenue that all other taxes could be eliminated. ____ 50. Todays property tax a.taxes only raw land.b.is exactly the same as Henry Georges single-tax proposal.c.taxes land and the improvements to land.d.has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners surplus. ____ 51. When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will a.decrease tax revenue and decrease the deadweight loss.b.decrease tax revenue and increase the deadweight loss.c.increase tax revenue and decrease the deadweight loss.d.increase tax revenue and increase the deadweight loss. ____ 52. The higher a countrys tax rates, the more likely that country will be a.at the top of the Laffer curve.b.on the positively sloped part of the Laffer curve.c.on the negatively sloped part of the Laffer curve.d.experiencing small deadweight losses. ____ 53. Which of the following ideas is the most plausible a.Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.b.Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.c.Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.d.Reducing a tax rate can never increase tax revenue. ____ 54. Suppose the tax on gasoline is raised from 0.50 per gallon to 2.50 per gallon. As a result, a.tax revenue necessarily increases.b.the deadweight loss of the tax necessarily increases.c.the supply curve for gasoline necessarily becomes steeper.d.All of the above are correct. ____ 55. Suppose the tax on liquor is increased so that the tax goes from being a medium tax to being a large tax. As a result, it is likely that a.tax revenue increases and the deadweight loss increases.b.tax revenue increases and the deadweight loss decreases.c.tax revenue decreases and the deadweight loss increases.d.tax revenue decreases and the deadweight loss decreases. ____ 56. The price of a good that prevails in a world market is called the a.absolute price.b.relative price.c.comparative price.d.world price. ____ 57. If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a.the country will be an exporter of the good.b.the country will be an importer of the good.c.the country will be neither an exporter nor an importer of the good.d.Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither. ____ 58. Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that, in the production of beef, a.the U.S. has a comparative advantage over other countries and the U.S. will export beef.b.the U.S. has a comparative advantage over other countries and the U.S. will import beef.c.other countries have a comparative advantage over the U.S. and the U.S. will export beef.d.other countries have a comparative advantage over the U.S. and the U.S. will import beef. ____ 59. Suppose Haiti has a comparative advantage over other countries in producing sugar, but other countries have an absolute advantage over Haiti in producing sugar. If trade in sugar is allowed, Haiti a.will import sugar.b.will export sugar.c.will either export sugar or export sugar, but it is not clear from the given information.d.would have nothing to gain either from exporting or importing sugar. ____ 60. When, in our analysis of the gains and losses of international trade, we assume that a country is small, we are in effect assuming that the country a.cannot experience significant gains or losses by trading with other countries.b.cannot have a significant comparative advantage over other countries.c.cannot affect world prices by trading with other countries.d.All of the above are correct. ____ 61. When a country allows trade and becomes an exporter of a good, a.consumer surplus and producer surplus both increase.b.consumer surplus and producer surplus both decrease.c.consumer surplus increases and producer surplus decreases.d.consumer surplus decreases and producer surplus increases. ____ 62. For any country that allows free trade, a.domestic quantity demanded is equal to domestic quantity supplied at the world price.b.domestic quantity demanded is greater than domestic quantity supplied at the world price.c.both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported.d.the domestic price is equal to the world price. ____ 63. The world price of a simple electronic calculator is 5.00. Before Singapore allowed trade in calculators, the price of a calculator there was 4.00. Once Singapore began allowing trade in calculators with other countries,Singapore began a.importing calculators and the price of a calculator in Singapore increased to 5.00.b.importing calculators and the price of a calculator in Singapore remained at 4.00.c.exporting calculators and the price of a calculator in Singapore increased to 5.00.d.exporting calculators and the price of a calculator in Singapore remained at 4.00. ____ 64. The world price of a pound of T-bone steak is 9.00. Before Guatemala allowed trade in beef, the price of a pound of T-bone steak there was 12.00. Once Guatemala began allowing trade in beef with other countries, Guatemala began a.exporting T-bone steak and the price per pound in Guatemala remained at 12.00.b.exporting T-bone steak and the price per pound in Guatemala decreased to 9.00.c.importing T-bone steak and the price per pound in Guatemala remained at 12.00.d.importing T-bone steak and the price per pound in Guatemala decreased to 9.00. Figure 9-1 ____ 65. Refer to Figure 9-1. Without trade, consumer surplus is a.210.b.245.c.455.d.490. Figure 9-2. The domestic country is China. ____ 66. Refer to Figure 9-2. With trade, producer surplus in China is a.800.b.1,200.c.1,800.d.2,700. Scenario 9-1 The before-trade domestic price of tomatoes in the United States is 500 per ton. The world price of tomatoes is 600 per ton. The U.S. is a price-taker in the tomatoes market. ____ 67. Refer to Scenario 9-1. If trade in tomatoes is allowed, U.S. producers of tomatoes a.will be better off.b.will be worse off.c.will be unaffected.d.will experience a decrease in their collective producer surplus. Figure 9-4 ____ 68. Refer to Figure 9-4. With trade, this country a.exports 20 wagons.b.exports 50 wagons.c.imports 30 wagons.d.imports 50 wagons. ____ 69. Refer to Figure 9-4. If this country allows free trade in wagons, a.consumers will gain more than producers will lose.b.producers will gain more than consumers will lose.c.producers and consumers will both gain equally.d.producers and consumers will both lose equally. ____ 70. The before-trade price of fish in Greece is 3.00 per pound. The world price of fish is 5.00 per pound. Greece is a price-taker in the fish market. If Greece allows trade in fish, then Greece will become an a.importer of fish and the price of fish in Greece will be 3.00.b.importer of fish and the price of fish in Greece will be 5.00.c.exporter of fish and the price of fish in Greece will be 3.00.d.exporter of fish and the price of fish in Greece will be 5.00. Figure 9-6. The figure applies to the nation of Wales and the good is cheese. ____ 71. Refer to Figure 9-6. With trade, the Welsh price of cheese and the Welsh quantity of cheese demanded are a.P1 and Q2.b.P1 and Q1.c.P0 and Q0.d.P3 and Q1. ____ 72. Refer to Figure 9-6. Which of the following is a valid equation for Welsh producer surplus with trade a.Producer surplus with trade (1/2)P0Q0.b.Producer surplus with trade (1/2)P1Q1.c.Producer surplus with trade (1/2)P1Q2.d.None of the above is correct. Figure 9-7. On the diagram below, Q represents the quantity of cars and P represents the price of cars. ____ 73. Refer to Figure 9-7. The price corresponding to the horizontal dotted line on the graph represents the price of cars a.after trade is allowed.b.before trade is allowed.c.that maximizes total surplus when trade is allowed.d.that minimizes the well-being of domestic car producers when trade is allowed. Figure 9-9. The figure applies to the nation of Kenya and the good is air conditioners. ____ 74. Refer to Figure 9-9. The price and quantity of air conditioners in Kenya before trade is a.P0 and Q0.b.P1 and Q1.c.P2 and Q2.d.P1 and Q0. ____ 75. Refer to Figure 9-9. When trade takes place, the quantity Q2 - Q1 is a.the number of air conditioners bought and sold in Kenya.b.the number of air conditioners produced in Kenya.c.the number of air conditioners exported by Kenya.d.the number of air conditioners imported by Kenya. ____ 76. Refer to Figure 9-9. Kenyas gains from trade are represented by the area that is bounded by the points a.(0, P0), (Q0, P0), (Q2, P1), and (0, P1).b.(0, P1), (0, P2), (Q0, P0), and (Q1, P1).c.(Q0, P0), (Q2, P1), and (Q1, P1).d.(0, P0), (0, P2), and (Q0, P0). ____ 77. Refer to Figure 9-9. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents a.Kenyas gains from trade.b.the amount by which Kenyas gain in consumer surplus exceeds its loss in producer surplus due to trade.c.Kenyas gain in total surplus due to trade.d.All of the above are correct. ____ 78. Refer to Figure 9-9. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents a.Kenyas gains from trade.b.the amount by which Kenyas gain in producer surplus exceeds its loss in consumer surplus due to trade.c.Kenyas loss in total surplus due to trade.d.All of the above are correct. Figure 9-10 ____ 79. Refer to Figure 9-10. The change in total surplus in this market because of trade is a.A, and this area represents a loss of total surplus.b.B, and this area represents a gain in total surplus.c.C, and this area represents a loss of total surplus.d.D, and this area represents a gain in total surplus. Figure 9-11 ____ 80. Refer to Figure 9-11. With trade, domestic production and domestic consumption, respectively, are a.600 and 400.b.800 and 400.c.400 and 600.d.400 and 800. ____ 81. Refer to Figure 9-11. Producer surplus after trade is a.4,800.b.5,600.c.6,400.d.7,000. ____ 82.
A tariff on a product makes a.domestic sellers better off and domestic buyers worse off.b.domestic sellers worse off and domestic buyers worse off.c.domestic sellers better off and domestic buyers better off.d.domestic sellers worse off and domestic buyers better off. ____ 83. A tariff is a tax placed on a.an exported good and it lowers the domestic price of the good below the world price.b.an exported good and it ensures that the domestic price of the good stays the same as the world price.c.an imported good and it lowers the domestic price of the good below the world price.d.an imported good and it raises the domestic price of the good above the world price. ____ 84. A tariff a.lowers the domestic price of the exported good below the world price.b.keeps the domestic price of the exported good the same as the world price.c.raises the domestic price of the imported good above the world price.d.lowers the domestic price of the imported good below the world price. Figure 9-14 ____ 85. Refer to Figure 9-14. Producer surplus with trade and without a tariff is a.G.b.C G.c.A C G.d.A B C G. ____ 86. Refer to Figure 9-14. Producer surplus with the tariff is a.G.b.C G.c.A C G.d.A B C G. Figure
9-15. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. ____ 87. Refer to Figure 9-15. Government revenue raised by the tariff is represented by the area a.E.b.B E.c.D E F.d.B D E F. ____ 88. Refer to Figure 9-15. The tariff a.decreases producer surplus by the area C and decreases consumer surplus by the area C D E F.b.decreases producer surplus by the area C D and decreases consumer surplus by the area D E F.c.increases producer surplus by the area C and decreases consumer surplus by the area C D E F.d.increases producer surplus by the area B C and decrease consumer surplus by the area D E F. ____ 89. Refer to Figure 9-15. The deadweight loss created by the tariff is represented by the area a.B.b.D F.c.D E F.d.B D E F. ____ 90. Workers displaced by trade eventually find jobs in a.another country.b.the government sector.c.the industries in which the country has a comparative advantage.d.a different company in the same industry. ____ 91. Which of the following is the most accurate statement a.Protection is necessary in order for young industries to grow up and be successful.b.Protection is not necessary for an industry to grow.c.Protection is necessary because if young industries are not protected, they may suffer losses.d.Protection may not always be necessary for infant industries, but it has proven to be useful in most cases. ____ 92. According to columnist George F. Will, a.the outsourcing of American jobs overseas will lead to significant economic problems for the United States in the long run.b.practices such as having X-rays analyzed in India are already starting to thwart economic growth in the United States.c.German labor laws give the United States a comparative advantage in producing automobiles.d.American labor laws give Germany a comparative advantage in producing automobiles. ____ 93. When a country takes a multilateral approach to free trade, it a.removes trade restrictions on its own.b.reduces its trade restrictions while other countries do the same.c.does not remove trade restrictions no matter what other countries do.d.is willing to trade with multiple countries at once. ____ 94. The rules established under GATT are enforced by the a.governments of the nations that are involved in GATT.b.North American Free Trade Association.c.World Trade Organization.d.European Union. ____ 95. Senator Blowhard represents a state in which many textile firms are located. He wants to impose tariffs on all imported textiles. Which of the following is the least likely consequence of such tariffs a.Domestic textile buyers will lose consumer surplus, have less variety, and will pay higher prices.b.Domestic textile sellers will gain producer surplus.c.Domestic textile sellers will have a higher rate of technological advance.d.Domestic textile sellers will have more market power. Short Answer 96. Using the graph shown, determine the value of each of the following a.equilibrium price before the taxb.consumer surplus before the taxc.producer surplus before the taxd.total surplus before the taxe.consumer surplus after the taxf.producer surplus after the taxg.total tax revenue to the governmenth.total surplus (consumer surplus producer surplus tax revenue) after the taxi.deadweight loss 97. John has been in the habit of mowing Willas lawn each week for 20. Johns opportunity cost is 15, and Willa would be willing to pay 25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement 98. Use the following graph shown to fill in the table that follows. WITHOUT TAXWITH TAXCHANGEConsumer surplusProducer surplusTax revenueTotal surplus 99. Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply. 100. Use the graph to answer the following questions about CDs. a.What is the equilibrium price of CDs before tradeb.What is the equilibrium quantity of CDs before tradec.What is the price of CDs after trade is allowedd.What is the quantity of CDs exported after trade is allowede.What is the amount of consumer surplus before tradef.What is the amount of consumer surplus after tradeg.What is the amount of producer surplus before tradeh.What is the amount of producer surplus after tradei.What is the amount of total surplus before tradej.What is the amount of total surplus after tradek.What is the change in total surplus because of trade 101. Using the graph below, answer the following questions about hammers. a.What is the equilibrium price of hammers before tradeb.What is the equilibrium quantity of hammers before tradec.What is the price of hammers after trade is allowedd.What is the quantity of hammers imported after trade is allowede.What is the amount of consumer surplus before tradef.What is the amount of consumer surplus after tradeg.What is the amount of producer surplus before tradeh.What is the amount of producer surplus after tradei.What is the amount of total surplus before tradej.What is the amount of total surplus after tradek.What is the change in total surplus because of trade 102. Using the graph, assume that the government imposes a 1 tariff on hammers. Answer the following questions given this information. a.What is the domestic price and quantity demanded of hammers after the tariff is imposedb.What is the quantity of hammers imported before the tariffc.What is the quantity of hammers imported after the tariffd.What would be the amount of consumer surplus before the tariffe.What would be the amount of consumer surplus after the tarifff.What would be the amount of producer surplus before the tariffg.What would be the amount of producer surplus after the tariffh.What would be the amount of government revenue because of the tariffi.What would be the total amount of deadweight loss due to the tariff 103. How does an import quota differ from an equivalent tariff 104. Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other 105. What are the arguments in favor of trade restrictions, and what are the counterarguments According to most economists, do any of these arguments really justify trade restrictions Explain. Review packet for Chapters 8 9 Test Answer Section MULTIPLE CHOICE 1. ANS C DIF 1 REF 8-0 TOP Taxes MSC Definitional 2. ANS D DIF 2 REF 8-1 TOP Tax burden MSC Interpretive 3. ANS A DIF 2 REF 8-1 TOP Tax, Supply curve MSC Interpretive 4. ANS C DIF 2 REF 8-1 TOP Tax, Demand curve MSC Interpretive 5. ANS C DIF 1 REF 8-1 TOP Producer surplus MSC Interpretive 6. ANS C DIF 2 REF 8-1 TOP Tax, Supply curve MSC Interpretive 7. ANS B DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Analytical 8. ANS D DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Analytical 9. ANS B DIF 2 REF 8-1 TOP Tax, Government MSC Interpretive 10. ANS D DIF 2 REF 8-1 TOP Deadweight losses MSC Interpretive 11. ANS A DIF 2 REF 8-1 TOP Taxes, Inefficiency MSC Interpretive 12. ANS D DIF 2 REF 8-1 TOP Deadweight losses MSC Interpretive 13. ANS B DIF 2 REF 8-1 TOP Deadweight losses MSC Applicative 14. ANS B DIF 3 REF 8-1 TOP Deadweight losses MSC Applicative 15. ANS D DIF 3 REF 8-1 TOP Deadweight losses, Elasticity MSC Applicative 16. ANS C DIF 2 REF 8-1 TOP Tax, Equilibrium price MSC Applicative 17. ANS B DIF 2 REF 8-1 TOP Deadweight losses MSC Applicative 18. ANS B DIF 3 REF 8-1 TOP Consumer surplus MSC Analytical 19. ANS B DIF 2 REF 8-1 TOP Tax, Government MSC Applicative 20. ANS D DIF 3 REF 8-1 TOP Deadweight losses MSC Analytical 21. ANS D DIF 2 REF 8-1 TOP Tax burden MSC Applicative 22. ANS D DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Applicative 23. ANS D DIF 2 REF 8-1 TOP Total surplus MSC Applicative 24. ANS D DIF 2 REF 8-1 TOP Consumer surplus MSC Interpretive 25. ANS C DIF 2 REF 8-1 TOP Total surplus MSC Interpretive 26. ANS B DIF 2 REF 8-1 TOP Tax, Consumer surplus MSC Applicative 27. ANS D DIF 2 REF 8-1 TOP Tax, Equilibrium price, Equilibrium quantity MSC Applicative 28. ANS C DIF 2 REF 8-1 TOP Tax, Total surplus MSC Applicative 29. ANS C DIF 3 REF 8-1 TOP Deadweight losses MSC Applicative 30. ANS B DIF 1 REF 8-1 TOP Equilibrium price, Equilibrium quantity MSC Interpretive 31. ANS B DIF 2 REF 8-1 TOP Tax, Equilibrium price MSC Applicative 32. ANS D DIF 3 REF 8-1 TOP Deadweight losses MSC Analytical 33. ANS B DIF 2 REF 8-1 TOP Tax, Consumer surplus MSC Interpretive 34. ANS A DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Interpretive 35. ANS D DIF 2 REF 8-1 TOP Tax, Producer surplus MSC Interpretive 36. ANS D DIF 3 REF 8-1 TOP Consumer surplus, Producer surplus, Deadweight losses MSC Applicative 37. ANS D DIF 1 REF 8-1 TOP Consumer surplus MSC Interpretive 38. ANS A DIF 2 REF 8-1 TOP Tax, Deadweight losses MSC Applicative 39. ANS A DIF 1 REF 8-1 TOP Consumer surplus MSC Interpretive 40. ANS D DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 41. ANS C DIF 3 REF 8-2 TOP Price elasticity of supply, Deadweight losses MSC Applicative 42. ANS C DIF 2 REF 8-2 TOP Taxes, Labor, Elasticity, Deadweight losses MSC Interpretive 43. ANS D DIF 2 REF 8-2 TOP Taxes, Labor MSC Interpretive 44. ANS B DIF 2 REF 8-2 TOP Deadweight losses MSC Applicative 45. ANS B DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 46. ANS D DIF 2 REF 8-2 TOP Deadweight losses MSC Interpretive 47. ANS D DIF 3 REF 8-2 TOP Deadweight losses MSC Applicative 48. ANS C DIF 1 REF 8-2 TOP Perfectly inelastic supply MSC Interpretive 49. ANS B DIF 2 REF 8-2 TOP Land tax, Deadweight losses MSC Interpretive 50. ANS C DIF 2 REF 8-2 TOP Land tax MSC Definitional 51. ANS C DIF 2 REF 8-3 TOP Laffer curve MSC Applicative 52. ANS C DIF 2 REF 8-3 TOP Laffer curve MSC Interpretive 53. ANS B DIF 3 REF 8-3 TOP Tax rates, Laffer curve MSC Applicative 54. ANS B DIF 2 REF 8-3 TOP Deadweight losses MSC Applicative 55. ANS C DIF 2 REF 8-3 TOP Deadweight losses MSC Applicative 56. ANS D DIF 1 REF 9-1 TOP Price, World trade MSC Definitional 57. ANS B DIF 2 REF 9-1 TOP Prices, Imports MSC Interpretive 58. ANS A DIF 2 REF 9-1 TOP Comparative advantage, Prices MSC Applicative 59. ANS B DIF 2 REF 9-1 TOP Comparative advantage, Absolute advantage MSC Interpretive 60. ANS C DIF 2 REF 9-2 TOP Prices, International trade MSC Interpretive 61. ANS D DIF 2 REF 9-2 TOP Exports, Consumer surplus, Producer surplus MSC Interpretive 62. ANS D DIF 2 REF 9-2 TOP International trade, Prices MSC Interpretive 63. ANS C DIF 2 REF 9-2 TOP Exports, Prices MSC Applicative 64. ANS D DIF 2 REF 9-2 TOP Imports, Prices MSC Applicative 65. ANS B DIF 2 REF 9-2 TOP Consumer surplus MSC Applicative 66. ANS D DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 67. ANS A DIF 2 REF 9-2 TOP Producer surplus MSC Interpretive 68. ANS D DIF 2 REF 9-2 TOP Imports MSC Applicative 69. ANS A DIF 2 REF 9-2 TOP Economic welfare MSC Interpretive 70. ANS D DIF 2 REF 9-2 TOP Exports, Prices MSC Applicative 71. ANS B DIF 2 REF 9-2 TOP Trade, Equilibrium MSC Interpretive 72. ANS D DIF 3 REF 9-2 TOP Trade, Producer surplus MSC Analytical 73. ANS B DIF 1 REF 9-2 TOP Equilibrium price MSC Interpretive 74. ANS A DIF 1 REF 9-2 TOP Equilibrium price, Equilibrium quantity MSC Interpretive 75. ANS D DIF 2 REF 9-2 TOP Imports MSC Applicative 76. ANS C DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 77. ANS D DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 78. ANS A DIF 3 REF 9-2 TOP Gains from trade MSC Analytical 79. ANS D DIF 2 REF 9-2 TOP Trade, Total surplus MSC Applicative 80. ANS B DIF 2 REF 9-2 TOP Trade, Equilibrium quantity MSC Applicative 81. ANS C DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 82. ANS A DIF 2 REF 9-2 TOP Tariffs MSC Interpretive 83. ANS D DIF 2 REF 9-2 TOP Tariffs, Prices MSC Interpretive 84. ANS C DIF 2 REF 9-2 TOP Tariffs, Prices MSC Interpretive 85. ANS A DIF 2 REF 9-2 TOP Trade, Producer surplus MSC Applicative 86. ANS B DIF 2 REF 9-2 TOP Tariffs, Producer surplus MSC Applicative 87. ANS A DIF 2 REF 9-2 TOP Tariffs, Government MSC Applicative 88. ANS C DIF 2 REF 9-2 TOP Tariffs, Economic Welfare MSC Applicative 89. ANS B DIF 2 REF 9-2 TOP Tariffs, Deadweight losses MSC Applicative 90. ANS C DIF 1 REF 9-3 TOP Trade, Employment MSC Interpretive 91. ANS B DIF 2 REF 9-3 TOP Trade policy MSC Interpretive 92. ANS C DIF 2 REF 9-3 TOP Trade policy MSC Definitional 93. ANS B DIF 1 REF 9-3 TOP Trade policy MSC Definitional 94. ANS C DIF 1 REF 9-3 TOP GATT, WTO MSC Definitional 95. ANS C DIF 2 REF 9-3 TOP Tariffs, Technology MSC Applicative SHORT ANSWER 96. ANS a.10b.3600c.2400d.6000e.900f.600g.3000h.4500i.1500 DIF 3 REF 8-1 TOP Tax, Economic welfare MSC Applicative 97. ANS If the tax is less than 10, there will exist a price at which both John and Willa will still benefit from the lawn-mowing arrangement. If the tax is 10, a price can be set which will leave John and Willa neither better off nor worse off from the lawn-mowing arrangement. If the tax is greater than 10, all possible prices will leave at least one of the parties worse off from the lawn-mowing arrangement. DIF 2 REF 8-1 TOP Tax, Gains from trade MSC Applicative 98. ANS WITHOUT TAXWITH TAXCHANGEConsumer surplusA B CA(B C)Producer surplusD E FF(D E)Tax revenueNoneB D(B D)Total surplusA B C D E FA B D F(C E) DIF 2 REF 8-1 TOP Tax, Economic welfare MSC Applicative 99. ANS DIF 2 REF 8-2 TOP Deadweight losses, Elasticity MSC Applicative 100. ANS a.12b.50c.15d.30e.250f.122.50g.250h.422.50i.500j.545k.45 DIF 2 REF 9-2 TOP Exports, Economic welfare MSC Applicative 101. ANS a.14b.90c.10d.85e.360f.810g.405h.125i.765j.935k.170 DIF 2 REF 9-2 TOP Imports, Economic welfare MSC Applicative 102. ANS a.6, 84b.66c.44d.384e.294f.45g.80h.44i.11 DIF 2 REF 9-2 TOP Tariffs, Economic welfare MSC Applicative 103. ANS Both the import quota and the tariff raise the domestic price of the good, reduce the welfare of domestic consumers, increase the welfare of domestic producers, and cause deadweight losses. The only difference for the economy is that the tariff raises revenue for the government, while the import quota creates surplus for license holders. DIF 2 REF 9-2 TOP Tariffs, Import quotas MSC Interpretive 104. ANS A unilateral approach is when a country removes its trade restrictions on its own. A multilateral approach is when a country removes its trade restrictions while other countries do the same. A multilateral approach has two advantages. The first is that it has the potential to result in freer trade because it can reduce trade restrictions abroad as well as at home. If international negotiations fail, however, the result could be more restricted trade than under a unilateral approach. 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