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| 1 | |
Which of the following taxes is progressive? |
| | A) | The federal income tax |
| | B) | State sales taxes |
| | C) | Gasoline excise taxes |
| | D) | Property taxes |
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| 2 | |
A public good exhibits the characteristics of: |
| | A) | rivalry and excludability. |
| | B) | nonrivalry and excludability. |
| | C) | rivalry and nonexcludability. |
| | D) | nonrivalry and nonexcludability. |
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| 3 | |
The Coase theorem suggests that government intervention is least likely to be needed to correct which of the following spillovers? |
| | A) | Individuals who outfit their cars with Lojack antitheft devices provide benefits to themselves and other car owners in the community. |
| | B) | A large brewery discharges its wastewater into a creek, killing many fish that a downstream resort relies on to attract fishermen. |
| | C) | Automobiles discharge greenhouse gases that potentially reduce the ozone layer and contribute to global warming. |
| | D) | Hundreds of ranchers pay below-market rates for their cattle to graze on public land, resulting in overgrazing. |
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| 4 | |
Most states tax gasoline and use the proceeds to build and maintain highways. This tax best reflects: |
| | A) | the ability-to-pay principle. |
| | B) | the benefits-received principle. |
| | C) | the comparative advantage principle. |
| | D) | the diminishing returns principle. |
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| 5 | |
Use the following diagram to answer the question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch5_q5.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>]]>
Refer to the diagram. Assume S is a market supply curve comprising all private costs of production and D is a demand curve representing all private benefits. Further assume that property rights are well defined. In which of the following circumstances is the appropriate government response most likely to be a tax that shifts the supply curve to S1? |
| | A) | Production of this good generates a substantial spillover benefit and the number of affected parties is small. |
| | B) | Production of this good generates a substantial spillover benefit and the number of affected parties is large. |
| | C) | Production of this good generates a substantial spillover cost and the number of affected parties is small. |
| | D) | Production of this good generates a substantial spillover cost and the number of affected parties is large. |
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| 6 | |
External benefits are most likely to be found in the production of: |
| | A) | illegal drugs. |
| | B) | DVD recording devices. |
| | C) | milk and dairy products. |
| | D) | secondary education. |
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| 7 | |
An externality is: |
| | A) | a cost or benefit incurred by someone who is not directly involved in the production or consumption of a good or service. |
| | B) | never relevant to the production of goods and services. |
| | C) | a cost that is incurred by consumers. |
| | D) | a benefit that is incurred by producers. |
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| 8 | |
Refer to the following: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch5_q8.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>]]>
The tax represented in the accompanying table is: |
| | A) | regressive. |
| | B) | proportional. |
| | C) | progressive. |
| | D) | optimal. |
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| 9 | |
Which of the following markets is likely to be characterized by substantial positive externalities (spillover benefits)? |
| | A) | Flu vaccine |
| | B) | Salmon |
| | C) | Newsprint |
| | D) | Concrete |
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| 10 | |
Free markets will tend to underallocate resources to the production of goods that: |
| | A) | are public goods. |
| | B) | are characterized by rivalry and excludability. |
| | C) | generate spillover costs. |
| | D) | are subject to the principal-agent problem. |
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