Deck 5: Efficiency and the Role of Government

Question 1

Rent-seeking occurs when

A)the government regulators for an industry are taken over by the businesses they are meant to regulate
B)the owner of land collects rent from her tenants
C)an organization seeks to get benefits from the government using lobbying
D)a person seeks the lowest cost apartment he can afford

Answer 1

C

Question 2

What is the optimum tax rate?

A)64-46 = 18
B)64-55 = 9
C)55-45 = 10
D)77.5-55 = 22.5

Answer 2

A

Question 3

In Figure 5-6 the deadweight loss is ____for the price ceiling and _____ for the price floor.

A)C+E for both
B)D+E for the price ceiling and B+C for the price floor
C)F for the price ceiling and A for the price floor
D)C for the price ceiling and C+E for the price floor

Answer 3

A

Question 4

In figure 5-15 what is the CHANGE in the producer surplus due to the tax?

A)E+F+G
B)E+F
C)B+C
D)B+E+H

Question 5

Suppose that the production of a good produces a negative externality resulting in higher marginal social costs (MSC) than marginal private costs (MPC).Suppose MPC=10+Q and MSC=10+1.5Q and Demand is P=100-Q.
What is the social equilibrium quantity and price?

A)Q = 45, P = 55
B)Q = 36, P = 64
C)Q = 55, P = 65
D)Q = 35, P = 45

Question 6

Using the same figure, what is the net benefit with the subsidy?

A)B+C+D+E+H-I
B)A+B+C+F-I
C)H+D+E-I
D)A+B+C+D+E-I

Question 7

What is the Government Surplus with the Subsidy in place?

A)negative A+B+C+D+E
B)negative A+H+I
C)negative B+C+D+E+H+I
D)negative B+C+D+E
E)none of the above, the government surplus is positive

Question 8

The school of thought that believes self-interested voters, politicians and interest groups limit government's ability to produce effective policy is known as

A)Chicago School
B)Virginia School
C)Austrian School
D)Keynesian School

Question 9

What is the government surplus with the optimal tax in place?

A)Zero
B)$324
C)$648
D)$1,012.5

Question 10

In Figure 5-15 what is the government surplus with the tax in place?

A)A+B+C+D
B)B+C+D+E+F+G
C)B+C+E+F
D)E+F+G+H+I