Deck 10: Policy issues: resource taxes and climate change

Question 1

The mining output sold by Australian firms:

A)does not have much competition in other countries.
B)competes with heterogeneous output from other suppliers from other countries.
C)competes with output from other suppliers from other countries in markets lacking essential information.
D)competes with almost homogenous output from other suppliers from other countries.

Answer 1

D

Question 2

Super profits tax is:

A)a tax on the economic profits earned in extractive industries.
B)a tax on the full economic costs earned in extractive industries.
C)a tax on some economic profits earned in all industries.
D)a tax on the economic costs and benefits created by extractive industries.

Answer 2

A

Question 3

The level of tax on profits suggested in the government's super profits tax proposal was:

A)30%.
B)70%.
C)40%.
D)10%.

Answer 3

C

Question 4

The resource companies operate in a/an:

A)duopoly market.
B)monopoly market.
C)almost perfectly competitive market.
D)kinked demand curve market.

Question 5

The ad valorem royalties are preferred to the flat rate royalties because:

A)they are estimated at an accelerated rate.
B)they are easier to calculate.
C)they create more revenue to the government.
D)they reflect the change in the value of the mineral.

Question 6

Which of the following statements is true?

A)The resource profits have declined in the past 10 years.
B)Rising mineral prices during the resources boom created a larger share of profits for mining firms but a smaller share of the net proceeds to all Australians.
C)Mineral royalties keep pace with the rising profitability of mining firms.
D)The resource taxes and royalties as a share of resource profits have increased in the past 10 years.

Question 7

The MRRT means:

A)Mega Resource Return Tax.
B)Minerals Rate of Return Tax.
C)Marginal Rate of Return Tax.
D)Minerals Resource Rent Tax.

Question 8

Mineral royalties are:

A)subsidies to the mining companies to continue to operate in Australia.
B)payment from the government to the extractive industries to operate.
C)payment by firms to the government for minerals extracted from the ground.
D)savings by mining companies that can be used for exploration.

Question 9

If the price is $100 per tonne and the royalty is $10 per tonne,the marginal revenue of the mineral producer will be:

A)$90 for each tonne produced.
B)$90 for each tonne sold.
C)$110 for each tonne sold.
D)$100 for each tonne produced.

Question 10

Which of the following statements is most likely to be true?

A)The RSPT has a lower tax rate than the MRRT.
B)The Minerals Resource Rent Tax has no benefits to the economy.
C)Most of the industries have to pay the MRRT.
D)The MRRT has lower rates than the RSPT.

Question 11

Which of the following statements is true?

A)A per tonne royalty may increase the level of mineral output and result in government revenues which are too low when prices are low.
B)A per tonne royalty may reduce the level of mineral output and result in government revenues which are too high when prices are high.
C)A per tonne royalty may reduce the level of mineral output and result in government revenues which are too low when prices are low.
D)A per tonne royalty may reduce the level of mineral output and force some firms to exit the industry.

Question 12

The _____________ is described by Treasury as a super profit:

A)total revenue.
B)marginal profit.
C)total profit.
D)economic profit.

Question 13

Today the royalties are usually paid:

A)as a percentage of the cost incurred by the firm.
B)at an increased rate.
C)at a flat rate.
D)as a percentage of the value of the mineral extracted.

Question 14

Which of the following statements is true?

A)When the mineral prices increase, the share of the value of the mineral going to taxpayers falls.
B)When the mineral prices increase, the share of the value of the mineral going to taxpayers grows.
C)When the mineral prices increase, the share of the value of the mineral going to mining companies falls.
D)When the mineral prices decrease, the share of the value of the mineral going to mining companies grows.

Question 15

Which of the following statements is true?

A)A coal mining company is a price taker in the world market.
B)The average total cost curve of mineral producers is horizontal, reflecting the world market.
C)None of Australia's mineral output is sold in open markets.
D)Ten per cent of Australia's mining output is exported to the rest of the world.

Question 16

The Minerals Resource Rent Tax is best described as:

A)a tax applied to all mines and which is taxed at the same rate as the original super profits tax.
B)a tax applied to more mines and which is taxed at a lower rate than the original super profits tax.
C)a tax applied to all sectors of the economy and which is taxed at a lower rate than the original super profits tax.
D)a tax applied to fewer mines and which is taxed at a lower rate than the original super profits tax.

Question 17

The super profits tax was:

A)announced, discussed and debated in 2010 with the mineral industry strongly objecting the tax in many countries.
B)announced, discussed and debated in 2010 with the Australian mineral industry strongly supporting the tax.
C)announced, discussed and debated in 2010 with the Australian mineral industry strongly objecting to the tax.
D)adopted in 2010 while the Australian mineral industry was readily supporting the tax.

Question 18

The royalties:

A)reduce the output.
B)increase the incentive for firms to produce more.
C)shift the industry supply curve to the right.
D)increase the quality of mining production.

Question 19

If the price is $100 per tone and the government raises the royalties from $10 per tonne to $20 per tonne,then the marginal revenue of mining company is likely to:

A)decrease from $90 to $80 per tonne.
B)remain unchanged.
C)increase from $80 to $90 per tonne.
D)increase from $100 to $110 per tonne.

Question 20

One of the reasons for introduction of the RSPT was:

A)to use some of the tax revenue to reduce the impact of structural changes in the economy.
B)that Australians are paid more for minerals in the ground than their true value.
C)that the tax revenue would be put to top up the insurance premiums to assist with recovery from natural disasters.
D)to use some of the tax revenue to fund the government's foreign aid.

Question 21

The replacement of a per-tonne royalty with a tax on super profits results in:

A)less tax revenue and a lower level of output.
B)more tax revenue and a higher level of output.
C)less tax revenue and a higher level of output.
D)more tax revenue and a lower level of output.

Question 22

An increase in royalty may decrease output because:

A)it provides an incentive to innovate.
B)it changes the market structure of the industry.
C)the supply of vital resources will decline.
D)it reduces the profit.

Question 23

An increase in the resources super profits tax is likely to:

A)increase employment and decrease output.
B)increase employment and increase output.
C)decrease employment and decrease output.
D)decrease employment and increase output.

Question 24

One of the criticisms of the super profits tax was that:

A)the tax would encourage more firms to enter the industry.
B)the tax would increase industry output.
C)the tax would restrict industry output.
D)the tax would restrict demand.

Question 25

A decrease in the resources super profits tax should:

A)increase employment and decrease output.
B)increase employment and increase output.
C)decrease employment and decrease output.
D)decrease employment and increase output.

Question 26

Which of the following is correct?

A)A per-tonne royalty in place results in a lower level of output, whereas a super profits tax results in more tax revenue.
B)A per-tonne royalty in place results in a higher level of output, whereas a super profits tax results in more tax revenue.
C)A per-tonne royalty in place results in a lower level of output, whereas a super profits tax results in less tax revenue.
D)A per-tonne royalty in place results in a lower level of emissions, whereas a super profits tax results in less output.

Question 27

Which of the following statements is true?

A)Under a super profits tax regime firms continue to operate indefinitely.
B)Under a royalties regime firms continue to operate indefinitely.
C)Under a super profits tax regime firms continue to operate if the price is equal to minimum ATC.
D)Under a super profits tax regime firms exit the industry if the price is equal to minimum ATC.

Question 28

Long-term changes in the world's climate are believed to be caused by:

A)human activity.
B)natural changes in climate.
C)pre-industrial revolution.
D)governments' policies.

Question 29

Replacement of a system of per-tonne royalties with a super profits tax would result in:

A)less industry output, more firms staying in the industry and more firms entering the industry.
B)more industry output, less firms staying in the industry and more firms entering the industry.
C)more industry output, more firms staying in the industry and more firms entering the industry.
D)less industry output, less firms staying in the industry and less firms entering the industry.

Question 30

If prices fall to be equal to minimum ATC the firm:

A)will shut down under a super tax regime.
B)will reduce its production under a super tax regime.
C)will continue to produce under a royalties regime in the long run.
D)will continue to produce under a super tax regime.

Question 31

Climate change is:

A)long-term changes in the world's climate.
B)short-term changes in the world's climate.
C)long-term changes in the local climate.
D)short-term changes in the local climate.

Question 32

A reduction in royalties can be expected to:

A)decrease the output of the nation.
B)increase employment.
C)decrease employment.
D)have no impact on market.

Question 33

Exhibit 10-1

According to Exhibit 10-1,if the international price is MRp and the royalty is $100 per tonne,the profit will be:

A)$21,000.
B)$12,000.
C)$3,000.
D)$700.

Question 34

Exhibit 10-1

According to Exhibit 10-1,if the price is $300 per tonne and the royalty is $100 per tonne,then the:

A)marginal revenue will be between $200 and $300 per tonne.
B)marginal revenue will be $200 not $300 per tonne.
C)marginal revenue will be less than $150 per tonne.
D)marginal revenue will be $300 per tonne.

Question 35

Which of the following statements is true?

A)The super profits tax is the same as a royalty.
B)The super profits tax charges a different rate depending on the elasticity of the good or service.
C)The super profits tax is imposed only on imported goods.
D)The super profits tax allows government to compensate mineral producers if they make losses.

Question 36

Exhibit 10-1

According to Exhibit 10-1,if the international price is MRp and the royalty is $100 per tonne,the output will be:

A)60 units.
B)70 units.
C)50 units.
D)80 units.

Question 37

The Australian government was proposing to introduce a super profits tax and to:

A)double a progressive income tax.
B)abolish company tax.
C)neutralise the effect of royalties.
D)mitigate a proportional income tax.

Question 38

Which of the following statements is true?

A)Tax results in efficient market allocation.
B)Super profits tax is the same as a royalty.
C)The lower the tax for a firm the less is the firm's willingness to invest and take risks.
D)Super profits tax would compensate the people of Australia for the value of the minerals extracted in mineral industries.

Question 39

The super profits tax was thought to:

A)force firms to be more competitive.
B)target goods and services that are highly inelastic.
C)target goods and services that are highly elastic.
D)compensate mining companies for the full cost of royalties collected by state governments.

Question 40

Exhibit 10-1

According to Exhibit 10-1,if the international market price is MRp and a royalty is $100 per tonne,we would expect the marginal revenue to:

A)increase by $100.
B)increase by $200.
C)decrease by $200.
D)decrease by $100.

Question 41

If the external costs of carbon emissions were included in the industry supply curve:

A)carbon emitters would use more resources but emit less.
B)carbon emitters would use fewer resources and emit less.
C)carbon emitters would use fewer resources but emit more.
D)carbon emitters would use the same resources but emit less.

Question 42

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,if the external cost is not included in the supply curve 'Supply 1',the market demand and market supply curve 'Supply 1' produce a/an:

A)socially desirable outcome.
B)efficient outcome.
C)inefficient outcome.
D)better outcome than an intersection of market demand and Supply 2.

Question 43

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,the market demand curve 'Demand' and market supply curve 'Supply 1' establish a:

A)socially desirable level of emissions.
B)market equilibrium.
C)regulated output.
D)price and quantity of external costs.

Question 44

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,which of the following is likely to be true?

A)Equilibrium between the market demand 'Demand' curve and market supply 'Supply' curve indicate the over allocation of resources to carbon intensive activities.
B)Supply curve 'Supply 2' includes the positive externality that is not included in the supply curve 'Supply 1'.
C)If the carbon tax of $30 is imposed, the supply curve 'Supply 1' will shift to the right to supply curve 'Supply 2'.
D)Carbon tax will result in 60 units of carbon intensive outputs at $30 per unit.

Question 45

Exhibit 10-2 Carbon emissions as an externality

Suppose government imposed a carbon tax to reduce carbon emissions.How is it illustrated in Exhibit 10-2?

A)A shift from 'Supply 2' to 'Supply 1'.
B)A movement along the 'Supply 1' curve.
C)A shift in demand.
D)A shift from 'Supply 1' to 'Supply 2'.

Question 46

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,assume that firms are required to pay tax of $30 per unit of carbon intensive outputs.Further assume that the initial supply curve was 'Supply 1'.What is the socially desirable outcome?

A)40 units of carbon intensive outputs at the price of $30.
B)40 units of carbon intensive outputs at the price of $40.
C)70 units of carbon intensive outputs at the price of $40.
D)80 units of carbon intensive outputs at the price of $20.

Question 47

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,which of the following is likely to be true?

A)Carbon emitting firms include the cost of carbon in their market cost (Supply 1).
B)Firms exit the industry if the cost of carbon is not included in their market cost (Supply 1).
C)Tax shifts the 'Supply 2' curve to the right.
D)If firms are required to purchase emissions permits, the supply curve 'Supply 1' will shift to the left to supply curve 'Supply 2'.

Question 48

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,what is the quantity of carbon intensive outputs if the supply is 'Supply 2'?

A)60.
B)40.
C)20.
D)80.

Question 49

Exhibit 10-2 Carbon emissions as an externality

Suppose that firms are required to purchase equipment to reduce carbon emissions.How is this illustrated in Exhibit 10-2?

A)A shift from 'Supply 2' to 'Supply 1'.
B)A movement along the 'Supply 1' curve.
C)A shift in demand.
D)A shift from 'Supply 1' to 'Supply 2'.

Question 50

If the external costs of carbon emissions were included in the industry supply curve:

A)the supply curve would shift to the right decreasing the price and increasing the output.
B)the supply curve would shift to the left increasing the price and increasing the output.
C)the supply curve would shift to the left increasing the price and reducing the output.
D)the supply curve would shift to the right increasing the price and reducing the output.

Question 51

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,what is the price of carbon intensive outputs if the supply is 'Supply 2'?

A)$30.
B)$40.
C)$50.
D)$20.

Question 52

The absence of the external costs of carbon emissions in the price of electricity means that:

A)firms produce electricity accounting for the global warming.
B)firms produce electricity equal to what is socially desirable.
C)firms produce more electricity than is socially desirable.
D)firms produce less electricity than is socially desirable.

Question 53

The climate change issue involves:

A)no externalities.
B)neutral externalities.
C)negative externalities.
D)positive externalities.

Question 54

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,the market demand curve 'Demand' and market supply curve 'Supply 1' establish a market equilibrium at:

A)60 units of carbon intensive outputs at $30 per unit.
B)40 units of carbon intensive outputs at $30 per unit.
C)40 units of carbon intensive outputs at $40 per unit.
D)60 units of carbon intensive outputs at $50 per unit.

Question 55

Australian governments have argued that:

A)Australia should not focus on climate change issues as it is a minor issue for Australia.
B)Australia should address the climate change issues even if other countries are unwilling to do so.
C)Australia should address the poverty issues first.
D)Australia should address the climate change issues only when other countries are willing to do the same.

Question 56

The industry supply curve typically:

A)includes all costs including social costs.
B)does not include the external costs.
C)only includes external costs.
D)includes internal and external costs.

Question 57

The most important contributor to climate change is:

A)Carbon dioxide (SO2).
B)Sulphur dioxide (CO2).
C)Carton dioxide (KO2).
D)Carbon dioxide (CO2).

Question 58

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,what is the price of carbon intensive outputs if the supply is 'Supply 1'?

A)$30.
B)$40.
C)$50.
D)$20.

Question 59

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,what is the quantity of carbon intensive outputs if the supply is 'Supply 1'?

A)60.
B)40.
C)20.
D)80.

Question 60

An example of a policy that is not designed to reduce the output of the activity creating the negative externality is a:

A)congestion charge.
B)policy that restricts the fishing activity.
C)competition policy.
D)policy that creates property rights.

Question 61

Exhibit 10-2 Carbon emissions as an externality

Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2' (Exhibit 10-2).What is the level of carbon tax imposed?

A)$10.
B)$30.
C)$40.
D)$20.

Question 62

Emissions trading scheme is:

A)a scheme involving trading in emissions (tonnes).
B)the scheme adopted by Barack Obama.
C)a part of game theory looking at interactions of the polluters and consumers.
D)a government scheme requiring emitters to buy emissions permits.

Question 63

Exhibit 10-2 Carbon emissions as an externality

Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10-2).What is the reduction in the output after the carbon tax was imposed?

A)0 units.
B)30 units.
C)20 units.
D)10 units.

Question 64

The emissions trading scheme is often called a:

A)'less is better' scheme.
B)'buy and sell' scheme.
C)'cap and trade' scheme.
D)'ceiling and cap' scheme.

Question 65

Regulation can encourage firms to:

A)introduce processes that reduce emissions per unit of output more than without the regulation.
B)increase the output because firms have limited competition.
C)increase emissions as their output declines.
D)adopt emissions intensive technologies.

Question 66

The upper limit to allowable emissions is called:

A)cap.
B)ceiling.
C)unacceptable level of emissions.
D)lowest level of emissions.

Question 67

The Carbon Pollution Reduction Scheme (CPRS)was authored by:

A)Kevin Rudd.
B)Barack Obama.
C)Bill Clinton.
D)Ross Garnaut.

Question 68

The revenue from the carbon tax:

A)could be used to fund more hospitals.
B)could be used to fully compensate those damaged by the pollution.
C)could be used to fully compensate those who are paying the carbon tax.
D)could be used to make industries more competitive internationally.

Question 69

Which of the following is not a policy solution to reduce emissions?

A)Carbon tax.
B)Regulation.
C)Emissions trading.
D)Income tax.

Question 70

Exhibit 10-2 Carbon emissions as an externality

In Exhibit 10-2,which of the following is likely to be true? Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2'.

A)Global warming is not a local problem and firms should not be taxed.
B)Since the discharge of the carbon dioxide in the atmosphere increased health care costs, the policy measures should be adopted to shift the supply curve 'Supply 1' to the left ('Supply 2').
C)The carbon tax will increase the price from $30 to $60 per unit.
D)The demand is negatively related to the supply.

Question 71

The carbon tax has to be set at the ________ level.

A)high
B)correct
C)low
D)fair

Question 72

Which of the following statements is true?

A)A 'cap and trade' scheme is beneficial to consumers because more goods are produced.
B)A new emissions reducing production technology will increase the price of emissions permits.
C)A 'cap and trade' scheme has a fixed price for emissions permits.
D)A decrease in demand for permits reduces the equilibrium price of permits.

Question 73

If the pollution control costs are low but the carbon tax is high,firms are encouraged to:

A)pay the carbon tax.
B)install pollution control equipment.
C)sell their inventories at lower prices.
D)increase production.

Question 74

Exhibit 10-2 Carbon emissions as an externality

Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10-2).What is the price increase (at the equilibrium level)after the carbon tax was imposed?

A)$10.
B)$30.
C)$40.
D)$20.

Question 75

The recession would cause:

A)an increase in demand, a decrease in industry output, reduced emissions and a reduced demand for emissions permits.
B)a decrease in demand, a decrease in industry output, increased emissions and an increased demand for emissions permits.
C)a decrease in demand, a decrease in industry output, reduced emissions and a reduced demand for emissions permits.
D)a decrease in demand, a decrease in industry output, increased emissions and a reduced demand for emissions permits.

Question 76

If there were a total of 1000 permits and firm A owned 200 of those permits.Then firm A is allowed to emit:

A)20% of total emissions of firm A
B)80% of total emissions of firm A
C)80% of total emissions allowed by the cap.
D) 20% of total emissions allowed by the cap.

Question 77

Which of the following statements is true?

A)The reduced demand for permits would increase their price.
B)The reduced demand for permits would shift the industry supply curve for carbon intensive output to the left.
C)The increased demand for permits would increase firms' costs and shift the supply curve for carbon intensive outputs to the left.
D)The reduced demand for permits would lower their price, lower firms' costs, and shift the industry supply curve for carbon intensive outputs to the right.

Question 78

Suppose a new emissions reducing production technology is installed.The price of emissions permits will:

A)increase due to the decrease in demand for permits.
B)reduce due to the increase in demand for permits.
C)increase due to the increase in demand for permits.
D)reduce due to the decrease in demand for permits.

Question 79

Firms wanting to emit carbon dioxide have to:

A)buy emissions permits.
B)sell emissions permits.
C)stop production.
D)exit the industry.

Question 80

Carbon tax is:

A)a tax levied as a percentage of the revenue earned by producers.
B)a tax levied per tonne of carbon emitted by producers.
C)a tax levied per tonne of carbon consumed by consumers.
D)a tax levied on the value of carbon emitted by producers.