Texas A&M University (TAMU) ECON202 Practice Exam 2

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• What type of curve illustrates the marginal cost of producing one more unit of a good or service?
• What primary effect does a price ceiling create in a market?
• What is maximized in a competitive market when marginal benefit equals marginal cost?
• The sum of consumer surplus and producer surplus is maximized at:
• If Frieda buys a dozen roses for $75 and is willing to pay $75, what does this imply about her consumer surplus?
• An economic agent ______ when he accounts for the full costs and benefits of his actions.
• What term describes the actual burden of a tax shared between buyers and sellers?
• What is often the result of significant positive externalities in a market?
• Which statement is true about the elasticity of low-quality guns in the context of gun buy-back programs?
• What reflects an increase in the equilibrium price of a product?
• What is the efficiency level of carbon emissions in relation to marginal benefits and costs?
• When demand is perfectly inelastic, the burden of a tax is primarily absorbed by?
• Is it true that if transaction costs are low, private bargaining will always result in an efficient solution to externalities?
• What happens to the quantity of a good sold when sellers are taxed per unit sold?
• Which statement correctly describes the impact of negative externalities in a competitive market?
• How is the total amount that consumers pay calculated?
• What happens to drug dealer revenues when supply is reduced in the illegal drug market, considering inelastic demand and elastic supply?
• If the government imposes a tax on a utility equal to the cost of the damage caused by negative externalities, what is this action called?
• If the supply of milk in Nexus City is perfectly elastic, what will occur if a tax is imposed?
• When is the tax incidence on sellers likely to be higher?
• Consumers typically buy products until which condition is met?
• Which economic term relates to the responsiveness of quantity demanded to changes in price?
• What does the Coase theorem imply regarding government intervention?
• How much does Arthur value his cell phone if he receives a consumer surplus of $150 from a purchase price of $150?
• For a given supply curve, if demand is more elastic, what happens to the deadweight loss from a tax?
• What is the outcome if a price floor is set above the equilibrium price?
• How does the imposition of a tax on a good or service affect its market?
• What is an example of a positive externality in production?
• In economic efficiency, marginal benefit equals marginal cost at:
• What happens when a Pigouvian subsidy is provided?
• What type of externality occurs when an economic activity has a spillover cost affecting non-participants?
• What does a regressive tax indicate about taxation for different income levels?
• If a drug that cures a communicable disease benefits those not directly involved, this is an example of what type of externality?
• The demand curve represents which economic metric?
• What is an example of a price ceiling?
• What defines a positive externality?
• What is the purpose of setting limits on pollution levels by the government?
• Which of the following best describes the concept of a Pigouvian tax?
• In a proportional tax system, how does taxation differ between income levels?
• What characterizes a market with elastic supply?
• What is an example of a private solution to an externality?
• In the scenario where four households have different incomes, which one pays the highest percentage in taxes if the taxes are regressive?
• If a price control is set below the equilibrium price, what is most likely to occur?
• In a competitive market, what does the demand curve show?
• If the marginal social benefit from the production of the last unit of a good is $4,800 and the willingness to pay for that unit is $3,900, what is the external benefit from its production?
• What effect does a negative externality have on private market output levels?
• The relationship depicted by the demand curve represents what aspect of consumer behavior?
• The market demand curve primarily reflects what aspect of consumption?
• What defines an externality in economic terms?
• What is the equilibrium quantity of silver pendants in thousands?
• What is the likely outcome when the demand and supply curves for a commodity both shift to the right by the same amount?
• What is the consumer surplus for a purchase where the consumer pays exactly what they are willing to pay?
• Which scenario represents an efficient private solution to a negative externality?
• What consequence follows a decrease in production costs for organic produce paired with a rising consumer preference for it?
• Private solutions to externalities tend to be most effective when:
• If a good has a social benefit greater than the private benefit at the market equilibrium, what is the implication about its production?
• In a competitive market, the demand curve reflects what for consumers?
• An advantage of imposing a tax on the producer that generates pollution is that?
• Under what condition does a price ceiling not create a deadweight loss?
• The concept that determines who bears the economic burden of a tax is known as?
• What typically causes a decrease in equilibrium quantity while equilibrium price remains unchanged?
• What effect does an increase in demand have on consumer surplus in the market?
• One reason economists prefer market-based solutions to pollution over command-and-control solutions is that?
• What causes an increase in both equilibrium price and quantity of watermelons?
• If the CDC announces health benefits of walnuts, what happens in the market for walnuts?
• What is the expected market outcome of implementing a price floor on sparkling wine in Vinyardia?
• What is the market impact if the government restricts logging of forest lands for tropical hardwood trees?
• If you hired a lawyer to sue for damages caused by pollution, what would your legal fees be considered?
• The difference between the lowest price a firm would have been willing to accept and the price it actually receives is called what?
• In a market with negative externalities, how does the quantity supplied relate to the social optimal level?
• What term describes the maximum price a buyer is willing to pay for a good?
• In general, if demand is more elastic, who tends to bear less of the tax burden?
• If positive externalities are present in a free market, what can be said about the marginal social benefit of production compared to marginal private benefit?
• When there is a positive externality in a free market, is it true that too much of the good is produced and consumed?
• What is the primary effect of a decrease in supply on market equilibrium?
• What results in a decrease in equilibrium quantity for a product?
• When the demand for a product is less elastic than the supply, who pays the majority of the tax on that product?
• If marginal benefit is less than marginal cost in a competitive market, what is the likely outcome?
• What effect does a price ceiling below the equilibrium price typically have on total surplus?
• How does a free market typically respond to eliminate a shortage?
• Which of the following is a market-based approach to controlling pollution?
• Which of the following describes a characteristic of a progressive tax system?
• Which of the following statements about marginal cost is true?
• Many economists are critical of the "command-and-control" approach to pollution reduction because?
• In a competitive market, if output is too high, what does this indicate about efficiency?
• True or False: Market equilibrium occurs where supply equals demand.
• How is an excise tax illustrated in a supply graph?
• When the demand for a product is less elastic than supply, what happens to tax burden distribution?
• What is the primary purpose of rent control in New York City?
• Given the demand and supply equations for silver pendants, what is the equilibrium price?
• In response to a surplus, how does the market price adjust?
• What is the effect of an increase in demand for lobster along with a decrease in supply due to weather conditions?
• Which of the following is NOT a characteristic of an efficient market solution to externalities?
• How does the marginal social cost curve behave in the presence of negative externalities?
• How can firms address negative externalities through taxation?
• In Foodieland, if the demand for chocolate is perfectly inelastic, what happens when a tax is imposed?
• Which of the following best defines a positive externality?
• What happens to the market price of a good if its production involves positive externalities?
• What is the effect on the equilibrium price of salmon when there is an increase in supply?
• The production of steel in a factory generates a negative externality. A per-unit tax on the factory that equals _________ of steel production will internalize the externality entirely.
• What is a probable consequence of a natural disaster affecting crop supply?
• In relation to the market supply curve, the area above the supply curve and below the market price is equal to what?
• Suppliers are willing to supply a product if what condition is met?
• What could cause both equilibrium price and quantity of cotton to rise?
• If both the demand and supply curves for a commodity shift left equally, what happens to equilibrium?
• When a price ceiling is in effect, what happens to the relationship between quantity demanded and quantity supplied?
• How does an increase in production costs and a decrease in smoking rates affect the cigarette market?
• What does a "command-and-control" approach to pollution entail?
• A price ceiling is defined as:
• If you pay a consistent percentage of your taxable income in taxes, which type of tax is this?
• Considering both demand and supply shifts, what happens when the demand curve shifts more than the supply curve?
• How is scarcity defined in economic terms?
• If you pay $2,000 in taxes on an income of $20,000 and $3,000 on an income of $30,000, what type of tax is this considered over that income range?
• After a significant hurricane damages Florida's orange crop, what is likely to happen in the orange market?
• When the demand for a product is more elastic than the supply, who bears the majority of the tax burden?
• Which economic principle ensures that the last unit sold provides equal value to both consumers and producers?
• Is the statement "The total amount of producer surplus in a market is equal to the area below the supply curve" true or false?
• To be considered a binding price ceiling, it must be set:
• Which of the following represents a market situation where resources are allocated efficiently?
• Government-imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of?
• If the price elasticity of demand for a product is inelastic, what effect will a price increase have on total revenue?
• How is producer surplus carried out in a market?
• When both the supply curve shifts to the right and the demand curve shifts to the left by the same degree, what will happen to the equilibrium price and quantity?
• How do unregulated markets typically address a labor shortage?
• What is likely to occur in a market when a price floor is implemented?
• If the government sets the price of milk at $3.50 when it costs $4.00, what market condition will occur?