Shopping Cart
Your shopping cart is empty!

ECO 450 Week 11 Final Exam

ECO 450 Week 11 Final Exam
Model:Recent
Price: $35.00 $25.00
Qty:   Check out
This Tutorial was Purchased: 3  Times   & Rated: A by student like you.

attachments This Tutorial contains following Attachments:

  • ECO 450 - Week 11 - Final Exam.doc

ECO 450 Week 11 Final Exam

(Many other Questions are also Included)

  1.   The Social Security pension system is a fully funded retirement plan. 

  2.   Social Security pension benefits are transfers from workers to retirees. 

  3.   Social Security pensions are financed by voluntary contributions by workers. 

  4.   The gross replacement rate measures the ratio of taxes paid per year by workers to their annual Social Security pension when they retire. 

  5.   In the year prior to retirement, a worker earned $20,000 and paid $5,000 in taxes on those earnings. His annual Social Security pension is $10,000 per year. Then it follows that his net replacement rate is 50 percent. 

  6.   The gross replacement rate for Social Security pensions is the same for all workers independent of their preretirement earnings. 

  7.   The annual growth in wages subject to Social Security taxes is 3 percent. Given the payroll tax rate, the growth in funds available to pay pension benefits is also 3 percent. 

  8.   The asset-substitution effect of Social Security pensions discourages saving. 

  9.   The availability of Social Security pensions to workers over normal retirement age results in an income effect unfavorable to work but no substitution effect. 

10.   The bequest effect of Social Security encourages workers to save less. 

11.   The normal retirement age for Social Security old-age pensions is 67 for people born in the United States in 1960 or later. 

12.   Workers in the United States can retire under Social Security at age 62 with lower pensions than they would receive at their normal retirement age. 

13.   As of 2009, retired workers between the ages of 62 and their normal retirement age were subject to an “earnings test” that reduced their pension by $1 for each $2 of earnings after a certain minimum level of earnings. 

14.   Reducing the replacement rate will have no effect on the tax rate necessary to finance pensions under a pay-as-you-go, tax-financed pension system. 

15.   Workers who quit their jobs are eligible for unemployment insurance benefits in the United States. 

16.    By 2050, the expected percentage of the U.S. population that is considered elderly will be less than 20%.

17.    Social Security was created in 1965.

18.    On average, the elderly are less likely to be poor when compared to the rest of the U.S. population.  

Multiple Choice Questions

  1.   The Social Security retirement system:

a.    is a fully funded pension system.

b.   is a tax-financed system that pays benefits from taxes that are invested to return principal and interest to workers when they retire.

c.    is a tax-financed retirement system that finances pensions by taxing workers each year and transferring the bulk of revenues obtained directly to retirees.

d.   does not use taxes on workers to pay pensions to retirees.

         2.     The gross replacement rate:

a.    measures a worker’s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement.

b.   measures a worker’s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement.

c.    is an increasing function of gross monthly earnings prior to retirement.

d.   is independent of gross monthly earnings prior to retirement.

  3.   A worker earns $2,000 per month before taxes. He pays $140 per month payroll tax on those wages. In addition, the income taxes on those wages are $360 per month. On retirement, the worker receives a Social Security pension of $750 per month. Which of the following statements is true?

a.    The worker’s gross replacement rate is 50 percent.

b.   The worker’s net replacement rate is 50 percent.

c.    The worker’s net replacement rate is 38 percent.

d.   The worker’s net replacement rate is 75 percent.

  4.   The growth in hourly wages over the past 50 years has averaged about 2 percent per year. How­ever, the growth in Social Security pensions has far exceeded this 2-percent rate. The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by:

a.    increases in payroll tax rates.

b.   use of other taxes beside the payroll tax to pay Social Security benefits.

c.    an increase in the number of workers paying Social Security taxes.

d.   either (a) or (b)

e.    either (a) or (c)

  5.   Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax, the tax rates used to tax payrolls were increased in the 1980s because:

a.    the number of retirees per worker will increase.

b.   the number of retirees per worker will decrease.

c.    wages are expected to decline.

d.   the size of the work force is expected to increase.

  6.   Which of the following is likely to increase the net federal debt as a share of GDP?

a.    a federal budget surplus.

b.   a federal budget deficit.

c.    a recession.

d.   either b or c.

  7.   The asset-substitution effect of the Social Security retirement system leads all workers to:

a.    save more for retirement.

b.   save less for retirement.

c.    save absolutely nothing for retirement.

d.   work more

8.   Which of the following is a consequence of a growing federal budget deficit in the United States?

a.    A decrease in the federal debt outstanding.

b.   An increase in the federal debt outstanding.

c.    A decrease in the portion share of federal government expenditures that must be allocated to interest in the future.

d.   An increase in national saving.

  9.   The induced-retirement effect of the Social Security pension system induces workers to:

a.    save less for retirement.

b.   save more for retirement.

c.    reduce savings for retirement to zero.

d.   work more after retirement.

10.   Unemployment insurance benefits are:

a.    financed by payroll taxes levied on workers.

b.   financed by payroll taxes levied on employers.

c.    both (a) and (b)

d.   financed by sales taxes.

11.   Which of the following is true about the Social Security pension system in the United States?

a.    Pensions received by retired workers are based entirely on their contributions to the Social Security pension trust fund and the investment return on that fund.

b.   Pensions received by married retirees with dependents are greater than that received by those without dependents.

c.    Gross replacement rates are inversely related to preretirement earnings.

d.   both (b) and (c)

12.   Which of the following can decrease tax rates necessary to pay pensions for a pay-as-you-go pension system?

a.    an increase in replacement rates

b.   a decrease in the retirement age

c.    an increase in the size of the work force

d.   an increase in the number of retirees

13.   Unless legislation is introduced to change the normal retirement age, people born in 1960 or later will be able to retire with full Social Security benefits at age:

a.    62.

b.   65.

c.    66.

d.   67.

14.   The earnings test for retirees:

a.    increases their incentive to work.

b.   is applied to all retirees.

c.    is applied only to retirees below normal retirement age.

d.   reduces pension benefits by $1 for each $2 of earnings.

e.    both (c) and (d)

15.   A nation has 40 million current retirees and a work force of 100 million. Which of the following is true?

a.    The replacement rate is 40 percent.

b.   The replacement is 2.5.

c.    The dependency ratio is 0.4.

d.   The dependency ratio is 2.5.

16.   Social Security tax rates can be reduced if:

a.    taxable wages decline.

b.   the retirement age is lowered.

c.    the retirement age is raised.

d.   the work force decreases in size.

         17.    A retiree subject to the earnings test under Social Security:

a.    can earn as much as he or she chooses without losing Social Security pension benefits.

b.   has his or her Social Security pension benefits reduced by one dollar for each dollar of labor earnings.

c.    has his or her Social Security pension benefits reduced immediately by one dollar for each three dollars of labor earnings.

d.   has his or her Social Security pension benefits reduced by one dollar for each two dollars of earnings after a certain minimum amount per year.

         18.    A pay-as-you-go social security retirement system is:

a.    exemplified by the current U.S. social security system.

b.   exemplified by the current Chilean social security system.

c.    designed to have retirees set aside a contribution specifically for themselves during their earlier working life.

d.   both (a) and (b).

        19.     Approximately, what percentage of beneficiaries of U.S. Social Security are retired workers?

a.    50%

b.   60%

c.    70%

d.   80%

         20.    The Social Security Act was implemented in the United States in:

a.    1927.

b.   1935.

c.    1947.

d.   1965.

 

 

 

 

 

 

 

True/False Questions

  1.   In the United States the government pays the health bills of 90 percent of the population. 

  2.   The American system of health care is financed by a mix of private and government insurance programs that pay over 80 percent of the health care bills for U.S. citizens. 

  3.   Spending per person on health care in the United States is less than in the United Kingdom where national health insurance finances health expenditures. 

  4.   Government spending on health care is declining as a percent of total government spending. 

  5.   Medicare is a government program of health insurance for the elderly. 

  6.   Exclusion of employer-provided health insurance to employees is an indirect subsidy to private provision of health insurance. 

  7.   Third-party payments for health care services increase the quantity of health care demanded by reducing out-of-pocket costs to patients. 

  8.   An increase in coinsurance and deductibles for health insurance can contribute to a reduction in expenditures on health care. 

  9.   Half of Americans do not have health insurance coverage. 

10.   Under national health insurance in Great Britain, the price system is used to ration health care. 

11.   Approximately 16 percent of GDP was allocated to provision of health care in the United States as of 2006. 

12.   Individuals in the United States, on average, pay 50 percent of their health care costs out-of-pocket, and the remaining 50 percent is paid by insurance, governments, and charity. 

13.   Asymmetric information in the market for health care occurs when sellers of medical care are better informed about cost and quality of care than buyers. 

14.   Because of third-party payment for services in the market for health care, the price paid by buyers is less than the payment sellers receive, and the marginal social cost of health care exceeds its mar­ginal social benefit. 

15.   Medicaid costs are paid entirely by the federal government. 

16.    Healthcare expenditures in the U.S. are projected to be 20% of GDP by 2017.

17.    Asymmetric information can occur when the provider of a service is better informed than the consumer of the service.

18.    A risk averse individual prefers to pay certain modest costs in exchange for possible unforeseen high costs.

Multiple Choice Questions

  1.   Most of the medical bills of Americans in the United States are paid by:

a.    the patients.

b.   private and government health insurance.

c.    charities.

d.   Medicaid.

  2.   Since 1960, expenditures on health care as a percent of GDP has:

a.    been cut in half.

b.   nearly tripled.

c.    remained the same.

d.   doubled.

  3.   The government program that provides the health insurance to the poor in the United States is called:

a.    national health insurance.

b.   Medicare.

c.    Medicaid.

d.   employer-provided health insurance.

  4.   Which of the following programs accounts for the greatest amount of government expenditures on public health in the United States?

a.    Medicare

b.   worker’s compensation

c.    the Public Health Service

d.   medical research

  5.   Which of the following subsidizes private provision of health insurance?

a.    Medicare

b.   Medicaid

c.    the Public Health Service

d.   tax exclusion of the value of employer-provided health insurance to workers

6.    Which of the following could help decrease the rate of increase of spending on health care in the United States?

a.    a reduction in the deductibles on private health insurance policies

b.   an increase in the coinsurance rate on health insurance and subjecting a larger volume of ser­vices to coinsurance

c.    extension of Medicaid insurance to all persons who are poor

d.   a reduction in the coinsurance rate on health insurance and subjecting a smaller volume of ser­vices to coinsurance

  7.   Which of the following is an example of the “moral hazard of health insurance”?

a.    an increase in the number of surgeries prescribed for benign prostate disease beyond the point at which the marginal benefit equals the marginal cost

b.   a decreased willingness of individuals to go to the doctor for minor ailments because of increases in coinsurance rates

c.    an underallocation of resources to medical care because of monopoly power of hospitals

d.   experience rating of health insurance groups by health insurers

  8.   A third-party payment system for health care:

a.    results because of externalities in the production of health care services.

b.   encourages more than the efficient amount of resources to be allocated to health care.

c.    encourages patients and health care providers to economize on the use of health care resources.

d.   means that patients pay the full price for health care services they consume.

  9.   Which of the following services is typically not covered under private health insurance and Medicare in the United States?

a.    treatment for heart attack

b.   surgery

c.    office visits to physicians

d.   long-term care services

10.   Under national health insurance as operated in Great Britain,

a.    the British system pays fees equal to half of the costs of services provided to them.

b.   general practice physicians are paid on a per-patient rather than on a per-unit-of-service basis.

c.    patients requiring surgery can pick their surgeons and can usually obtain the surgery in a matter of days, even if it is not an emergency.

d.   there are no government limits on health care spending by hospitals.

11.   Which of the following is true about the Medicaid program in the United States?

a.    It is a program of health insurance for the elderly.

b.   Its costs are paid entirely by the federal government.

c.    It is a program of health insurance for the poor.

d.   Its costs have been declining in recent years.

12.   In the United States, individuals pay approximately what percent of the cost of their medical care directly to providers?

a.    100 percent

b.   50 percent

c.    15 percent

d.   zero

13.   The percent of total health care costs in the United States paid for by governments is approximately:

a.    90 percent.

b.   45 percent.

c.    25 percent.

d.   10 percent.

14.   The system of third-party payment for medical care in the United States has which of the following effects in the market for health care?

a.    It improves efficiency in the market.

b.   It causes the marginal social benefit of health care to exceed its marginal social cost.

c.    It causes the marginal social cost of health care to exceed its marginal social benefit.

d.   It results in less than the efficient quantity of health care services.

15.   Which of the following is true about the Medicare program in the United States?

a.    It is only available to those who pass a means test.

b.   It is available to all citizens over the age of 65.

c.    The costs are completely financed by fees paid by insurees.

d.   It places no limits on reimbursement to medical care providers.

16.   What would be the effect of having no health insurance available?

a.    The quantity of healthcare would be set at where the marginal benefit and marginal cost are equal.

b.   Excess demand for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit exceeds the marginal cost.

c.    Excess supply for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit would be below the marginal cost.

d.   the quantity of healthcare would be at an inefficient level.

17.   The elderly are what proportion of beneficiaries of Medicare?

a.    95%

b.   85%

c.    77%

d.   70%

18.   What is the moral hazard associated with third party payment for health services?

a.    The recipient of the service is not as informed as the provider of the service.

b.   The recipient of services tends to decline more services than they should.

c.    The recipient of services tends to have more services than what is needed relative to the efficient level of services.

d.   There is no moral hazard.

19.   Which is not reason for excalating healthcare costs in the U.S.?

a.    Increase in malpractice insurance.

b.   Cross-subsidization of patients who cannot pay for healthcare or insurance.

c.    Overuse of new technology.

d.   Both (b) and (c).

20.   If the quantity of healthcare is more than the efficient quantity, what is the consequence?

a.    Some will not have access to healthcare that would have access at the efficient level.

b.   The healthcare will suffer in quality.

c.    Capital could be more efficiently spent elsewhere leading to less overall productivity.

d.   Lower marginal costs and marginal benefits.

 

 

 

True/False Questions

  1.   Taxes simultaneously ration and finance government goods and services. 

  2.   The federal government finances only half of its expenditures with taxes. 

  3.   The benefit principle argues that the means of financing government goods and services should be linked to the benefits received from those goods and services. 

  4.   Horizontal equity is achieved when individuals of the same economic capacity pay the same amount of taxes over a given period. 

  5.   A flat-rate income tax is a proportional tax on an income base. 

  6.   The marginal tax rate will eventually exceed the average tax rate if the tax rate structure is propor­tional. 

  7.   The marginal tax rate for a payroll tax is 7 percent on all wages up to $60,000 per year. The marginal tax rate for wages in excess of $60,000 per year is zero. The payroll tax is therefore a regressive tax. 

  8.   Tax evasion would be less of a problem if tax rates were lowered. 

  9.   The user charge for a congestible public good should be zero at all times. 

10.   Zero prices for price-excludable government services provide benefits only to the poor. 

11.   The gasoline tax is an example of a general tax on consumption. 

12.   For a proportional tax, the marginal tax rate is always equal to the average tax rate. 

13.   Tax avoidance is an illegal activity in the United States. 

14.   An increase in marginal tax rates is likely to increase tax evasion. 

15.   Most studies indicate that state-run lotteries are equivalent to a progressive tax on gambling. 

16.    Government activity requires the reallocation of resources from government to private use.

17.    A flat income tax (i.e. a fixed amount paid by every taxpayer) is an example of a selective tax.

18.    The average tax rate and marginal tax rate are the same under a progressive tax rate structure.  

Multiple Choice Questions

  1.   According to the benefit principle,

a.    taxes should be distributed according to ability to pay.

b.   user charges are an ideal source of finance for government goods and services.

c.    the progressive income tax represents the ideal way of distributing taxes among citizens.

d.   flat-rate taxes are always the best kind.

  2.   If horizontal equity is achieved in taxation,

a.    vertical equity will also be achieved.

b.   individuals of equal economic capacity will pay equal taxes.

c.    a flat-rate tax will be used.

d.   the tax system will not result in losses in efficiency in markets.

  3.   The tax base of a payroll tax is:

a.    consumer expenditures.

b.   interest income.

c.    labor income.

d.   both (b) and (c)

  4.   A 5-percent retail sales tax on all consumer purchases in a state is imposed. The sales tax is:

a.    a flat-rate tax.

b.   a tax with a regressive rate structure.

c.    levied on an income base.

d.   all of the above

  5.   A tax on the value of real estate holdings is a:

a.    selective tax on wealth.

b.   general tax on wealth.

c.    general tax on income.

d.   selective tax on income.

  6.   An excise tax is a:

a.    general consumption tax.

b.   selective consumption tax.

c.    general wealth tax.

d.   selective tax on wealth.

          7.   A proportional income tax has an average tax rate that:

a.    always is less than the marginal tax rate.

b.   always exceeds the marginal tax rate.

c.    equals the marginal tax rate at first and then becomes less than the marginal tax rate.

d.   always equals the marginal tax rate.

  8.   A payroll tax taxes a worker’s wages at 14 percent until the worker earns $60,000 per year. All labor earnings in excess of $60,000 are not subject to tax. The tax rate structure of the payroll tax is therefore:

a.    proportional.

b.   progressive.

c.    regressive.

d.   flat-rate.

  9.   A bridge becomes congested after 100 vehicles per hour use it on any day. To achieve efficiency, a toll:

a.    that charges all users of the bridge, no matter how many vehicles use it per hour, should be imposed.

b.   on additional users in excess of 100 per hour should be imposed.

c.    on all users should be imposed, if more than 100 users per hour are expected.

d.   is not required.

10.   A government prints money to finance its expenditures. As a result,

a.    the economy can operate at a point outside its production possibility curve.

b.   inflation will occur.

c.    consumers will give up private goods to finance the increased government expenditures.

d.   both (b) and (c)

11.   Taxes are likely to affect:

a.    market equilibrium.

b.   political equilibrium.

c.    the distribution of income.

d.   all of the above

12.   Taxes:

a.    are voluntary payments to governments.

b.   are unlikely to affect market supply and demand.

c.    never affect efficiency in the allocation of resources.

d.   are compulsory payments associated with certain activities.

13.   A tax on real estate is a:

a.    general wealth tax.

b.   general consumption tax.

c.    selective wealth tax.

d.   selective income tax.

14.   The marginal tax rate will eventually exceed the average tax rate for a:

a.    proportional tax.

b.   regressive tax.

c.    progressive tax.

d.   flat-rate tax.

15.   Marginal tax rates were reduced in 2001. Other things being equal, this is likely to:

a.    increase tax evasion.

b.   decrease tax evasion.

c.    have no effect on tax evasion.

d.   increase tax avoidance.

 

         16.   What is an example of a normative criterion that a government must trade-off in its method of

                taxation?

a.    Equity

b.   Efficiency

c.    Administrative ease

d.   all of the above

17.    Tax avoidance is:

a.    a means of tax evasion.

b.   a means of decreasing taxes paid by adjusting behavior.

c.    a political process explicitly for the reduction of taxation.

d.   a means to avoid tax owed.

18.    If the marginal tax rate is 20% under a proportional tax rate structure, the average tax rate:

a.    should be 20%.

b.   should be above 20%.

c.    should be below 20%.

d.   cannot be determined.

19.    If the average tax rate under a progressive tax rate structure is 35%, a possible marginal tax rate is:

a.    30%.

b.   25%.

c.    42%.

d.   not able to be determined.

20.    Which of the following countries has the highest average tax rate relative to GDP?

a.    Japan

b.   Sweden

c.    Iceland

d.   United Kingdom

 

 

 

True/False Questions

  1.   A lump-sum tax results in both income and substitution effects. 

  2.   A consumer currently pays $500 a year retail sales taxes. She would be better off if she paid the same amount annually as a lump-sum tax. 

  3.   Clothing is sold in perfectly competitive markets where no externalities prevail. An excise tax on clothing will result in a market price for clothing that equals the marginal social benefit and mar­ginal social cost of service. 

  4.   Assuming that the income effects are negligible and that beer is sold in a competitive market, a 10‑cent per can tax on beer that causes a 10,000 can per month decline in sales will result in an excess burden of $1,000 per month. 

  5.   A tax on land results in an income effect on landlords but no substitution effect. Then it follows that the excess burden of a tax on land will be zero. 

  6.   The excess burden of a tax on interest income is $5 billion per year. Total interest income per year is $50 billion. The tax currently collects $15 billion in revenue per year. The efficiency-loss ratio of the tax is therefore 0.33. 

  7.   A payroll tax results in a difference between the gross wages paid by employers and the net wages received by workers. 

  8.   If the market supply of labor services is perfectly inelastic, a tax on labor income will reduce the net wages received by workers by the full amount of the tax per labor hour. 

  9.   If a $10 per unit tax is levied on the output of a monopolist, more of that tax will be shifted to con­sumers than would be the case if the same good were produced by a competitive industry. 

10.   A study indicates that taxes in the United States reduce the Gini coefficient for the nation by 10 percent. This implies that taxes make the income distribution more equal. 

11.   A lump-sum tax only results in income effects. 

12.   An income tax is an example of a price-distorting tax. 

13.   The more price-elastic the demand of a taxed item, the lower the excess burden of a tax on the sale of that item. 

14.   If the tax on the sale of gasoline is doubled from 20 cents per gallon to 40 cents per gallon, the excess burden of the tax will quadruple. 

15.   If the compensated elasticity of supply of labor is zero, then a tax on labor earnings will have zero excess burden. 

16.    Lump-sum taxes do not prevent prices from equaling the marginal social cost and benefit of any goods and services.

17.    Lump-sum taxes can vary in amount based on income level.

18.    A lump-sum tax can distort prices and affect consumption behavior. 

Multiple Choice Questions

  1.   A lump-sum tax:

a.    distorts market prices so that they do not simultaneously equal MSB and MSC.

b.   can result in price changes but does not prevent prices from simultaneously being equal to MSB and MSC.

c.    results in substitution effects that change prices.

d.   results in both substitution effects and income effects that change prices.

  2.   The current price of compact discs, which are traded in perfectly competitive markets, is $10. A $1 per unit tax is levied on the discs. Annual record sales decline from five million to four million as a result of the tax. Assuming that the income effect of the tax-induced price change is negligible, the excess burden of the tax will be:

a.    $500,000 per year.

b.   $1 million per year.

c.    $2 million per year.

d.   $2.5 million per year.

  3.   The elasticity of supply of land is zero. A tax on land results only in an income effect to landlords. Then it follows that a 10-percent tax on land rents will:

a.    have a positive excess burden.

b.   be shifted forward to tenants.

c.    be paid entirely by landlords.

d.   have zero excess burden.

e.    both (c) and (d)

  4.   Currently, a 10-cent per gallon tax is levied on gasoline consumption. The tax is increased to 20 cents per gallon. The excess burden of the tax will:

a.    remain the same.

b.   double.

c.    increase four times.

d.   decline.

  5.   The supply of new cars is perfectly elastic. A $400 per car tax is levied on buyers. As a result of the tax,

a.    the price received by sellers will fall by $400.

b.   the price paid by buyers, including the tax, will increase by $400.

c.    the quantity of cars sold per year will be unchanged.

d.   the excess burden of the tax will be zero.

e.    both (c) and (d)

  6.   Other things being equal, the more inelastic the demand for a taxed good,

a.    the greater the portion of the tax paid by sellers.

b.   the greater the excess burden of the tax.

c.    the greater the portion of the tax paid by buyers.

d.   the less the portion of a tax on sellers that can be shifted to buyers.

  7.   The market supply of labor is perfectly inelastic. However, the income effect of tax-induced wage changes are believed to be substantial. Then it follows that a tax on labor income will:

a.    have zero excess burden.

b.   have positive excess burden.

c.    be paid entirely by workers as a reduction in net wages.

d.   both (a) and (c)

e.    both (b) and (c)

  8.   Suppose an economy is comprised of only two markets: one for food and the other for housing. A tax on food used to finance transfer payments is likely to:

a.    decrease the price of food.

b.   increase the price of housing.

c.    decrease the price of housing.

d.   have no effect on either the price of food or housing.

  9.   Differential tax incidence measures the effect:

a.    that a tax and the expenditures it finances have on the distribution of income.

b.   that one tax alone has on the distribution of income.

c.    on the distribution of income of substituting one tax for another while holding the size and composition of the budget fixed.

d.   on the distribution of income of substituting one tax for another while changing the kinds of government services financed.

10.   Most studies of tax incidence assume that taxes on labor income and other input services are borne entirely by the workers and other input owners that supply the services. This implies that the:

a.    supply of those input services is very elastic.

b.   supply of those input services is of unitary elasticity.

c.    supply of those input services is perfectly inelastic.

d.   demand for those input services is perfectly elastic.

11.   Most studies show that the price elasticity of demand for gasoline is –0.2. If the price elasticity of supply is 2, then a tax on gasoline will:

a.    have no effect on the market equilibrium price of gasoline.

b.   cause the market equilibrium price of gasoline to fall.

c.    cause the market equilibrium price paid by buyers to rise.

d.   cause the net price received by sellers to fall.

e.    both (c) and (d)

12.   The demand for medical care is very inelastic. If a 10-percent tax is levied

Write a review

Your Name:


Your Review: Note: HTML is not translated!

A   B   C   D   F  

Enter the code in the box below: