Answer the following statement(s) true (T) or false (F)
1. Although a sales tax hurts both producers and consumers, their losses are fully offset by the benefits created by the tax revenues.
2. One effect of a tax is that output in the market which is taxed falls.
3. Even if total surplus is maximized, there is still a chance that there will be a deadweight loss.
4. When the Pareto criterion is used to choose between different policies, any recommendation requires unanimous agreement.
5. If the potential Pareto criterion rejects a policy change, then the efficiency criterion will reject it as well.
1. False
2. True
3. False
4. True
5. True
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For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced, what must be done?
A) The size of marginal external benefit must be accurately determined. B) The government must produce the product. C) Private production and private consumption must both be directly subsidized. D) The quantity demanded must be decreased to the efficient amount. E) Private production without the subsidy must be prohibited.
When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by
A) an external benefit B) a competitive good C) a public good D) an excludable good
Suppose country X can produce a personal computer at an opportunity cost of 1000 t-shirts. Assume that country X has a comparative advantage in the production of t-shirts
Would country X ever agree to terms of trade with country Y such that one personal computer would be exchanged for 1100 t-shirts?
Refer to Table 2-14. Ireland has a comparative advantage in the production of
A) both products. B) motorcycles. C) guitars. D) neither product.