Suppose that there is a negative externality associated with alcohol consumption in the United States. Will the United States be better or worse off if it eliminates all tariffs on alcohol imports?
a. The United States will always be better off when tariffs on imported alcohol are eliminated.
b. The United States will always be worse off when tariffs on imported alcohol are eliminated.
c. The United States will be no better or worse off when tariffs on imported alcohol are eliminated.
d. The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol consumption when tariffs on imported alcohol are eliminated.
Ans: d. The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol consumption when tariffs on imported alcohol are eliminated.
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Suppose that the supply of insulin is perfectly elastic and the demand for insulin perfectly inelastic. Then the result of an excise tax would be
A. a significant increase in government revenue and a significant decrease in the quantity consumed. B. a significant decrease in the quantity consumed with no change in government revenue. C. a significant increase in government revenue and no change in the quantity consumed. D. no increase in government revenue and no change in the quantity consumed.
If Alberto Reyes increases his work hours when his real wage increases, then
A) the substitution effect of the wage increase outweighs the income effect. B) the income effect of the wage increase outweighs the substitution effect. C) leisure is an inferior good to Alberto. D) the substitution effect of the wage increase is completely offset by the income effect.
Refer to Table 4-3. For whom is the good a normal good?
Table 4-3
Price | Bert’s | Ernie’s | Grover’s | Oscar’s |
$0.00 | 20 | 16 | 4 | 8 |
$0.50 | 18 | 12 | 6 | 6 |
$1.00 | 14 | 10 | 2 | 5 |
$1.50 | 12 | 8 | 0 | 4 |
$2.00 | 6 | 6 | 0 | 2 |
$2.50 | 0 | 4 | 0 | 0 |
a. This cannot be determined from the table.
b. Grover only
c. Bert only
d. Bert, Ernie, Grover, and Oscar
Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount
a. True b. False Indicate whether the statement is true or false