Refer to the information provided in Figure 16.4 below to answer the question(s) that follow.Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel.
Figure 16.4Refer to Figure 16.4. Suppose the government assigns property rights to the residents of Playa Del
Rey, then the airlines and the residents engage in negotiations. The resulting efficient level of air travel is
A. 0 units.
B. 100 units.
C. 120 units.
D. indeterminate from the given information.
Answer: B
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Capital gains are taxed at a different rate than income and this reduces revenues the government receives. All else equal, what would happen if capital gains taxes were eliminated?
A) They would have to be replaced by a consumption tax. B) The government would not be able to spend money on any programs. C) Everyone would have to pay less in taxes. D) The deficit would increase because of lack of revenues.
If a consumer prefers apples to bananas and prefers bananas to citrus fruit, in order to satisfy assumptions about preferences she has to prefer
A) bananas to apples. B) citrus fruit to bananas. C) apples to citrus fruit. D) citrus fruit to apples.
Figure 4-15
In , suppose a price floor is established at $20.00. What is the result?
a.
a shortage of 10 units
b.
a surplus of 10 units
c.
a shortage of 20 units
d.
a surplus of 20 units
e.
there is no change from the situation that exists at the equilibrium price
The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded. In this case:
A. A 10 percent increase in price will result in a 10 percent increase in total revenues B. A 10 percent increase in price will result in a 10 percent decrease in the quantity demanded C. A 10 percent increase in price will result in a 10 percent decrease in total revenues D. A 10 percent increase in price will result in a 10 percent increase in quantity demanded