When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good ________ and the quantity ________
A) falls; decreases
B) falls; might increase, decrease, or not change
C) rises; might increase, decrease, or not change
D) might rise, fall, or not change; decreases
D
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It's not unusual for strangers driving through a small town to find a gas station more quickly than people driving through a major city center
According to the economic way of thinking, gas stations in city centers appear few and far between because A) big cities are just plain confusing to out-of-towners. B) the real estate space available for gas stations has more valuable alternative uses. C) the opportunity cost of placing additional gas stations in city centers is too low. D) the owner of gas stations would rather have people drive further distances and thereby use more gasoline.
It is argued that special interest groups are likely to take over and promote protectionist policies, which may lead to a decrease in national economic welfare. This argument leads to
A) a presumption that in practice a free trade policy is likely to be better than alternatives. B) a presumption that trade policy should be shifted to Non-Governmental Organizations, so as to limit taxpayer burden. C) a presumption that free trade is generally a second-best policy, to be avoided if feasible alternatives are available. D) a presumption that free trade is the likely equilibrium solution if the government allows special interest groups to dictate its trade policy. E) a presumption that protectionist policies will better serve a country as a whole than free trade policies.
If a market produces a level of output that exceeds the competitive equilibrium output, then
A) social welfare will be higher. B) producer surplus will be higher. C) marginal cost will exceed price. D) All of the above.
Describe who benefits and who loses from tariffs and from quotas. What is the major difference between the effects of a quota and the effects of a tariff?