Which of the following is true of a constant-cost production-possibility curve?
A. Along a constant-cost production-possibilities curve, the opportunity cost of producing more of a good is constant.
B. A constant-cost production-possibilities curve is drawn as a positively sloped straight line.
C. When a country engages in free trade, the constant-cost production-possibility curve shifts to the right.
D. A country with a constant-cost production-possibility curve partially specializes in the production of goods when it engages in free trade with other nations.
Answer: A
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The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. What is the marginal social cost to the economy of Kaffenia of producing the 300th dozen doughnuts each day?
A) $10.00 per dozen B) $8.00 per dozen C) $6.00 per dozen D) $4.00 per dozen
In a country without foreign trade and no income taxes, if the government increases autonomous taxes by 1000 and the MPS is 0.1, then the initial or first round change in expenditures by all tax payers will be
A) a reduction equal to 1000. B) an increase equal to 1000. C) a reduction equal to 900. D) an increase equal to 900.
How does the imposition of a tariff reduce the price of imports?
a. At the lower quantity supplied, the price to the importer is lower than if there were free trade. b. At the lower quantity demanded, the price to the importer is lower than if there were free trade. c. Supply of the product is increased from domestic production, reducing the price of the imports. d. Demand for the product is decreased, so that price must fall.
Which of the following statements is not correct?
a. Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. b. Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. c. Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. d. Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment.