Question

               

18) A tax on luxury goods such as yachts (expensive private boats) would have all of the following effects except:

A. RAISE THE PRICE PAID BY BUYERS OF YACHTS

B. REDUCE THE PRICE RECEIVED BY PRODUCERS OF YACHTS AFTER THE TAX IS REMITTED

C. RAISE THE TOTAL AMOUNT SPENT ON YACHTS

D. REDUCE THE QUANTITY BOUGHT AND SOLD OF YACHTS

               

19) In a perfectly competitive market for some product it is assumed that

A. THE PRODUCTS SOLD BY THE SELLERS ARE SOMEWHAT DIFFERENTIATED OR POSSESS VARYING FEATURES

B. THERE ARE ENTRY BARRIERS WHICH PREVENT DISRUPTION OF THE MARKET BY OUTSIDERS

C. COMPETITION IS INTENSIFIED BY THE PRESENCE OF A SMALL NUMBER OF SELLERS BUT MORE THAN ONE SELLER

D. SELLERS VIEW THEMSELVES AS HAVING NO INDIVIDUAL INFLUENCE OVER THE MARKET PRICE

               

20) A detrimental or negative externality occurs when

A. BYSTANDERS OR THIRD PARTIES OUTSIDE A TRANSACTION BEAR COSTS FOR WHICH THEY ARE NOT COMPENSATED

B. PRODUCERS EXIT THE INDUSTRY BECAUSE OF INCREASING ECONOMIC LOSSES

C. WIDESPREAD PUBLIC BENEFITS ACCOMPANY THE PRODUCTION AND PRIVATE SALE OF A PRODUCT

D. THIRD PARTIES RECEIVE A BENEFIT FOR WHICH THEY DO NOT PAY FROM PRIVATE PROVISION AND SALE OF A GOOD

21) __________ is a set of benefits that a company promises to deliver to customers to satisfy their needs?

A. SHARE OF CUSTOMER

B. MARKETING MIX

C. VALUE PROPOSITION

D. MARKET SEGMENTATION

22) The set of marketing tools a firm uses to implement its marketing strategy is called the ________.

A. PRODUCT MIX

B. MARKETING MIX

C. MARKET OFFERING

D. MARKETING EFFORT

23) When no “market failures” (e.g., monopoly, externalities, etc.) are present, an increase in an excise tax

A. WILL ALWAYS YIELD MORE TAX REVENUE

B. WILL ORDINARILY INCREASE THE DEADWEIGHT OR EFFICIENCY LOSS FROM THE TAX

C. WILL RAISE THE AFTER-TAX AMOUNT RECEIVED BY THE SELLERS

D. WILL SHIFT THE SUPPLY CURVE TO THE RIGHT

24) A competitive firm in the short run would shut down its operations if

A. MARKET PRICE IS LESS THAN AVERAGE TOTAL COST

B. TOTAL REVENUE IS LESS THAN TOTAL VARIABLE COST

C. FIXED COST PER UNIT IS GREATER THAN AVERAGE VARIABLE COST

D. ECONOMIC PROFIT IS LESS THAN ACCOUNTING PROFIT

25) A decrease in the price of a video game system will cause

A. AN INCREASE IN THE QUANTITY DEMANDED OF VIDEO GAMES FOR THAT SYSTEM

B. AN INCREASE IN THE SUPPLY OF VIDEO GAMES FOR THAT SYSTEM

C. A DECREASE IN QUANTITY SUPPLIED OF VIDEO GAMES FOR THAT SYSTEM

D. AN INCREASE IN DEMAND FOR VIDEO GAMES FOR THAT SYSTEM

Answer 1

(18) (C)

Luxury goods are highly elastic, therefore a rise in price (caused by the tax) will decrease total revenue (expenditure).

(19) (D)

Each firm is too small to influence market price.

(20) (A)

(21) (C)

(22) (B)

(23) (B)

An excise tax increases the price paid by buyers, decreases the price received by sellers, decreases quantity sold and increases deadweight loss.

(24) (B)

Firm will shut down if Price < AVC or Total revenue < TVC.

(25) (A)

Following law of demand, a fall (rise) in price increases (decreases) the quantity demanded of the good.