Question 1

Prohibiting the legal sale of a good because of the good's external costs

Accepted Answer

A) will always lead to fewer negative consequences of the good's sale and use. 
B) will never lead to fewer negative consequences of the good's sale and use. 
C) could lead to more negative consequences of the good's sale and use because of criminal activity. 
D) is never the answer to a good with negative externalities. 
A) will always lead to fewer negative consequences of the good's sale and use. 
B) will never lead to fewer negative consequences of the good's sale and use. 
C) could lead to more negative consequences of the good's sale and use because of criminal activity. 
D) is never the answer to a good with negative externalities.

Question 2

One of the external costs associated with illegal methamphetamine production is the

Accepted Answer

A) Increased difficulty of purchasing some over-the-counter cold medications. 
B) Substitution of somewhat less effective ingredients in some over-the-counter cold medications. 
C) Increased difficulty illegal methamphetamine producers face in obtaining their ingredients. 
D) Increased difficulty of purchasing some over-the-counter cold medications as well as a substitution of somewhat less effective ingredients in some over-the-counter cold medications. 
A) Increased difficulty of purchasing some over-the-counter cold medications. 
B) Substitution of somewhat less effective ingredients in some over-the-counter cold medications. 
C) Increased difficulty illegal methamphetamine producers face in obtaining their ingredients. 
D) Increased difficulty of purchasing some over-the-counter cold medications as well as a substitution of somewhat less effective ingredients in some over-the-counter cold medications.

Question 3

For a previously legal good, criminalization will cause

Accepted Answer

A) demand to increase. 
B) demand to become less elastic. 
C) supply to become more elastic. 
D) price to rise, unambiguously. 
A) demand to increase. 
B) demand to become less elastic. 
C) supply to become more elastic. 
D) price to rise, unambiguously.

Question 4

A tax on alcohol will

Accepted Answer

A) raise the equilibrium price and lower the equilibrium quantity. 
B) lower the equilibrium price and lower the equilibrium quantity. 
C) raise the equilibrium price and raise the equilibrium quantity. 
D) lower the equilibrium price and raise the equilibrium quantity. 
A) raise the equilibrium price and lower the equilibrium quantity. 
B) lower the equilibrium price and lower the equilibrium quantity. 
C) raise the equilibrium price and raise the equilibrium quantity. 
D) lower the equilibrium price and raise the equilibrium quantity.

Question 5

An example of an external cost of alcohol is

Accepted Answer

A) traffic fatalities attributable to drunk driving. 
B) the cost to alcoholics of going to rehabilitation clinics. 
C) the cost of producing whiskey. 
D) the cost to bars of hiring janitors to clean up after their customers. 
A) traffic fatalities attributable to drunk driving. 
B) the cost to alcoholics of going to rehabilitation clinics. 
C) the cost of producing whiskey. 
D) the cost to bars of hiring janitors to clean up after their customers.

Question 6

A tax on beer will

Accepted Answer

A) raise the equilibrium price and lower the equilibrium quantity. 
B) lower the equilibrium price and lower the equilibrium quantity. 
C) raise the equilibrium price and raise the equilibrium quantity. 
D) lower the equilibrium price and raise the equilibrium quantity. 
A) raise the equilibrium price and lower the equilibrium quantity. 
B) lower the equilibrium price and lower the equilibrium quantity. 
C) raise the equilibrium price and raise the equilibrium quantity. 
D) lower the equilibrium price and raise the equilibrium quantity.

Question 7

-In Figure 22.2 and ignoring any possible externalities, the net benefit to society of this market is

Accepted Answer

A) 0BCQ* 
B) ABC 
C) BP*C 
D) 0P*CQ* 
A) 0BCQ* 
B) ABC 
C) BP*C 
D) 0P*CQ*

Question 8

-In Figure 22.1, which area represents producer surplus to the drug dealer?

Accepted Answer

A) AP*C 
B) BP*C 
C) 0BCQ* 
D) 0P*CQ* 
A) AP*C 
B) BP*C 
C) 0BCQ* 
D) 0P*CQ*

Question 9

A drug addict will likely have a demand for drugs that is very

Accepted Answer

A) elastic. 
B) inelastic. 
C) flat. 
D) upward sloping. 
A) elastic. 
B) inelastic. 
C) flat. 
D) upward sloping.

Question 10

The external costs associated with tobacco are estimated to be approximately

Accepted Answer

A) $1 a pack. 
B) $5 a pack. 
C) nonexistent. 
D) 10 cents a pack. 
A) $1 a pack. 
B) $5 a pack. 
C) nonexistent. 
D) 10 cents a pack.

Question 11

Externalities are effects of a transaction on

Accepted Answer

A) the buyers and sellers. 
B) the sellers but not the buyers. 
C) the buyers but not the sellers. 
D) someone other than the buyer or seller. 
A) the buyers and sellers. 
B) the sellers but not the buyers. 
C) the buyers but not the sellers. 
D) someone other than the buyer or seller.

Question 12

For a previously illegal good, decriminalization will cause

Accepted Answer

A) supply to increase. 
B) supply to become less elastic. 
C) demand to become less elastic. 
D) price to rise, unambiguously. 
A) supply to increase. 
B) supply to become less elastic. 
C) demand to become less elastic. 
D) price to rise, unambiguously.

Question 13

A tax on cigarettes will have the effect of properly dealing with the externality unless the tax

Accepted Answer

A) is lower than the marginal external costs. 
B) is so high that it generates a black market. 
C) causes people to use smoke less. 
D) is lower than the marginal external costs or it is so high that it generates a black market. 
A) is lower than the marginal external costs. 
B) is so high that it generates a black market. 
C) causes people to use smoke less. 
D) is lower than the marginal external costs or it is so high that it generates a black market.

Question 14

For a previously illegal good, decriminalization will cause

Accepted Answer

A) supply to increase. 
B) supply to become less elastic. 
C) demand to become less elastic. 
D) price to fall, unambiguously. 
A) supply to increase. 
B) supply to become less elastic. 
C) demand to become less elastic. 
D) price to fall, unambiguously.

Question 15

An example of an external cost of tobacco is

Accepted Answer

A) cigarette burns on the furniture of smokers. 
B) matches. 
C) increase life insurance premiums of smokers. 
D) unnecessary deaths induced by second-hand smoke. 
A) cigarette burns on the furniture of smokers. 
B) matches. 
C) increase life insurance premiums of smokers. 
D) unnecessary deaths induced by second-hand smoke.

Question 16

Suppose the United States chose to legalize the production and use of marijuana but also decided to put a tax on the good. After doing so, suppose that the price that consumers paid fell and the amount that growers got to keep also fell. This would

Accepted Answer

A) indicate that the demand-side effect was greater than the supply-side effect. 
B) be shockingly counter-intuitive because there would be no supply-and-demand model that could explain it. 
C) indicate that the demand-side effect was smaller than the supply-side effect. 
D) suggest that the supply curve is vertical. 
A) indicate that the demand-side effect was greater than the supply-side effect. 
B) be shockingly counter-intuitive because there would be no supply-and-demand model that could explain it. 
C) indicate that the demand-side effect was smaller than the supply-side effect. 
D) suggest that the supply curve is vertical.

Question 17

The "acceptable deaths" notion suggests that it is better to have the benefits of a good to the buyer and seller with a specified number of deaths

Accepted Answer

A) than to prohibit the good's production and use entirely. 
B) than to let the good be produced outside the US. 
C) but only if the deaths are of less desirable people. 
D) in no circumstance. 
A) than to prohibit the good's production and use entirely. 
B) than to let the good be produced outside the US. 
C) but only if the deaths are of less desirable people. 
D) in no circumstance.

Question 18

For a previously legal good, criminalization will cause

Accepted Answer

A) supply to increase. 
B) supply to become more elastic. 
C) demand to become less elastic. 
D) price to fall, unambiguously. 
A) supply to increase. 
B) supply to become more elastic. 
C) demand to become less elastic. 
D) price to fall, unambiguously.

Question 19

The reason that the impact on prices of decriminalization is ambiguous is that decriminalization causes a price

Accepted Answer

A) increasing supply curve movement and a price decreasing demand curve movement. 
B) decreasing supply curve movement and a price decreasing demand curve movement. 
C) increasing supply curve movement and a price increasing demand curve movement. 
D) decreasing supply curve movement and a price increasing demand curve movement. 
A) increasing supply curve movement and a price decreasing demand curve movement. 
B) decreasing supply curve movement and a price decreasing demand curve movement. 
C) increasing supply curve movement and a price increasing demand curve movement. 
D) decreasing supply curve movement and a price increasing demand curve movement.

Question 20

The 1998 tobacco settlement requires that tobacco companies pay ___ to the states in the settlement over a period of twenty years.

Accepted Answer

A) $2.5 million 
B) $250 million 
C) $2.5 billion 
D) $250 billion 
A) $2.5 million 
B) $250 million 
C) $2.5 billion 
D) $250 billion

Exam 22: The Line Between Legal and Illegal Goods

Prohibiting the legal sale of a good because of the good's external costs

One of the external costs associated with illegal methamphetamine production is the

For a previously legal good, criminalization will cause

A tax on alcohol will

An example of an external cost of alcohol is

A tax on beer will

-In Figure 22.2 and ignoring any possible externalities, the net benefit to society of this market is

-In Figure 22.1, which area represents producer surplus to the drug dealer?

A drug addict will likely have a demand for drugs that is very

The external costs associated with tobacco are estimated to be approximately

Externalities are effects of a transaction on

For a previously illegal good, decriminalization will cause

A tax on cigarettes will have the effect of properly dealing with the externality unless the tax

For a previously illegal good, decriminalization will cause

An example of an external cost of tobacco is

Suppose the United States chose to legalize the production and use of marijuana but also decided to put a tax on the good. After doing so, suppose that the price that consumers paid fell and the amount that growers got to keep also fell. This would

The "acceptable deaths" notion suggests that it is better to have the benefits of a good to the buyer and seller with a specified number of deaths

For a previously legal good, criminalization will cause

The reason that the impact on prices of decriminalization is ambiguous is that decriminalization causes a price

The 1998 tobacco settlement requires that tobacco companies pay ___ to the states in the settlement over a period of twenty years.

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Perfect Competition, Monopoly, and Economic Versus Normal Profit

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

Interest Rates and Present Value

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

The Recession of 2007-2009: Causes and Policy Responses

Is Economic Stagnation the New Normal

Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities

International Trade: Does It Jeopardize American Jobs

International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

The Economics of Race and Discrimination

Income and Wealth Inequality

Farm Policy

Minimum Wage

Ticket Brokers and Ticket Scalping

Rent Control

Economics of K-12 Education

Economics of College and University Education

Poverty and Welfare

Head Start

Social Security

Personal Income Taxes

Energy Prices

If We Build It, Will They Come and Other Sports Questions

The Stock Market Crashes

Unions

Walmart: Always Low Prices and Low Wages- Always

The Economic Impact of Casino Gambling

The Economics of Terrorism

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