Assume that the world price of Good A is 8 per unit while its domestic price is 6, and the marginal cost incurred by domestic producers for producing one unit of Good A is 5 . If the government imposes a tax of 3 per unit on domestic producers, which of the following situations will be observed?
a. The tax will increase the price of Good A in the domestic market.
b. The tax will increase the world price of Good A.
c. The tax will decrease the profit earned by domestic producers.
d. The tax will decrease the price of Good A in the domestic market.
QUESTION 2Under perfect competition, the per unit revenue of a firm is equal to its marginal revenue.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3Marginal cost regulation of a natural monopoly:
a. generates economic losses for the seller.
b. necessitates a subsidy payment to the firm.
c. imposes a price that is less than average total cost.
d. is characterized by all of the above.
QUESTION 4After the U.S. government had approved the feeding of hormones to U.S. beef cattle, several western European nations restricted the import of beef from the U.S. Which of the following tools of commercial policy had been put to use in this situation?
a. Tariff
b. Quota
c. Health and safety standards
d. Subsidy
e. Government procurement
QUESTION 5Suppose beer producers in Munich became aware of the low price of one barrel of beer in the domestic market relative to that in the United States. What will be the impact of this price difference?
a. Beer production in Munich will decline.
b. Price of beer in the domestic market will increase.
c. Beer production in the U.S. will increase.
d. Beer consumption in the domestic market will increase.
QUESTION 6The profit of a perfectly competitive firm is maximized at a level of output where its marginal cost is rising.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Which of the following is a problem with government regulation of natural monopolies?
a. creation of excessive profits levels
b. reduced incentives to cut costs
c. decreased number of firms in the market
d. lack of influence from special interest groups
QUESTION 8As a result of the government procurement policy in the U.S.:
a. the domestic consumers are required to pay a higher price than the world price for the domestically produced goods.
b. the government wields the sole authority of importing goods from abroad.
c. the government wields the sole authority of exporting goods.
d. the domestic producers can charge the government a higher price for their products than they charge consumers.
e. the government is required to sponsor research and development for the domestic firms.
QUESTION 9Which of the following products witnessed a high growth in the number of producers within a few years of market introduction, but was followed by a fast and substantial shakeout?
a. Tortilla
b. Penicillin
c. Livestock
d. Fastfood
Quick Reply
