Econ B-251 IU Final Exam 2 Questions
with Guaranteed Pass Solutions 2025-
2026 Updated.
when demand is more inelastic, ______________ pay more of the tax - Answer consumers
when demand is more elastic, ______________ pay more of the tax - Answer producers
when demand is unit elastic, consumers and producers pay _____________ of the tax - Answer
the same amount
protectionism - Answer regulations that burdens foreign producers but not domestic
producers
tariff - Answer tax on imports
trade quota - Answer restriction on the quantity of foreign goods that can be imported
tariffs raise ______________ for _______________ - Answer tax revenue, the government
tariffs increase _____________________ and decrease _____________________ - Answer
domestic production, domestic consumption
a restriction on trade wastes __________________ and creates ___________________ from
trade - Answer resources, lost gains
3 conditions why a free market is efficient - Answer 1) supply of goods is bought by buyers
with the highest willingness to pay
2) supply of goods is sold by the sellers with the lowest costs
3) between buyers and sellers, there are no unexploited gains from trade or any wasteful trades
tariffs reduce _________ because the supply of goods is no longer sold by the sellers with the
___________________________ - Answer efficiency, lowest costs
, the more ______________ the market, the more they are burdened by taxes - Answer
inelastic
the optimal tariff balances increase in ______________ with increase in ____________ -
Answer deadweight loss, revenues
social cost - Answer private cost + external cost
external cost - Answer a cost that is paid not by consumers or producers, but
by bystanders to the transaction
when externalities are significant, - Answer markets work less
social surplus - Answer consumer surplus + producer surplus + everyone else's surplus
markets with externalities DO NOT - Answer maximize social surplus
market equilibrium - Answer maximizes consumer plus producer surplus
efficient equilibrium - Answer the price and quantity that maximizes social surplus
when external costs are significant, - Answer output is too high
Qmarket > Qefficient
a tax set equal to the level of external costs would: - Answer -shift supply up so that it overlays
the social cost curve
-market quantity would fall from q market to q efficient
-market equilibrium would be the efficient equilibrium
a tax on a good with an external cost reduces ___________ and raises ____________ - Answer
deadweight loss, revenue
with Guaranteed Pass Solutions 2025-
2026 Updated.
when demand is more inelastic, ______________ pay more of the tax - Answer consumers
when demand is more elastic, ______________ pay more of the tax - Answer producers
when demand is unit elastic, consumers and producers pay _____________ of the tax - Answer
the same amount
protectionism - Answer regulations that burdens foreign producers but not domestic
producers
tariff - Answer tax on imports
trade quota - Answer restriction on the quantity of foreign goods that can be imported
tariffs raise ______________ for _______________ - Answer tax revenue, the government
tariffs increase _____________________ and decrease _____________________ - Answer
domestic production, domestic consumption
a restriction on trade wastes __________________ and creates ___________________ from
trade - Answer resources, lost gains
3 conditions why a free market is efficient - Answer 1) supply of goods is bought by buyers
with the highest willingness to pay
2) supply of goods is sold by the sellers with the lowest costs
3) between buyers and sellers, there are no unexploited gains from trade or any wasteful trades
tariffs reduce _________ because the supply of goods is no longer sold by the sellers with the
___________________________ - Answer efficiency, lowest costs
, the more ______________ the market, the more they are burdened by taxes - Answer
inelastic
the optimal tariff balances increase in ______________ with increase in ____________ -
Answer deadweight loss, revenues
social cost - Answer private cost + external cost
external cost - Answer a cost that is paid not by consumers or producers, but
by bystanders to the transaction
when externalities are significant, - Answer markets work less
social surplus - Answer consumer surplus + producer surplus + everyone else's surplus
markets with externalities DO NOT - Answer maximize social surplus
market equilibrium - Answer maximizes consumer plus producer surplus
efficient equilibrium - Answer the price and quantity that maximizes social surplus
when external costs are significant, - Answer output is too high
Qmarket > Qefficient
a tax set equal to the level of external costs would: - Answer -shift supply up so that it overlays
the social cost curve
-market quantity would fall from q market to q efficient
-market equilibrium would be the efficient equilibrium
a tax on a good with an external cost reduces ___________ and raises ____________ - Answer
deadweight loss, revenue
