WSU ECON 101 EXAM 2 QUESTIONS AND ANSWERS
Price Controls - CORRECT ANSWER✅✅are legal restrictions on how high or low market price may go.
EX: price ceiling, price floor
Price Ceiling - CORRECT ANSWER✅✅a maximum price sellers are allowed to charge
Price Floor - CORRECT ANSWER✅✅a minimum price buyers are required to pay
Price ceilings often lead to inefficiency in the form of INEFFICIENT ALLOCATION TO CONSUMERS -
CORRECT ANSWER✅✅which means people who want the good badly and are willing to pay a high price
don't het it, and those who care less about the good and are only willing to pay a low price do get it.
Price ceilings typically lead to inefficiency in the form of WASTED RESOURCES - CORRECT
ANSWER✅✅which means people expend money, effort, and time to cope with shortages caused by the
price ceiling
Price ceilings often lead to inefficiency in that the goods being offered are of INEFFICIENTLY LOW
QUALITY - CORRECT ANSWER✅✅which means sellers offer low quality goods at a low price even
though buyers prefer high quality at higher price
Price floors lead to INEFFICIENT ALLOCATION OF SALES AMONG SELLERS - CORRECT ANSWER✅✅which
means those who would be willing to sell the good at the lowest price are not always those who manage
to sell
Price floors often lead to inefficiency in that goods of INEFFICIENTLY HIGH QUALITY are offered -
CORRECT ANSWER✅✅which means sellers offer high quality goods at a high price, even though buyers
would prefer lower quality at a lower price
Progressive tax - CORRECT ANSWER✅✅rises more than in proportion to income
-high income taxpayers pay larger
, Regressive tax - CORRECT ANSWER✅✅rises less than in proportion to income
-high income taxpayers pay lower
Proportional tax - CORRECT ANSWER✅✅rises in proportion to income
-taxpayers pay the same percentage of their income
Excise tax - CORRECT ANSWER✅✅is a tax on sales of a particular good or service
-gasoline
Tax incidence - CORRECT ANSWER✅✅is the distribution of a tax burden
A lump-sum tax - CORRECT ANSWER✅✅is a tax of a fixed amount paid by all taxpayers
Imports - CORRECT ANSWER✅✅goods and services purchased from other countries
Exports - CORRECT ANSWER✅✅goods and services sold to other countries
Autarky - CORRECT ANSWER✅✅when a country does not trade
According to The Heckscher-Ohlin Model - CORRECT ANSWER✅✅a country has a comparative
advantage in a good whose production is intensive in the factors that are abundantly available in that
country
The domestic demand curve - CORRECT ANSWER✅✅shows how the quantity of a good demanded by
domestic consumers depends on the price
The domestic supply curve - CORRECT ANSWER✅✅shows how the quantity of a good supplied by
domestic producers depends on the price.
Price Controls - CORRECT ANSWER✅✅are legal restrictions on how high or low market price may go.
EX: price ceiling, price floor
Price Ceiling - CORRECT ANSWER✅✅a maximum price sellers are allowed to charge
Price Floor - CORRECT ANSWER✅✅a minimum price buyers are required to pay
Price ceilings often lead to inefficiency in the form of INEFFICIENT ALLOCATION TO CONSUMERS -
CORRECT ANSWER✅✅which means people who want the good badly and are willing to pay a high price
don't het it, and those who care less about the good and are only willing to pay a low price do get it.
Price ceilings typically lead to inefficiency in the form of WASTED RESOURCES - CORRECT
ANSWER✅✅which means people expend money, effort, and time to cope with shortages caused by the
price ceiling
Price ceilings often lead to inefficiency in that the goods being offered are of INEFFICIENTLY LOW
QUALITY - CORRECT ANSWER✅✅which means sellers offer low quality goods at a low price even
though buyers prefer high quality at higher price
Price floors lead to INEFFICIENT ALLOCATION OF SALES AMONG SELLERS - CORRECT ANSWER✅✅which
means those who would be willing to sell the good at the lowest price are not always those who manage
to sell
Price floors often lead to inefficiency in that goods of INEFFICIENTLY HIGH QUALITY are offered -
CORRECT ANSWER✅✅which means sellers offer high quality goods at a high price, even though buyers
would prefer lower quality at a lower price
Progressive tax - CORRECT ANSWER✅✅rises more than in proportion to income
-high income taxpayers pay larger
, Regressive tax - CORRECT ANSWER✅✅rises less than in proportion to income
-high income taxpayers pay lower
Proportional tax - CORRECT ANSWER✅✅rises in proportion to income
-taxpayers pay the same percentage of their income
Excise tax - CORRECT ANSWER✅✅is a tax on sales of a particular good or service
-gasoline
Tax incidence - CORRECT ANSWER✅✅is the distribution of a tax burden
A lump-sum tax - CORRECT ANSWER✅✅is a tax of a fixed amount paid by all taxpayers
Imports - CORRECT ANSWER✅✅goods and services purchased from other countries
Exports - CORRECT ANSWER✅✅goods and services sold to other countries
Autarky - CORRECT ANSWER✅✅when a country does not trade
According to The Heckscher-Ohlin Model - CORRECT ANSWER✅✅a country has a comparative
advantage in a good whose production is intensive in the factors that are abundantly available in that
country
The domestic demand curve - CORRECT ANSWER✅✅shows how the quantity of a good demanded by
domestic consumers depends on the price
The domestic supply curve - CORRECT ANSWER✅✅shows how the quantity of a good supplied by
domestic producers depends on the price.
