Question

2. Which of the following is not a likely source of market failure?

Asymmetric information

Moral hazard

Externalities

Perfect competition

3. Which of the following categories most accurately describes the Social Security tax in the United States?

Proportional

Progressive

Regressive

Value-added tax

4. Which of the following best describes a progressive tax?

A tax under which the percentage of income paid as tax increases as income increases

A tax under which the percentage of income paid as tax decreases as income increases

A tax under which the percentage of income paid as tax is the same as income increases

5. Taxes are always economically efficient-that is, the revenues generated by a tax usually exactly offset the burden imposed by the tax.

True

False

6. Which of the following is most likely to be true in an economically efficient market?

Firms operate at maximum capacity.

Unemployment is zero.

Goods and services are priced at marginal cost.

Income taxes are progressive.

7. Which of the following best describes a proportional tax?

A tax under which the percentage of income paid as lax increases as income increases

A tax under which the percentage of income paid as tax decreases as income increases

A tax under which the percentage of income paid as tax is the same as income increases

8. In equilibrium, a market sells 2,000 widgets at a price of $10. Suppose that the government levies a $1 sales tax on the sale of widgets, and the tax is collected by the widget sellers at the time of sale. Which of the equilibrium quantities below is most likely to result? (Assume the demand curve Is downward-sloping and the supply curve is upward-sloping.)

2,500 widgets at $10

1,500 widgets at $11

2,500 widgets at $11

2,000 widgets at $10.50

9. The costs and benefits of externalities are efficiently allocated by normal market methods.

True

False

10. Which of the following is an example of a beneficial externality?

A firm drains its waste products into a river, raising pollution.

Traffic congestion increases atter a large manufacturing plant opens.

Concerts in an outdoor arena produce loud noise.

NASA develops a product that has commercial benefits outside of the space program.

11. The key characteristics of "public goods" are that they are nonexcludable and depletable.

True

False

12. Which of the following is considered a direct tax?

Income tax

Sales tax

Excise tax

Properly tax

13. What is the most likely reason why the government would impose a tax on firms that cause significant pollution?

To cause the firms to change behavior, leading to lower pollution

To raise revenues to fund pollution cleanup

To raise revenues for other environmental issues

14. Public parks and streetlights are examples of which of the following?

Depletable goods

Public goods

Excludable goods

Private goods

15. Government or third-party intervention is necessary to ensure the economically efficient provision of public goods.

True

False

Answer 1

Due to presence of HOMEWORKLIB POLICY, I am answering first question.

2.

Ans: Perfect competition.

Explanation:

• Causes of market failure are moral hazard, externalities, adverse selection etc.
• Perfect competition maximizes total surplus in market as optimal point is P = MC or demand = supply.

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