Question

Question Completion Status: QUESTION 19 When the government increases tariffs production switches from low-cost foreign producers to high-cost domestic producers, wasting resources domestic producers buy more of the good, increasing the gains from trade domestic producers produce more output, increasing the gains from trade deadweight losses are eliminated because foreign producers sell below their product cost QUESTION 20 As a result of tariffs, domestic producers tend to • gain more than domestic consumers lose • spend less money on lobbying o have a greater incentive to lower their production costs lose more than the government gains QUESTION 21 Compared with the efficient outcome, the market price of a good that generates external benefits is too high too low optimal equal to the efficient price QUESTION 22 Products that create external benefits are over-consumed because the private benefits exceed the private costs under consumed because consumers only consider the private benefits of consumption optimally consumed as long as private benefits equal private costs underconsumed because the social costs exceed the social benefits QUESTION 23 The Coase theorem suggests that private bargains will ensure the efficiency of markets even when externalities exist o but only in the presence of government regulation if consumers have more information regarding the externality than suppliers if transactions costs are low and property rights are well-defined if the cost of the negotiation are less than the price of the good QUESTION 24 Incentives to work and save are reduced when income taxes are higher consumption taxes replace income taxes corrective taxes are implemented lump sum taxes are imposed

Answer 1

19) third option is correct. Increased tariffs will increase the producer surplus only at the cost of decreased consumer surplus. In this manner producers start producing more goods and services and therefore they are able to increase their gains from trade.

20) tariffs are always desirable for some producers who are not willing to reduce their production cost or face international competition. If tariffs are increased, this produces will now have to spend less on lobbying activity. Second option is correct

21) it is too high. This is because when production has positive externality, there is under production and the market price charge is too high for the demand to be encouraged.

22) second option is correct

23) third option is correct

24) first option is correct.