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If the government wanted to curb consumption of alcohol by taxing alcohol without hurting consumer welfare it would

If the government wanted to curb consumption of alcohol by taxing alcohol without hurting consumer's welfare it would:  

A. raise the tax on alcohol until demand for alcohol became elastic

B. need to know the substitution effect but not the income effect of a tax hike

C. need to know the income effect but not the substitution effect of a tax hike

D. tax until the income effect of the price increase, which would be refunded, is exactly equal to the revenue gained from the tax

2.If the UK were to adopt an educational voucher system where parents could spend their share of taxes at any school of their choice, then we could expect families to:  

A. choose less education than before because the public schools would get better

B. choose more education because they do not need to pay double for private education

C. make no changes in their education choices because the relative price of private and public education has not changed

D. make choices that can not be predicted by economic theory

3.If I get 10 units of pleasure from my first ice cream cone and 2 less units than before from each succeeding cone, I will buy ____ cones and gain _____ units of consumer surplus if the price of a cone = to 5 units of pleasure.  

A. 4, 28

B. 6, 30

C. 2, 18

D. 3, 9

4.If you buy food which then is put on special at half price just after you paid:  

A. you will be disappointed and be worse off

B. you will be better off because you will go back to get some more food at bargain prices

C. your welfare will not change since you just finished your shopping

D. logic can not lead to an answer to this question even if you have a typical preference pattern

5.The consumer price index overestimates inflation because it:  

A. compares prices of what consumers actually buy rather than a fixed basket of goods

B. allows consumers to move along a given indifference curve from one year to the next

C. measures the cost of a market basket in the second year that has too many units of the most inflated items

D. uses the second year's market basket as the base rather than the first year's basket

6.The local golf course has upgraded seven of its 18 holes and raised its rates from 20 to 24 euros. It would be correct to say that:  

A. the true inflation rate for golf is more than 20%

B. the true inflation rate for golf is 20%

C. the true inflation rate for golf is less than 20%

D. more information is needed to answer this question

7.If markets for addictive drugs have a more elastic demand curve than is often thought, and if addicts tend to be unstable people with low incomes, we might speculate that the most likely reason for the surprising elasticity estimates is that:  

A. the substitution effect is smaller than expected because addicts aren't as addicted as we thought

B. the income effect has a more constraining effect than we had anticipated

C. addictive drugs are inferior goods

D. the income and substitution effects work in opposite directions

8.If the opportunity cost of a unit of current consumption is exactly 1 unit of future consumption then you must sacrifice €10 of current consumption to finance:  

A. €9 of future consumption

B. €10 of future consumption

C. €11 of future consumption

D. €1 of future consumption

9.Suppose a bank will pay you a 10% interest rate on your deposits for 1 period. In this case you must sacrifice €10 of current consumption to finance:  

A. €9 of future consumption

B. €10 of future consumption

C. €11 of future consumption

D. €1 of future consumption

10.Suppose you receive Y1 of your income this period and Y2 of your income in the next period. If you can either borrow or lend at an interest rate r, what is the most you can consume in the future period?  

A. Y1(1 + r) + Y2

B. Y2(1 + r) + Y1

C. Y1/(1 + r) + Y2

D. Y2/(1 + r) + Y1

Feb 11 2020 View more View Less

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