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COVID-19 became much more difficult to control when a new case could not be easily tied to a known case. This situation is best described as

community spread

Traditional economic analysis of minimum wage legislation assumes

competitive labor markets

The hypothesis that suggests that one firm who fears the arrival of competitors is all that is required to experience most of the benefits of perfect competition is the

contestable-markets hypothesis

In late February and early March, the stock market

declined and became more volatile Between late February and mid-March, global stock markets lost upwards of 40 percent of their values. There was considerable volatility as well. Many of the largest point losses and gains in stock market history occurred during this period.

If the poverty rate declines because of a general increase in a nation's income levels, the rational criminal model would predict

decreased crime.

With a natural monopoly, many argue that a potentially insurmountable barrier to entry is the

decreasing average total costs

The optimal resource use for a limited natural resource very much depends on the

discount rate you apply to the use to future limited natural resources.

If it costs Con Ed approximately $20 per additional ton of air pollution abated, but it costs PG&E only $10 per additional ton of air pollution abated, a marketable pollution permit trading for $14 per ton could

earn PG&E $4 per ton and save Con Ed $6 per ton.

Whether a firm stays in business or shuts down depends heavily on the concept of

economic profit Normal profit is the level of profit that business owners could get in their next best alternative investment. The next best alternative would be whatever investment an owner would choose if he or she decided to go out of business. Any profit above normal profit is called economic profit. If business owners do not make their normal profit, they will quit the business and move into another. This means that we might think of normal profit as the salary the business owners pay themselves and, as such, part of the "cost of doing business." If they make less than normal profit, then the salary they can pay themselves is too low to keep them in the industry. On the other hand, if profits are routinely more than that, others will want to enter the industry. This means that in the long run profit will shrink to normal levels.

The argument that the minimum wage does not significantly increase unemployment is based on

elasticity A minimum wage that has been set above the equilibrium wage has several effects. First, it raises the wage from the equilibrium wage to the imposed minimum wage. Second, it reduces the amount of labor sold. Third, as long as the money gained from raising the wage to workers is greater than the money lost as a result of having fewer people working, workers in general have more money than they had before. From your earlier study of the concept of elasticity, you will recognize the condition for this is that the demand for labor has to be inelastic.

The fiscal policy actions in response to COVID-19 were

even more bold and rapid than its response to the Great Recession. The fiscal policy actions taken in 2020 were much more rapid and robust than those engaged in during Fall 2008 and Winter 2009 (Great Recession). The CARES Act cost $2.5 trillion, dwarfing the Obama stimulus package of 2009 ($798 billion).

The Federal Reserve's approach to COVID-19's economic consequences was

even more bold and rapid than its response to the Great Recession. The monetary policy actions taken in 2020 were much more rapid and robust than those engaged in during Fall 2008 (Great Recession). The Federal Reserve moved nearly $3 trillion into the system and did so in only a few months.

As a general matter, under the consumer welfare model/framework underlying U.S. antitrust laws, the fact that Google and other companies do not charge a monetary price for their services effectively precludes any anti-trust enforcement by the U.S. government.

false

Historically, with respect to technological change, the substitution effect (the subsitution of capital for labor) has dominated over the output effect.

false

Optimal containment and "shuttering in" policies involve uniform policies and programs equally applied across demographic groups and economic sectors.

false

The "process of creative destruction" articulated by Joseph Schumpeter expresses the fact firms in perfectly competetive markets are more competitive than firms in other market structures (such as, for example, oligopolies) because the latter firms price their goods and services above marginal costs while firms in perfectly competetive markets do not.

false

The Coase theorem states that because information and transaction costs are zero, government regulation and (other) policies (such as taxes) are not necessary to solve the economic problem or issue created by externalities.

false

Wage gains arising from increased productivity that are tied to capital/labor complementarity is generally connected to the income elasticity of labor supply.

false

Between 1998 and 2007, the real minimum wage

fell steadily Although the minimum wage itself has been increased several times over the last 78 years, its real value, that is, the value adjusted for inflation in 1999 dollars, rose for the first 30 years of its existence and has steadily fallen since.

In the Microsoft case, the company was accused of violating that law the prohibits

firms from using their monopoly in one market to increase market share in another.

Some species would be worth the cost of saving them while another species might not be because

for that species, the marginal costs of saving it exceeds the marginal benefits of saving it. If the marginal costs of saving a species exceed the marginal benefits, then social welfare is reduced by saving the species. One problem is that sometimes the value of a species increases over time as we understand it better, and if it had already been destroyed, that could reduce social welfare.

Oligopoly differs from monopolistic competition in that oligopoly

has few firms, whereas monopolistic competition has many firms.

The evidence on most environmental pollutants (lead in the air and water, sulfur in the air, etc.) is that they

have decreased substantially within the last 40 years By most measures, environmental and pollution regulations have been effective. The nation's air and water are much cleaner than they were 40 years ago.

The argument that employers would actually not lose money if the minimum wage were raised is based on

the idea that workers would be more productive if they felt they were adequately compensated If higher pay translates into workers who are happier and who do more work per hour, it may be the case that some if not all of the impact of forcing wages to rise will be mitigated. In this way the minimum-wage increase may pay for itself.

a. A four-firm concentration ratio of 60 percent means that

the largest four firms, together, share 60 percent of the market.

An increasing marginal cost of producing oil will lead to a more spread-out utilization plan because

the marginal costs are greater than the marginal revenues until the price of the resource increases. An upward-sloping supply curve can aid in motivating conservation. The shale oil of the North Dakota area has been known to exist for half a century and yet went largely untapped even when oil prices peaked in 1980 and again in 2008. That is because it is very expensive to tap. The marginal cost of producing more oil, if that oil is from a location such as that, is very high and so few companies tried to extract it until recently. As a result, there is conservation of difficult-to-extract resources because the marginal costs are greater than the marginal revenues.

The optimal level of crime control is achieved where

the marginal reduction in the expected cost of crime equals the marginal cost of prevention.

Assume that the (U.S.) Environmental Protection Agency determines that that hydraulic fracking (a type of oil and gas drilling) adversely impacts drinking water resources under certain circumstances. If so, and assuming high transaction costs, and if uncorrected by public policies or otherwise, then

the market price of natural gas reflected in the competitive markets is too low

In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, because

the market supply for the good rises and falls when there is entry and exit, respectively. The marginal revenue is the same as the price in a perfectly competitive market. The effect of free entry and exit in a competitive market will cause the marginal revenue curve to move down if there is entry and up if there is exit.

The argument that the minimum wage is worse than the Earned Income Tax Credit is based on the idea that

the minimum wage applies to all workers, not just the working poor In the eyes of many economists a better alternative to the minimum wage is the Earned Income Tax Credit (EITC). Low-income working families with three or more children are eligible for up to a predetermined amount that arrives in the form of a tax refund. The benefits of the EITC are concentrated on the people who actually need the money to feed their families. More than 70 percent of the money goes to households that are or would otherwise be in poverty. This contrasts dramatically with the minimum wage, where upward of 70 percent of the benefits accrue to households not in poverty.

When accountants take money from their employers (by directing money to personal accounts), this is classified as

the non-violent crime of embezzlement.

Those who mistakenly thought an increase in the minimum wage was in their best interests include

the poor and uneducated The losers of a higher minimum-wage are the people who lose their jobs. Economists find that they are disproportionately black, Hispanic, and uneducated. That is, they are among the very people that an increase is trying to help. This point must not be missed. An increase in the minimum wage may very well hurt the poor more than it helps them

When tackling local environmental problems, taxes and regulations can be useful. The reason that global problems (like global warming) are more difficult to control is that

there is no ability to enforce those taxes or regulations. When an environmental problem is confined to one jurisdiction, the government, whether it be local, state, or national, can enact legislation to tackle the problem. When the problem is international, such as with global warming, there is no government to impose a regulatory or tax-based solution.

The Spur Industries v. Webb case and opinion best illuminates

Coase's argument regarding the "reciprocity of externalities."

In order for the minimum wage to reach its 1968 high in real terms (1999 dollars), it would have to rise to slightly more than ________ per hour.

$12 In 1968 the minimum wage was $1.60. With a base year of 1999, the 1968 CPI was 20.9 and the 2019 CPI was153.3. In order for the minimum wage to reach its 1968 high in real terms (1999 dollars), it would have to have been about $12 per hour in 2019 (= (($1.60 ÷ 20.9) × 153.3) = $11.74).

A rational criminal model assumes

-criminals will commit fewer crimes if the severity of punishment rises. -criminals will commit fewer crimes if the likelihood of getting caught rises. -criminals commit crimes because they have few legal opportunities.

a. Which of the following is a key difference between firms in a perfectly competitive industry and firms in a monopolistically competitive industry?

A monopolistically competitive firm does not have the exact same product as other firms.

An environmental economist would likely recommend which of the following policies?

A tax on gasoline equal to the environmental damage caused by one gallon of gasoline A tax could conceivably be used to discourage any polluting activity, including the creation of garbage or the use of fossil fuels or the consumption of gasoline. A tax would be set that was equal to the external cost, that is, the dollar-denominated value of the pollution. In this particular example, an environmental economist would likely recommend a tax on gasoline equal to the environmental damage caused by a gallon of gasoline.

In her Yale Law Journal article entitled "Amazon's Antitrust Paradox," Lina Khan argues that

Amazon's e-platform is an essential infrastructure that others depend on/utilize thus creating a conflict of interest since this platform generates important data used by Amazon (or its affliates.)

Suppose you overheard two of your fellow economics students arguing about where Internet service fits into the spectrum of market forms.

Both could be correct because if the one arguing for monopoly lived in a small town with one option and the other lived in a city with three options, both would be correct given their experience. Different locations could have only one firm (so a monopoly) while others have a few (so oligopoly). Both could be correct.

In terms of the economic consequences of pandemics,

COVID-19 had a much greater impact than that of any previous one. Other pandemics were coincident to recessions but there is little evidence that they were a cause or that they were significant contributors to the economic downturns. However, COVID-19 had a dramatic economic impact.

The argument that the minimum wage hurts society more than it helps is based on ________ analysis.

Consumer and Producer surplus What this all leads to is that under economic analysis of the minimum wage, there are winners and losers. The winners are those workers who get a wage increase and who are still able to continue working as much as they want. The losers are men and women who used to be working and who are now unemployed. The important part of this analysis is that what is gained by workers is less than what employers lose. In the end, the consumer surplus shrinks and producer surplus grows. The sum of the consumer and producer surpluses is less than it was without the minimum wage.

Joseph Schumpeter and Kenneth Arrow both argued that large scale enterprises and highly concentrated markets or industries are inherently anti-competitive.

False

Modern Monetary Theory suggests that the increase in federal debt (in itself) issued by the U.S. government as part of its pandemic fiscal relief efforts is a source of significant macroeconomic concern.

False

Tying arrangments and bundling are always anti-competitive, contstitute a form of price discrimination and violate the Robinson-Patman Act.

False

The Kyoto Protocols were initially

Signed by Bill Clinton but never passed in the senate

The law that governs most government regulation of monopoly in the United States is

The Sherman Anti-trust Act

Which of the following reasons offered for why crime fell in the 1990s does the Brennan Center suggest had no impact?

The increased use of the death penalty

There are seven firms in the automobile industry. The market shares of the firms are 34 percent, 21 percent, 17 percent, 9 percent, 8 percent, 6 percent and 5 percent. Assume that the two (2) smallest companies (in terms of market share) in the automobile industry seek to merge in an effort to realize economies of scale and effectively compete with the larger companies in the industry. If so, then most likely

The justice department will not challenge the merger

"Even though there are only three or four rivals in this market, the firms compete vigorously because they all know that new firms can easily enter if prices exceed per-unit cost. Similarly, firms can easily exit if prices fall below unit cost." This statement describes

a contestable market

Supply and demand forces and dynamics created an oddity in the oil futures market. That oddity was

a negative price.

The mechanisms or channels through which "too high" a public debt may affect medium to long term growth (and private capital formation) include

a reduced ability to engage in countercyclical fiscal policies

It is important to use marginal analysis in examining crime policies rather than "average" (cost and benefit) analysis because

additional spending is only effective when the marginal or added benefit exceeds the marginal or added cost.

Those most likely to lose from an increase in the minimum wage include

all businesses since wages for all workers will increase The losers are the people who lose their jobs, small business owners who have to pay the higher wage with perhaps a very small profit margin to do so, and anyone who buys goods or services produced by minimum-wage workers, because part of the increase is passed on to them in the form of higher prices

The size of the Federal Reserve balance sheet ________ from its 2019 level by May 2020.

almost doubled

The notion of "clean enough" is

appealing to an economist thinking about marginal benefit and marginal cost. Suppose the benefits of cleanup are slight and the time required is great. What this implies is that the marginal cost of achieving greater cleanliness is increasing while at the same time its marginal benefit is decreasing. This means that the maximum net benefit of environmental cleanup is where the marginal benefit equals the marginal cost. Thus, cleanup should occur so long as the marginal benefit of cleaning more is more than the marginal cost of cleaning more.

Cap and trade regulations

are intended to create incentives for the companies with the lower/lowest costs of pollution abatement to pollute less than companies with higher costs of pollution abatement

The monetary and fiscal policy actions taken in response to COVID-19 were primarily designed to

increase aggregate demand.

If the demand for labor is reflected in a downward sloping linear demand curve, then successive increases in any binding minimum wage (that is, for example, a binding minimum wage increases from $10.10/hr to $12.10/hr and then from $12.10/hr to $14.10/hr), will result in

increasing (as a percentage) job losses, and decreasing total income (or reduced rates of income growth) paid to labor

Economic theory would suggest that the profitability of an industry would be

inversely related to the number of firms competing in the industry. When a firm faces a large number of competitors, such that no one firm can influence the price (the case of perfect competition), the entry and exit will drive profits to a normal level. When a firm faces few competitors, such that the firm can influence the price (the case of monopoly), profits can be above the normal level.

The economic impact of epidemics/pandemics prior to COVID-19

is difficult to gauge because while recessions occurred during many of them, the aligning epidemic/pandemic was not the clear cause.

If the demand for labor is inelastic, then the unemployment caused by raising the minimum wage is

less than if it were elastic

Job polarization in the United States and Western European Countries refers to the

loss of "middle skilled" jobs

The present value of extracting a $50 barrel of oil in five years is

lower, the greater the discount rate. The greater the discount rate, the lower the present value of a future asset and the lesser will be the degree of conservation, and the lower the discount rate, the higher the present value of a future asset and the greater will be the degree of conservation.

Suppose you were to hear an economist defend the minimum wage on the grounds that when she estimated the saving rate of minimum wage workers and found it to be much smaller than the savings rate of employers. You would know her to be relying on the ________ argument.

macroeconomic

A reason to limit trade revealed by COVID-19 is the need to

maintain access to health-related goods during a pandemic.

If judges had to be trained as economists before taking their position, they might use ________ analysis when deciding on the right sentence.

marginal Of key concern to economists is not necessarily whether the total amount spent on crime control exceeds the total amount saved from preventing crime, but whether we are spending the correct amount. At its heart, the problem is exactly the same as the profit-maximizing problem for a business firm. The mere fact that a firm's revenues exceed its costs does not mean that profit is as high as it could be. That means we are less interested in the costs and benefits of capturing, trying, and incarcerating the "average" criminal than we are in incarcerating the "marginal" criminal.

The optimal level of police protection would compare the ________ with the ________.

marginal cost of hiring an additional officer; marginal benefit of crime reduction Of key concern to economists is not necessarily whether the total amount spent on crime control exceeds the total amount saved from preventing crime, but whether we are spending the correct amount. At its heart, the problem is exactly the same as the profit-maximizing problem for a business firm. The mere fact that a firm's revenues exceed its costs does not mean that profit is as high as it could be. That means we are less interested in the costs and benefits of capturing, trying, and incarcerating the "average" criminal than we are in incarcerating the "marginal" criminal.

Crime victims in the U.S. are disproportionately

minorities

The CARES Act provision for increased unemployment compensation payments (of $600 per week in supplemental federal payments)

most likely did not affect the work leisure choices of workers nor the level of structural unemployment in the U.S.

An industry in which there are two competitors with specific marketing niches is likely to be characterized by

oligopoly When a firm faces a large number of competitors, such that no one firm can influence the price, when the good a firm sells is indistinguishable from those its competitor sells, when firms have good sales and cost forecasts, and when there is no legal or economic barrier to its entry into or exit from the market, then we have what economists call perfect competition. Oligopoly refers to a situation in which there are few firms producing similar but not identical goods.

In the Spring of 2020 through the early Fall of 2020, the COVID-19 related deaths in developed countries were concentrated most starkly among

people over age 60.

An industry in which there are a very large number of firms is likely to be characterized by

perfect competition When a firm faces a large number of competitors, such that no one firm can influence the price, when the good a firm sells is indistinguishable from those its competitor sells, when firms have good sales and cost forecasts, and when there is no legal or economic barrier to its entry into or exit from the market, then we have what economists call perfect competition.

A Nobel Prize-winning economist by the name of Ronald Coase came up with a method of dealing with pollution. His widely cited theorem states that markets with externalities can be made to be efficient. This can be done by simply assigning rights to the polluted property, but it requires that bargaining costs not be prohibitive.

present value With non-renewable resources, there is the opportunity cost of using the resource now or waiting and using it later. When comparing values that occur at different times, the economic tool of present value is useful.

A law that prevents prices from increasing because of an emergency serves as a ________ and is meant to prevent ________. The result, however, creates a ________.

price ceiling; price gouging; shortage A law that is designed to prevent prices from rising operates as a price ceiling. A price ceiling is employed to prevent firms from raising prices in an emergency. When firms take advantage of emergencies to increase prices, it is called price gouging. A price ceiling will create a shortage because more of the good will be wanted at the limited price than will be available at that price.

The rational criminal model explains crimes of

profit The rational criminal model of criminal behavior explains crime in terms of a simple investment decision. The decision to commit a crime is one of risk versus return. The low-return investment, work at a legal job, has a low return, but the worker carries no risk of being arrested. On the other hand, the high-return investment, stealing or selling illegal goods, has a high return, but it puts the thief or drug dealer at risk of being caught and punished. In this context, a criminal is no different from an investment banker who has a portfolio that contains a mix of risky and safe assets.

The Sherman act of 1890

prohibited restraints of trade

Even though both monopolists and competitive firms follow the MC = MR rule in maximizing profits, there are differences in the economic outcomes because

pure competitors are small with no market power. In pure competition, MR = P because the firm's supply is so insignificant a part of industry supply that its output has no effect on price. It can sell all that it wishes at the price established by demand and the total industry supply. The firm cannot force the price up by holding back part or all of its supply. The monopolist, on the other hand, is the industry. When it increases the quantity it produces, price drops. When it decreases the quantity it produces, price rises. In these circumstances, MR is always less than price for the monopolist; to sell more the monopolist must lower the price on all units, including those it could have sold at the higher price had it not put more on the market. When the monopolist equates MR and MC, it is not selling at that price: The monopolist's selling price is on the demand curve, vertically above the point of intersection of MR and MC. Thus, the monopolist's price will be higher than the pure competitor's price.

The process of creative destruction refers to

real world competition arises from new products, new technologies and new sources of supply that vanquish old products and technologies.

If a chemical does environmental damage but is used in the production of a good that provides satisfaction to the consumer and profit to the producer an economist will

seek to impose a tax on either the chemical of the good. The costs of the chemical use must be weighed against the benefits of consumption. For example, even though some pesticides threaten certain species, they so enhance food production that using them is worth the cost. Here the costs of the pesticide use are weighed, but so are the benefits of consumption. To solve the environmental problems that we face, we have to encourage or require clean behaviors, or we must discourage unclean behaviors or render them illegal. To varying degrees, all these methods work. In this case, instead of an outright ban on the chemical, an economist might seek to impose a tax on the chemical so that the net benefit to society is maximized.

Regarding Tier 1 assets and the leverage ratio, the Federal Reserve ________ during the COVID-19 recession.

set more lenient standards

To an economist, the correct distribution of money among police, the justice system, and prisons is one that

sets the amount each gets so that no other element could better use (in terms of crime reduction) the marginal dollar. Marginal analysis is used to determine that the right amount of money is spent in an effective way to deter or reduce crime rates. The allocation between police, justice, and incarceration should depend on how effective the marginal dollar is in combating crime in each category. If the optimal distribution is accomplished, the marginal benefit of a dollar should be equal in the three areas.

If it costs Con Ed approximately $20 per additional ton of air pollution abated, but it costs PG&E only $10 per additional ton of air pollution abated and a marketable pollution permit trades for $14 per ton,

society would gain if PG&E would sell and Con Ed would buy.

Overfishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase would suggest that there would be no problem if

someone owned (and could control) the ocean. Common property is property that is without a discernible individual owner. This property is usually owned by the government, a neighborhood association, or some other collective group. The problem with common property is that even though it may be worth a great deal to the group, the benefits of treating the property well are not worth the costs to any one individual. Economists refer to this as the "tragedy of the commons." A Nobel Prize-winning economist by the name of Ronald Coase came up with a method of dealing with pollution. His widely cited theorem states that markets with externalities can be made to be efficient. This can be done by simply assigning rights to the polluted property, but it requires that bargaining costs not be prohibitive.

The costs borne by an individual victim of theft can diverge from the social costs if the

stolen items were covered by insurance.

The response of international investors to COVID-19 caused the U.S. dollar to ________ and interest rates on U.S. Treasuries to ________.

strengthen; fall International investors (seeking safety) sold significant assets and converted those assets into U.S. dollars. That strengthened the dollar. They then invested the proceeds in U.S. Treasuries, which reduced U.S. interest rates.

There are seven firms in the automobile industry. The market shares of the firms are 34 percent, 21 percent, 17 percent, 9 percent, 8 percent, 6 percent and 5 percent. Assume that the two (2) largest companies (in terms of market share) in the automobile industry seek to merge arguing that the merger will realize economies of scale. f so, then most likely

the Justice Department will review the merger and will probably not allow it to take place because the Herfindahl-Hirschman-index has increased

John Rawl's Theory of Justice and articulated "veil of ignorance" (would) best support

the establishment of an enhanced earned income tax credit (EITC) or universal basic income (UBI) over a minimum wage because they are more consistent with principles of justice which are to govern a just society chosen by rational agents in the original position from behind a veil of ignorance.

Those most likely to benefit from an increase in the minimum wage are

those workers who get a higher wage due to the minimum wage and who are still able to keep their jobs. The winners with a minimum wage are the more than 4 million people who work for the minimum wage and get a pay increase because they keep their jobs.

Economists refer to the problem that exists when public property is treated poorly because it is in no one's private interest to protect it as the

tragedy of the commons

Kenneth Arrow argued that highly concentrated markets or industries are inherently or generally anti-competitive.

true

When a BLS unemployment survey participant describes themselves as "employed but away from work" when they are really unemployed, this ________ the unemployment rate.

understates

Under the Sherman Anti-Trust Act, it is illegal to

use monopoly power in one market to foster a monopoly in another.

The European Union has prosecuted cases against Apple and Google for violations of their antitrust laws. Specifically, they were accused of

using their dominance in one area to dominate another.

The heart of the argument against an increase in the minimum wage is one based on

variations in the price elasticity of labor demand (i.e., labor demand may be elastic or slightly inelastic across various markets)

For a particular crime, the correct sentence length occurs

where the marginal benefit of incarceration equals the marginal cost of incarceration.

The article entitled "T-Mobile, Sprint Deal Wins Approval, Reshaping Industry" (published in the Wall Street Journal) reported that the Court approved the merger between T-Mobile and Spirit a decision supported by the U.S. Department of Justice. What best reflects the Court's and the Department of Justice's support of the merger:

while the merger increased the Herfindahl-Hirschman-index number in the wireless market, the merger also increased the level of competition in the wireless market.

The economic intuition behind the connection between abortion and crime rates is based on the idea that

women who choose abortion do not want the child and, if compelled to raise it would be poorer and do a poorer job at parenting, increasing the likelihood the child would grow up to be a criminal.