Econ 201 Final CH 18, 19, 20, 1, 2

In the ____, the tax receipts from today's workers are used to pay benefits to retired and disabled workers and their dependents today.

Social Security system

An example of acquired comparative advantage is that

Some U.S.consumers prefer German cars over American cars because German cars have a reputation of being very safe

Assume a society can produce either beer or wine. If the marginal rate of transformation of gallons of beer into gallons of wine is 0.5, then the opportunity cost of beer is

The 2 gallons of wine that must be forgone

_____ is available only to low income families with children

The Earned Income Tax Credit

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

The United States will import shoes from italy and italy will import wine from the United states

In a laissez-faire economy, ______ what gets produced, how it is produced, and who gets it

The behaviors of buyers and sellers determines

If a country has a trade surplus of $40 billion, which of the following can be true?

The country's exports are $160 billion, and its imports are $120 billion

The mistake of inferring causality from two events happening one after the other is called

The post hoc,ergo propter hoc fallacy

According to ________, a country should specialize and export goods with the lowest opportunity cost.

The theory of comparative advantage

Which of the following is a normative question?

To reduce the regressive nature of the gasoline excise tax, should the portion of the gasoline excise tax paid by high-income individuals be increased?

_____ is (are) paid regardless of a person's income from other sources and regardless of assets.

Unemployment benefits

In 2015, President Obama proposed increasing the minimum wage from $7.25 an hour to $10.10 an hour. According to theory what would likely be the result of such an increase?

Unemployment would increase as firms lay off workers

A measure that can change from observation is known as a

Variable

The idea that income redistribution violates the proposition that "one is entitles to the fruits of ones efforts" is a common argument most used

against income distribution

Which of the following is a base on which taxes are levied in the US?

all of the above : sales, income, property

A quota imposed on imported steel will cause the domestic ________ of steel to increase and the domestic ________ of steel to increase.

price; production

A family that earns $20,000 a year pays $400 a year in city wage taxes. The city wage tax is _____ tax.

progressive

If the average tax rate is less than the marginal tax rat, the tax would be

progressive

If the marginal tax rate exceeds the average tax rate, the tax would be

progressive

The US individual income is designed to be

progressive

The $1000 you earned last year on your money market fund is an example of

property income

A family that earns $20,000 a year pays $4,000 a year in payroll taxes. A family that earns $40,000 a year pays $8,000 a year in payroll taxes. The payroll tax is ____ tax

proportional

If the marginal tax rate equals the average tax rate, the tax would be

proportional

Refer to Table 19.2. The tax rate structure in this example is

proportional

Refer to table 19.1. The tax rate structure in this example is

regressive

The payroll tax for income earners at top income levels in the US is

regressive

Studies of the income tax show that its burden as a percentage of income

rises slightly as income increases

An economy produces capital goods and consumer goods. This economy is operating at a point on its production possibility frontier associated with a large amount of capital goods and a small amount of consumer goods. This is most likely to be a

"Rich" country because such a nation can afford to sacrifice

If you can download 10 ringtones for your cell phone for $10 or you could download 11 ringtones for your cell phone for $10.50, then the marginal cost of the 11th tone is

$.50

Consider the following game. You roll a sex-sided die and each time you roll a 6, you get $30. For all other outcomes you pay $6. What us the expected value of the game?

$0

The value of the slope of a society's production possibility frontier is called its

Marginal rate of transformation

An individual earning $60,000 pays $12,000 in taxes. The marginal tax rate on any income above $60,000 is 25%. When this person earns $70,000 and gives a $1000 tax deductible donation to charity. The donation reduces her tax payment by

$250

A Gini coefficient of _____ means that the income is equally distributed

0

Related to the Economics in Practice on page 391: Refer to Table 19.4. At an income level of $10,000, the average tax rate is

10%

An individual earning $40,000 pays $3,200 in taxes. The marginal tax rate on any income above $40,000 is 20%. When this person earns $60,000, her average tax rate is

12%

An individual earning $60,000 pays $12,000 in taxes. The marginal tax rate on any income above $60,000 is 25%. When this person earns $70,000, her average tax rate is

20.7%

Which of the following are of the three fundamental concepts of economics?

3 concepts: marginalism, opportunity cost, the working of efficient markets

An equal distribution of income would yield a Lorenz curve that is

45-degree line between 0 and 100%

When one country can produce a product at a lower cost in terms of other goods, that country is said to have

A comparative advantage

Which of the following phenomena can be explained by the simple comparative advantage theory?

A country that has a vast amount of farmland tends to export agricultural goods

Better insurance benefits increase the incentive of some individuals to work. This statement is best described as

A positive statement

For any pairs of countries, there is

A range of exchange rates that can lead automatically to both countries realizing the gains from specialization and comparative advantage

Economic growth may occur when

A society acquires new resources

The advantage in the production of a product enjoyed by one country over another when it uses fewer resources to produce that product than the other country does is?

An absolute advantage

______ market is characterized by the fact that profit opportunities are eliminated almost instantaneously

An efficient

In terms of the production possibility frontier, _____ would best be shown by the production possibility frontier shifting outward

An increase in productivity attributable to an increase in the capital stock

The demand for Alaskan fishermen is the same as the demand for deep-sea divers in Hawaii. The annual earning of Alaskan fishermen is 30% higher than the earnings of deep-sea divers. What is a possible explanation?

Being a fisherman in Alaska must be more dangerous than being deep sea diver in Hawaii

China has a comparative advantage in textiles and an absolute advantage in both textiles and radios. Japan has a comparative advantage in radios. According to this scenario

China should export textiles and import radios

Empirical economics refers to the

Collection and use of data to test economic theories

An economy in which a central authority draws up a plan that establishes what will be is

Command econimy

Production decisions are centralized is a

Command economy

The idea that consumers determine what is produced in the economy through their demand is known as

Consumer sovereignty

If someone can produce a good at a lower opportunity cost, she _____ in producing that good

Has a comparative advantage

If the slope of a straight line is 4 and if Y (the variable on the vertical axis) decreases by 20, then X (the variable on the horizontal axis

Decreases by 5

Some economists advocate government intervention in a market economy when resource costs for a private producer _____ to society

Do not reflect the full cost

Which of the following statements is true?

Economists believe that marginal tax rates have a greater influence on behavior than average tax rates

The four criteria that are frequently used in judging the outcome of economic policy are

Efficiency, equity, stability, and economic growth

_____ of the payroll tax if labor supply is perfectly elastic.

Employers will bear the full burden

Rent control laws are imposed when city officials believe landlords have been exploiting tenants. Which of the following criteria are they using to guide their actions?

Equity

Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes to rise with income. Which of the following criteria best explains the goal of this tax system?

Equity Equity = fairness

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

Fall

The freedom of individuals to start and operate private business in search of profits is known as

Free enterprise

In a ____, the amount of output that any one household gets depends on its income and wealth

Free market system

In a ______, the amount of output that any one household gets depends on its income and wealth

Free market system

The _____ is a commonly used measure of the degree of inequality in an income distribution

Gini coefficient

The economic problem can best be stated as

Given scarce resources, how exactly do societies go about deciding what to produce, how to produce it, and for whom to produce

Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana

Has a lower opportunity cost for soybeans, which means that it should specialize in the production of soybeans and engage in trade

A change in economic output is potentially efficient

If the value of the resulting gains exceeds the value of the resulting losses

For an economy to produce at a point beyond its current ppf, the economy must

Increase its resource base

A tariff imposed on imported shoes will cause the domestic price of shoes to ________ and the domestic production of shoes to ________.

Increase; increase

India has a comparative advantage compared to Spain in the production of clothing if

India can produce clothing at a lower cost in terms of other goods than Spain can

In economics, the creation of capital is referred to as

Investment

Ockham's razor is the principle that states

Irrelevant detail should not be included in a model

If society is producing at a point along its production possibility frontier, then the society

Is fully employing its resources, but not necessarily output efficiency

If resources are combined efficiently in production, then the society

Is producing at a point on the production possibility frontier but not necessarily at the most-desirable point

How did the introduction of the microwave oven in 1960 affect the market for frozen food?

It reduced the opportunity cost of eating frozen food by decreasing the amount of time required to prepare frozen meals

An economy in which individual people and firms pursue their own self-interest without any central direction or regulation is a

Laissez-fair economy

When countries specialize in producing those goods in which they have a comparative advantage, they

Maximize their combined output, but they do not necessarily allocate their resources more efficiently

If Mexico has a comparative advantage in the production of oil compared to France, then

Mexico can produce oil at a lower opportunity cost than France

If the unemployment rate decreases from 9% to 6%, the economy will

Move close to to point on the ppf

Scarce resources give rise to the concept of

Opportunity costs

The production possibility frontier is used to illustrate the concept of

Opportunity costs

Periods of less than full employment correspond to

Points underneath the ppf

Suppose that Greece and Portugal are both engaged in the production of grapes and figs, and that Greece has an absolute advantage in the production of both goods. If Portugal has a lower opportunity cost for producing figs, then

Portugal has a comparative advantage in the production of figs, and specialization and trade between the two countries can be mutually beneficial

It always rains about an hour after you finish washing your car. Concluding that washing your car causes it to rain is an example of the

Post hoc, ergo propter hoc fallacy

The basic coordinating mechanism in a free-market system is

Price

A decrease in the stock of capital will cause the

Production possibility frontier to shift inward

In a market system, self-interest motivates most people to

Provide products for other people

The concept of opportunity cost is based on the principle of

Scarcity

The concept of trade-offs would become irrelevant if

Scarcity were limited

Earning a doctorate in environmental economics is an example of

an investment in human capital

The total amount of tax you pay divided by your total income is the

average tax rate

The corporation income tax causes

capital to flow from the corporate sector to the non corporate sector

Refer to Figure 19.1. After firms can respond to the payroll tax, employment will have

decreased by 100

Refer to Figure 19.1. The payroll tax imposed initially

did not change the equilibrium wage rate

Property income generally takes the form of all of the following

dividends, profits, interest

Employees with less experience tend to earn less than employees with more experience, because

experience on the job increases an employees human capital

You cause an automobile liability insurance company to face a moral hazard problem when you take ___ driving precautions ____ you buy automobile liability insurance from the company.

fewer; after

In the long run, an increase in the individual income tax rate with no change in the corporate tax will lead to ______ profits in the corporate sector and _____ profits in the non corporate sector.

higher; lower

When measuring ____ for the purpose of classifying people as poor, the measurement used is money income

income

In the long run, a reduction in the corporate profits tax may lead to _____ prices for the products and _____ prices for the products partnerships and propiertorships

lower; higher

When measuring income for the purpose of classifying people as poor, the measurement of income used is

money income

Assume that both corporate and non corporate sectors are in long-run equilibrium before the imposition of a corporate profits tax. In the short run, the imposition of a corporate profits tax will _____ profits in the non corporate sector, but _____ profits in the corporate secotor.

not change, decrees profits in the corporate sector

Tax shifting

occurs when taxed agents can alter their behavior and do something avoid paying a tax

The ____ in the United States is set at three times the cost of the Department of Agriculture's minimum food budget

official poverty line

The tax rate structure is the

percentage of a tax base that must be paid in taxes

For most families, a majority of their property comes from

savings

The ultimate distribution of a tax burden is the

tax incidence

A(n) ____ is most easily shifted.

tax on pineapples

All of the following are programs in the Social Security system

the Disability Insurance Program, the Medicare program, the Old Age and Survivors Insurance program

A proportional income tax means that those with higher income pay

the same percentage of their income in taxes as low-income people

The ultimate burden of the corporate profits tax appears to depend on all of the following except

the tax rate structure of the corporate profits tax

The average tax rate is

the total amount of tax paid divided by total income

Food stamps are

vouchers that have a face value greater than their cost and that can be used to purchase food at grocery stores

Households derive the majority of their income from

wages and salaries

In the United States, most people's _____comes from saving.

wealth