ECON 610 ch 5,12,13

To calculate the price elasticity of demand using the midpoint method, you would use the following approach: a. % change in quantity / % change in price b. Price times quantity c. % change in price / % change in quantity d. % change in quantity minus the % change in price

% change in quantity / % change in price

To calculate the price elasticity of supply using the midpoint method, you would use the following approach: a. % change in price / % change in quantity b. % change in quantity minus the % change in price c. % change in quantity / % change in price d. Price times quantity

c. % change in quantity / % change in price

The wage elasticity of labor supply can be calculated using the following approach: a. % change in wage / % change in quantity of labor supplied b. The labor force participation rate / the inflation rate c. % change in quantity of labor supplied / % change in wage d. % change in quantity of labor supplied / the savings rate

c. % change in quantity of labor supplied / % change in wage

Which of the following would result in a positive externality? a. A restaurant provides calorie data on its menu. b. A power plant in a city neighborhood causes fumes that create respiratory problems. c. A company does research on DNA that supports vaccine development. d. A city introduces a rental price control.

c. A company does research on DNA that supports vaccine development.

Marketable permits work best when.. a. They are mandated by the federal government. b. Five firms are polluting and are willing to trade pollution permits. c. A few dozen or a few hundred parties are highly interested in trading. d. Four or five thousand parties are interested in trading.

c. A few dozen or a few hundred parties are highly interested in trading.

In general, supply and demand are often inelastic in the short run, so that shifts in either demand or supply can cause: a. A relatively smaller change in prices b. No change in prices c. A relatively greater change in prices d. A monopoly situation in all cases

c. A relatively greater change in prices

Which of the following is most likely to be rivalrous in some situations but non-rivalrous in others? a. An open-access ebook. b. A pile of mulch provided by the town from which everyone can take. c. A fireworks show. d. A public playground swingset.

d. A public playground swingset.

If income elasticity of demand for a good is positive, we say that good is a normal good. You can use the following approach to calculate the income elasticity of demand for a good: a. % change in quantity demanded / % change in income b. % change in quantity supplied / % change in income c. % change in quantity demanded / % change in income tax rates d. % change in income / % change in quantity demanded

a. % change in quantity demanded / % change in income

How does a marketable permit program encourage innovation? a. By providing a market for companies who can pollute less to sell to those who pollute more. b. By providing a market for companies that provide pollution testing. c. By lowering the total allowable pollution each year. d. By rewarding companies that reduce pollution.

a. By providing a market for companies who can pollute less to sell to those who pollute more.

If demand is ___, then a given % rise in price will cause a smaller % fall in quantity demanded so that total revenue (Price × Quantity) rises. a. Inelastic b. Elastic c. Perfectly Inelastic d. Unit Elastic

a. Inelastic

When the quantity of environmental protection is low so that pollution is extensive, there are usually numerous relatively cheap and easy ways to reduce pollution, and the marginal benefits of doing so are? a. Quite high. b. Perfectly elastic. c. Perfectly inelastic. d. Quite low.

a. Quite high.

Which of the following examples illustrates the tragedy of the commons? a. Someone takes all the books from a "take a book, leave a book" shelf at a town hall. b. Fruit and vegetables in a public garden go rotten because no one uses them. c. Someone rides the bus without paying. d. Someone takes a public good to resell it.

a. Someone takes all the books from a "take a book, leave a book" shelf at a town hall.

How a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when: a. Supply is more elastic than demand. b. The firm decides to pass none of the tax on to the consumer via a higher price. c. Cross elasticity of demand is .35 d. Demand is more elastic than supply

a. Supply is more elastic than demand.

Public goods have two characteristics: nonexcludable and non-rival. Non Excludable means: a. That only governments can buy it b. That it is very difficult to prevent someone from using the good. c. That when one person uses the public good, another can also use it. d. That only the buyer can use it.

b. That it is very difficult to prevent someone from using the good.

Which type of country would be most likely to invest heavily in environmental protection? a. A country that has newly achieved high GDP per capita b. A country that has long-sustained high GDP per capita c. A country with low GDP per capita d. A country with high levels of natural resources

b. A country that has long-sustained high GDP per capita

Having an outdoor arena that will host country music concerts a half-mile from your neighborhood would be called a positive externality if you loved country music. If you hated country music that situation would be called? a. A great opportunity to learn to like country music. b. A negative externality. c. A frictional externality. d. A public good.

b. A negative externality.

A company discovers a new technology that allows it to substantially reduce its cost of production. The demand for the product is inelastic. Consumers will in general experience: a. A price increase b. A price decrease c. A monopoly in the long run or a lower demand d. No change in the price of the product

b. A price decrease

A horizontal demand curve or supply curve would be called: a. Cross elastic b. Perfectly elastic c. Perfectly inelastic d. Unit elastic

b. Perfectly elastic

A firm offloads some of its production costs to 3rd parties. This would contribute to market failure because: a. The firm would lose money. b. Private benefits would not be the same as the benefits to society as a whole. c. Private costs would be the same as the costs to society as a whole. d. Consumers would love the lower prices.

b. Private benefits would not be the same as the benefits to society as a whole.

How do intellectual property rights drive innovation? a. They allow firms to innovate with much less debt. b. They allow companies to earn monopoly profits on its product for a period of time. c. They allow firms to earn oligopoly profits on their product for 10 years. d. They provide a means for innovators to share their new inventions with their competitors.

b. They allow companies to earn monopoly profits on its product for a period of time.

The social benefits of an innovation: a. are very easy to measure. b. account for the value of all the positive externalities of the new idea or product c. are impossible to quantify and are therefore of no value. d. are based on the social media attention generated by the innovation.

b. account for the value of all the positive externalities of the new idea or product

Which of the following represents a social benefit? a. The total revenue a company gains from developing a new vaccine. b. The satisfaction of eating a strawberry ice cream. c. All of the positive externalities from the invention of the laser d. All of the positive externalities a company receives from the implementation of a new technology that decreases the cost of production.

c. All of the positive externalities from the invention of the laser

Countries could analyze the tradeoffs between economic output and the environment that would show the set of productively efficient combinations by using a. Game theory b. The theory of consumer behavior c. Production possibilities model d. The theory of comparative advantage

c. Production possibilities model

Ecotourism loosely defined is about tourists who hope to appreciate the ecology of their destination. This willingness of people to travel to countries and enjoy their wildlife motivates countries to a. Increase housing in wilderness areas. b. Export wildlife. c. Pursue environment protections d. Allow tourists to pay for the environmental protections

c. Pursue environment protections

A free rider is a. Someone who only purchases resold goods or only uses items they can get for free. b. Someone who resells items they have purchased. c. Someone who consumes a public good but does not pay for it. d. Someone who gives away items they have purchased.

c. Someone who consumes a public good but does not pay for it.

Command-and-control regulation refers to laws that a.. Establish a government control center that watches the pollution behavior of firms. b. Establishes a citizen committee to oversee the pollution behavior of firms. c. Specify allowable quantities of pollution. d. Allow firms to control themselves without government involvement.

c. Specify allowable quantities of pollution.

What does the research and experimentation tax credit do? a. It offers firms a tax reduction depending on hiring of scientific and technical personnel. b. Generates significant tax revenue for the federal government. c. It offers a tax benefit to individuals who work in research and development. d. It offers firms a tax reduction depending on how much research and development they do.

d. It offers firms a tax reduction depending on how much research and development they do

A pollution charge gives a profit-maximizing firm an incentive to reduce its emissions with what condition? a. That they will benefit from subsidies or related rewards if they are successful. b. That the opportunity cost of reducing the emissions is less than the tax. c. The government will provide the means or method for the reduction. d. That the marginal cost of reducing the emissions is less than the tax.

d. That the marginal cost of reducing the emissions is less than the tax.

A perfectly inelastic demand curve or supply curve means... a. There is a 1% change in quantity demanded in response to a 1% change in price. b. There is an infinite change in quantity demanded or supplied in response to a change in price. c. If the price of one good changes by 1% the % change in quantity demanded will be greater than 1%. d. There is no change in quantity demanded or supplied in response to a change in price

d. There is no change in quantity demanded or supplied in response to a change in price

Firms will typically maintain a list of research and development projects ranked by expected rate of return. Expected rate of return is defined as: a. the total cost of the project times the number of days it takes to complete the project. b. the percentage increase in debt for the firm. c. the amount of money the firm must borrow to fund the project. d. the estimated payoff from the project.

d. the estimated payoff from the project.