Econ Test 4 (17, 18, 19, 20, 21)

Some nations are more involved in international trade than others, as measured by exports as a percentage of GDP. Which of the following most closely matches the exports as a percentage of GDP for the U.S. in 2010?

13 percent

Which of the following most closely represents the share of total U.S. income that flows to the poorest fifth of all U.S. households?

3.4 percent

Of the age groups given below, which has experienced the greatest decline in poverty rates in the U.S. since 1959?

65 years and older

Which of the following offers the best example of a positive externality?

A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood.

Which of the following is an unintended consequence of welfare?

A reduced incentive to leave welfare if more benefits are lost when income begins to be earned.

Which of the following correctly describes an aspect (or aspects) of the U.S. experience with affirmative action?

All companies doing business with the federal government are required to set numerical hiring, promotion, and training goals to ensure that these firms did not discriminate in hiring based on race, sex, religion, or national origin.

The U.S. had the largest trade deficit in 2009 with which of the following countries?

China

Why is the rate of deforestation frequently higher than would be socially optimal?

Deforestation generates costs, such as soil erosion and reduced production of atmospheric oxygen, that are entirely borne by those who harvest the trees.

Which of the following reasons best explains U.S. imports of bauxite from Jamaica and diamonds from South Africa?

Differences in resource endowments

Which of the following reasons for international specialization best explains why many small-population countries import automobiles from Japan, the U.S., and Germany rather than produce them domestically?

Economies of scale

Suppose firms A and B both formerly emitted 200 tons of pollution per year, and are both required to reduce pollution emissions by 100 tons per year. Each of these firms are allowed to emit 100 tons per year, and these allowances are tradable. Assume that it costs Firm A $10 per ton to reduce emissions, while it costs Firm B $50 per ton to reduce emissions. If Firm A can reduce its emissions up to 200 tons, then which of the following is true?

Efficient emissions trading would generate the same 50 percent reduction in emissions, and the total cost of reducing total emissions by 200 tons would be $2,000.

A key characteristic of a renewable natural resource is that it will continue to regenerate itself, regardless of how it is managed or used, and so can be used periodically for an indefinite period of time.

False

According to recent study, air pollution on average is greater outdoors than indoors.

False

Air, an open-access resource, cannot be apportioned into individual private property rights because no individual can easily access the resource and then easily allow designated individuals to use the resource.

False

Balance-of-payments accounts are maintained according to the principles of single-entry bookkeeping.

False

Based on the simplified trade relations assumed in the textbook, if two countries specialize according to comparative advantage, and trade according to mutually satisfactory terms of trade, then each country's consumption-possibilities frontier will shift inward relative to autarky.

False

Between 1917 and 1982 the U.S. ran a financial account surplus, since 1983 there has been a deficit in the financial account.

False

Comparative advantage is the ability of a country to produce a good at a higher opportunity cost relative to other countries.

False

Consumers in the importing country will tend to favor import quotas over free international trade.

False

Countries that came together by treaty to form the General Agreement on Tariffs and Trade (GATT) agreed to treat all members equally with respect to trade, impose high tariffs on non-GATT countries, and impose low import quotas on non-GATT countries.

False

Exchange rate refers to the quantity of one good exchanged for a unit of another good.

False

If quota rights accrue to foreigners, then the domestic economy is better off with a quota than with a tariff.

False

Net investment income from abroad is investment earnings by U.S. residents from their foreign assets plus investment earnings by foreigners from their assets in the United States.

False

Research indicates that providing welfare to a family will cause their children to remain on welfare.

False

Tariff is a legal limit on the amount of a commodity that can be imported.

False

The U.S. merchandise trade balance has been in surplus over the last 30 years.

False

The balance of payments measures a stock of transactions during a particular period, usually a year.

False

The biggest reform in the federal welfare system in 50 years came in 1997, when the Aid for Families with Dependent Children (AFDC) entitlement program replaced the Temporary Assistance for Needy Families (TANF) program.

False

The consumption possibilities frontier shows a nation's possible combinations of labor and capital resources that are used for specializing in the production of the comparative advantage good.

False

The deficit in the U.S. current account in recent years has been reinforced by a deficit in the U.S. capital account.

False

The environmentally friendly firm will operate at a lower marginal and average cost than those firms that shift some costs onto society in the form of external costs.

False

The greater the marginal cost and the lower the marginal benefit of reducing greenhouse gases, other things constant, the cleaner the air.

False

The growth in the number of poor families since 1965 has resulted overwhelmingly from a growth in the number of elderly households.

False

The marginal social cost curve lies below the marginal private cost curve, with the vertical difference between the two curves representing the marginal external cost.

False

The market for pollution rights represents a command-and-control environmental regulation approach to control pollution.

False

The only way to reduce pollution is to reduce output of the polluting firms.

False

Unless there are barriers to prevent free international trade, a country becomes an importer when the world price exceeds the domestic price. In contrast, a country becomes an exporter when the world price is less than the domestic price.

False

When a country has an absolute advantage in the production a few commodities, autarky is always preferred to trade.

False

When a country imposes a per-unit (ad-valorem) tariff on an imported good or service then, the price that domestic consumers pay for the import falls.

False

When an established domestic industry is in jeopardy of being displaced by lower-priced imports, then there could be a rationale for encouraging imports.

False

When the number of parties involved in the transaction is small, Coase's solution of assigning property rights may not be enough.

False

When a country runs a deficit in its current account, the amount of foreign exchange that the country gets from exporting goods and services and from receipts of unilateral transfers falls short of the amount needed to pay for its imports and to make unilateral transfers. Where does the additional foreign exchange come from?

From foreigners who invest in domestic production facilities, real estate, or financial assets, and from official government transactions in foreign currency

In the last four decades, the share of income going to U.S. households in the top fifth of the population:

Has increased

Suppose the installation of sound absorbing materials in the walls of an auto body shop would cost $4,000, and would generate $25,000 in increased property values for an adjacent neighbor. Completely reducing all noise would require extensive retrofitting, costing $100,000, and would generate $30,000 increase in property values for the adjacent neighbor. Thus there are net social benefits to installing the sound-absorbing materials. Which of the following would be consistent with the Coase Theorem?

If the area is zoned industrial and the shop has the right to emit noise, the efficient solution would be realized if the two parties negotiated and the neighbor bought sound-absorbing materials for the shop.

Which of the following are not counted as household income in determining whether or not a household is below the official poverty line?

In-kind transfers such as food stamps, Medicaid, and housing subsidies

In 2010, which category accounted for the highest share in the U.S. imports?

Industrial Supplies

The _____ argument was formulated as a rationale for protecting emerging domestic industries from foreign competition.

Infant Industry

The largest and costly welfare program in the U.S. is:

Medicaid

Suppose country Alpha must give up 2 units of clothing for each unit of food produced, while country Omega must give up 1⁄2 of a unit of clothing for each unit of food produced. If specialization and trade were to occur between these two fictitious countries, which of the following would be consistent with comparative advantage and mutually advantageous trade?

Omega will sell food to Alpha at a price of 1 unit of clothing for 1⁄2 unit of food.

Which of the following most closely defines the concept of poverty?

Poverty is a relative term and is based on income considerably below the average in society.

Who most clearly gains from a tariff on imports?

Producers in the importing country

Which of the following offers positive external benefits in consumption?

Public education

In 2010, which category accounted for the highest share in the U.S. exports?

Services

The major U.S. social insurance program is:

Social Security

From an economic standpoint, the passage of the Clean Air Act of 1970 did which of the following?

The 1970 act recognized the atmosphere as an economic resource with alternative uses, and gave Americans the right to breathe air of a certain quality.

How does the federal government determine the level of income that constitutes the poverty line for a family of a particular size?

The U.S. government defines the poverty line as income at or below three times the amount of money needed to buy basic, nutritionally sufficient food for all family members.

Which of the following makes up the balance on current account?

The balance on goods and services, net investment income from abroad, and net unilateral transfers abroad.

An open-access good is often subject to which of the following problems?

The common-pool problem

_____ states that when an established domestic industry is in jeopardy of being displaced by lower-priced imports, then there could be a rationale for temporary import restrictions.

The declining industry argument

If we compare the trend in median wage for people with no more than a high-school education to that of people with a bachelor's degree, which of the following best describes median wage trend in the U.S?

The median inflation-adjusted wages for people with only a high school education have declined by about 6 percent since 1980, while the median wage of college graduates has risen by 12 percent in the same time period.

Which of the following offers the best example of an external cost?

The payments to owners of labor resources and coal inputs used by a coal-burning electric generating facility

Which of the following correctly describes the trend in the percentage of U.S. families living in poverty?

The poverty rate steadily declined from about 22 percent in 1959 to about 12 percent in 1969, and has fluctuated since then. The poverty rate in 2009 was approximately 14.3 percent, due to the recession of 2007-2009.

Suppose the government of an importing country is considering imposing a tariff that would result in imports falling to 1 million units per year, or an import quota of 1 million units per year. Which of the following best describes the difference in the impact of these alternative trade restrictions?

The tariff provides the government of the importing country with revenue, while the quota provides gains to foreign exporting firms with quota rights.

A key reason why pollution and other negative externalities arise is because there are no practical, enforceable property rights to open-access resources such as the air and the ocean.

True

A major drawback associated with the assessment of income distribution is that they neglect the effects of taxes and in-kind transfers.

True

According to Coase, the efficient solution to an externality problem depends on which party can avoid the problem at the lower cost. Thus when property rights are assigned to one party or another, the two parties will agree on the efficient solution to an externality problem as long as transaction costs are low, regardless of which party is assigned the property right.

True

Approximately two-thirds of chemical pollution in the water comes from non-point pollution such as runoff from agricultural pesticides and fertilizer.

True

Autarky is the situation of national self-sufficiency, in which there is no economic interaction with foreign producers or consumers.

True

Economic efficiency approach offers each polluter the flexibility to reduce emissions as cost-effectively as possible.

True

In the presence of a positive externality, public policy aims to increase quantity beyond the private optimum.

True

Modeled like the 50 states in the U.S., the European Union (EU) is a type of common market in which goods, services, people, and capital can freely flow to their highest-valued use across any member state.

True

Most income differences across households are due to differences in worker productivity.

True

National defense argument, infant industries argument, and declining industries argument are arguments in favor of trade restrictions.

True

Net unilateral transfers abroad is the difference of the unilateral transfers received from abroad by U.S. residents and the unilateral transfers sent to foreign residents by the U.S. residents.

True

One reason why household incomes differ is that the number of household members who are working differs. For example, among households in the bottom 20 percent based on income, only about one household in seven has a full-time, year-round worker. The median income for households with two earners is 91 percent higher than for households with only one earner.

True

Pollution rights can generate considerable cost savings over the traditional regulatory system of fixed discharge standards that do not allow the market process to allocate emissions reductions efficiently.

True

Recent reforms in the U.S. welfare system have been aimed at reducing long-term dependency on welfare.

True

Since the 1970s, the share of income going to the poorest fifth of U.S. households has decreased, while the share of income going to the richest fifth of U.S. households has increased.

True

Smog is the most visible form of air pollution and around 15% of smog comes from manufacturing industries.

True

Social Security and Medicare have been hugely successful in reducing poverty among the elderly.

True

Some industries have argued that since their output is vital for national defense, they should be entitled to additional trade protection.

True

The World Trade Organization (WTO) was created in 1995 during the Uruguay Round of trade discussions.

True

The exchange rate is the price measured in one country's currency of buying one unit of another country's currency.

True

The financial account is the record of a country's international transactions involving purchases or sales of financial and real assets.

True

There are race-based differences in income that cannot be explained by factors such as educational attainment and years of experience. Evidence of discrimination comes from audit studies, where otherwise similar white and minority candidates are sent to the same source to seek jobs, rent apartments, or apply for mortgage loans, and minority candidates are treated less favorably.

True

Though both tariffs and quotas reduce consumer surplus and increase producer surplus in the importing country, the losses in consumer surplus are larger than the gains in producer surplus.

True

Which of the following programs is means tested?

Unemployment insurance

_____ is determined by the world demand for and the world supply of the good.

World Price

A high-income household usually is headed by _____, while a low-income household is usually headed by _____.

a well-educated working couple; a single parent who is not working

According to the Coase theorem, efficient solution of an externality problem:

can be achieved when any one of the parties to a transaction is assigned a property right.

During a year, the government of a country Orion imposed tariff on imported steel, arguing that imports had damaged the Orion steel industry. The government prohibited new investments in this industry and decided to phase out the tariff within the next eight years. This trade policy was based on the _____ argument in favor of trade protection.

declining industries

When some countries export products at prices below the cost of production, or the price charged in the domestic market it is called _____.

dumping

Almost 70 percent of U.S. garbage:

goes to landfills.

When there are positive externalities in the consumption of a good:

marginal social benefit exceeds marginal private benefit.

The merchandise trade balance is the value of a nation's:

merchandise imports subtracted from merchandise exports.

Marginal social cost equals marginal _____ cost plus marginal _____ cost, and reflects the true marginal cost to society of an additional unit of production.

private; external

The cost of the resources used by domestic producer groups including the lobbying fees, propaganda, and legal restrictions, is collectively referred to as the cost of:

rent seeking

A renewable resource such as fish which is also an open-access good is:

rival and nonexclusive.

Cases involving unequal pay for equal work and unequal access to promotion are monitored by:

the Equal Employment Opportunity Commission.

If income among households were evenly distributed, the Lorenz curve:

would be a straight line with a slope of one.