Econ Unit 6

A

A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the A. Marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner B. Marginal benefit from cleaner water is maximized C. Total benefit from cleaner water is zero D. Total benefit from cleaner water is equal to the total cost of making the water cleaner E. Total benefit from cleaner water is maximized

A

All of the following are sources of inequality in the distribution of personal income EXCEPT A. Progressive income taxes B. Discrimination in employment C. Differences in personal motivation D. Differences in educational level attained E. Differences in abilities

B

Assume that all the residents of the city of Smallville prefer to have streetlights installed citywide. Which of the best explains why any individual residents to not install the optimal number of streetlights? A. Streetlights generate negative externalities B. Streetlights are nonexcludable C. Installing streetlights results in diseconomies of scale D. The marginal cost of installing streetlights is zero E. The marginal benefit of installing streetlights is zero

C

Assume that many boats have free and open access to finishing in the waters of a country. Which of the following statements is true? A. With the availability of fish for all consumers, there is a positive externality; therefore, governments need to encourage greater use of the common areas with more production and increased consumption B. Over time, fishing operations will voluntarily leave the market as a result of increased competition C. There will be a tendency for fishing operations to overfish, reduce the stock of fish and limit the future availability of fish for succeeding generations D. The waters of a country are a rare example of a resource that is not scarce. Therefore, standard economic analysis does not apply E. The advantage of allowing free and open access to fishing is to limit the harm from a negative externality where too few fish are currently caught

D

Assume that the original supply and demand curves of a commodity are S and D, respectively. Also assume that the government imposes an excise tax (per unit tax) of t dollars on the commodity, which shifts the supply curve to S1. The deadweight loss created by the tax is equal to A. P1GHP0 B. P1GKP0 C. GHK D. GKI E. Zero

B

Based on the information in the Lorenz Curve below, which of the following is true? A. People in Country X make more money than people in Country Z B. Income is more equally distributed in Country X than in Country Z C. The top 20% of households in Country X received 60 percent of the total income D. The top 20% of households in Country Z received 40% of the total income E. The average income in Country X is higher than the average income in Country Z

B

Given the position of the marginal social cost curve, one can conclude that the A. Private cost of producing good X exceeds the social cost of production at all levels of output B. Production of good X creates a negative externality C. Production of good X occurs in an imperfectly competitive market D. Market quantity, Q3, is socially optimal quantity E. Free market will produce too little of good X

C

If government regulators set price such that a natural monopolist earns only normal profits, price will be set equal to A. Marginal revenue B. Marginal cost C. Average total cost D. Average revenue E. Average variable cost

E

In a perfectly competitive free market economy, a wage gap between two workers can be explained by differences in all of the following EXCEPT their A. Years of schooling B. Occupations C. Marginal products D. Marginal revenue products E. Tastes for luxury goods

D

In the absence of externalities, which of the following is true of a competitive market in equilibrium A. Consumer surplus is maximized B. Producer surplus is maximized C. Marginal benefit exceeds marginal cost D. Marginal social benefit equals marginal social cost E. Consumer surplus equals producer surplus

A

National defense is a good example of a pure public good because it is A. Nonrival and nonexcludable B. Nonrival and excludable C. Rival and nonexcludable D. Rival and excludable E. Free and provided at zero cost

B

Pollution Abatement will improve efficiency if the A. Marginal benefit of abatement is less than the marginal cost of abatement B. Marginal cost of abatement is less than the marginal benefit of abatement C. Marginal cost of abatement is positive D. Marginal benefit of abatement is positive E. Marginal cost of abatement is zero

B

Public goods are typically provided by the government, because private markets tend to A. Produce them at higher costs B. Produce less than the socially optimum quantity C. Produce more than the socially optimum quantity D. Charge a monopoly price that is greater than the marginal social cost E. Charge a monopoly price that is less than the marginal social cost

C

Public goods are underproduced in a competitive market because the free-rider problem causes which of the following? A. Fixed supply B. Effective price ceilings C. Reduced market demand D. Negative externalities E. Increased imports

D

When costs and benefits are internalized A. Consumer surplus is maximized B. Producer surplus is maximized C. Consumer surplus equals producer surplus D. Total surplus is maximized E. Marginal benefit exceeds marginal cost

E

The table below shows the distribution of income in Country X in 2010 before and after taxes and transfer payments. Which of the following can be concluded about the effect of the government's tax and transfer policies on income distribution in Country X? A. The distribution of income is significantly less equal after accounting for the impact of government policies B. The distribution of income is about the same after accounting for the impact of government policies C. The largest gainers from government policies are the third and fourth quintile groups D. The only quintile to benefit from government policies is the lowest quintile E. The major transfer of income is from the highest quintile to the two lowest quintiles

A

There are negative externalities associated with the use of a freeway in a major city at rush hour because during this time A. Drivers slow down other drivers because of high traffic volume B. Drivers value their time more C. Government revenues from toll roads increase D. Revenues of bus companies increase E. Gasoline costs more

C

To correct for positive externalities, the government should A. Do nothing, since no harm is done by positive externality B. Levy a tax on the output of the good or service C. Pay a subsidy equal to the marginal external benefit D. Impose a price ceiling on the good to discourage its production E. Impose a price floor on the good at which the marginal private benefit equals the margianl social cost

D

Which of the following actions is most likely to reduce the degree of income inequality within a society? A. Lowering the tax rate on income from savings B. Increasing regulations on labor unions C. Increasing the cost to households of primary and secondary education D. Introducing progressive inheritance taxes on accumulated wealth E. Eliminating taxes on corporate profits

C

Which of the following best fits the definition of a public good? A. A state university B. Trash removal service C. The emergency broadcast system D. A plumber unclogging the drain in a government building E. A national park

D

Which of the following best represents a positive externality? A. Purchasing a pass for an amusement park B. Dining at a favorite restaurant C. Being disturbed by neighboring construction noise D. Enjoying watching birds at a neighbor's bird feeder E. Dumping waste on someone else's property

A

Which of the following is a government policy that is intended to address a market failure? A. Taxing the use of toxic pesticides by farmers B. Fining firms that outsource jobs to lower labor costs C. Subsidizing corn farmers who face increasing production costs D. Taxing short-run profits in competitive markets E. Subsidizing entry of firms into a market with an existing natural monopoly

A

Which of the following is likely to result in allocative inefficiency? A. An oligopoly market structure B. A firm producing at the level of output where price is equal to marginal cost C. A perfectly competitive market in long-run equilibrium with no externalities D. A perfectly price-discriminating monopoly E. A monopsonist that faces a minimum wage where marginal revenue product equals the supply of labor

D

Which of the following is the formula for a Gigi coefficient, based on the graph below? A. X/Y B. Y/X C. Y/(X+Y) D. X/(X+Y) E. 1/2X*Y

D

Which of the following statements about income inequality is true? A. A low average household income in a society suggests significant income inequality B. A society with progressive income taxes will likely have a very unequal after-tax distribution of income C. Low taxes on savings tend to lead to a more equitable distribution of after-tax income D. Raising taxes on savings and providing subsidies to low-income households will lead to more equal after-tax and transfer incomes E. Low tax rates on wealth will lead to less unequal income distributions

D

Which of the following will cause an unregulated monopolist to produce a more allocatively efficient level of output? A. A tax based on the amount of profits B. A tax that does not change as output increases C. A tax that increases as output increases D. A subsidy that increases as output increases E. A subsidy that does not change as output increases