Micro Chapter 13: Labor Markets, Poverty, & Income Distribution, Micro: Chapter 14, Chapter 15: International Trade and Trade Policy

If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:

doctors' wages to increase.

If Utopia opened itself to trade it would

import 250 cases of tile per year.

Food stamps and Medicaid are examples of:

in-kind transfer programs.

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ______, and the wages of nonunionized workers to ______.

rise; fall

If low-income households spend a larger share of their income on food than do high-income households, then a tax on food is:

a regressive tax

The country Happy Land claims that it is producing everything its citizens consume. This situation is called

autarky.

Pork barrel programs are government programs that:

benefit local areas but are of questionable value from a national perspective.

Differences in wage rates associated with differences in working conditions are called:

compensating wage differentials.

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run:

competing firms will hire the worker away.

If a country is a net importer of a good, the price of that good will ____ when the economy goes from closed to open for trade.

decrease

Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the:

demand for labor has increased.

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. Voter Marginal Benefit Kyle $420 Dylan $360 Fran $350 Ronnie $190 Sam $170 The total social benefit of the swimming pool is:

$1,490.

The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P. Suppose the economy is closed. The equilibrium price of a car is _____ and equilibrium quantity is____.

$10,000; 10,000

The demand for microwaves in a certain country is given by: D = 8,000 - 30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, and the government imposes a tariff of $30 per microwave, then the tariff revenue collected by the government will be ________.

$24,000

The amount of revenue the government collects after imposing the tariff is ________.

$40,000

The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5. If this economy is open to trade, and the world price of a car is $6,000, and the government imposes a quota allowing 3,000 cars to be imported, then domestic price of the car will be ________.

$8,000

Curly pays $12,000 in taxes and earns $150,000. Moe pays $7,000 in taxes. If the tax system is proportional, then Moe's income is:

$87,500.

Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $26, and Mountain Breeze can buy the components for each filter for $1. Sandra and Bobby are two workers for Mountain Breeze. Sandra can assemble 60 air filters per month and Bobby can assemble 70. If the labor market is perfectly competitive, how much will Sandra and Bobby be paid?

1,500; 1,750

The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P.If this economy is open to trade, and the world price of a car is $6,000, the domestic quantity demanded will be ______ and quantity supplied will be _____.

14,000; 8,000

The demand for microwaves in a certain country is given by: D = 8,000 -30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, how many microwaves will be imported or exported?

2,000 imported

The increase in the price of sugar created by the tariff will lead domestic production to increase by ____ tons per year, compared to when the economy is open without the tariff.

20

The demand for microwaves in a certain country is given by: D = 8,000 - 30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, and the government imposes a tariff of $30 per microwave, then the domestic quantity demanded will be __ microwaves.

5,600

In an open economy, how many TVs will this country import?

60,000

In an open economy, how many bikes will this country export?

60,000

Compared to an open economy without a tariff, the amount of imported sugar will drop from _____ tons to _____ tons after the tariff is imposed.

80; 40

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. Resident Reservation Price Income Kris $100 $1,000 Taylor $200 $5,000 Max $700 $6,000 If the government proposes to pay for the public good with a proportional income tax of 8 percent, then:

Kris and Max will vote in favor of the tax, but Taylor will vote against it.

Which of the following items is an example of a good that is nonrival but excludable?

Pay-per-view movies

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9am to 5pm. Otherwise, the jobs are identical. You would expect:

Sarah's wages to be lower at Firm A than at Firm B.

If the economy opens to trade, what will be the domestic quantity demanded, the domestic quantity supplied, and the quantity of imports or exports?

The domestic quantity demanded will be 20,000 cars per year. The domestic quantity supplied will be 14,000 cars per year. The country will import 6,000 cars per year. The opening of the automobile market to trade will be favored by: domestic consumers, but opposed by domestic producers.

As a result of the tariff, what will happen to the quantity of imports and exports, and what is the revenue raised by the tariff?

The new quantity of imports will be 4,000 cars per year, and the government will raise $ 8,000,000 per year in revenue from the tariff. The imposition of the tariff on the automobile market is favored by: domestic producers, but opposed by domestic consumers.

When the government transfers resources to the poor in the form of a good or service, it is called:

an in-kind transfer.

To derive the labor demand curve for a particular market, one should ______for all the firms in the market.

To derive the labor demand curve for a particular market, one should ______for all the firms in the market.

An economy has two workers, Anne and Bill. Per day of work, Anne can pick 160 apples or 80 bananas, and Bill can pick 50 apples or 50 bananas. Anne and Bill each work 200 days per year.

a. Anne's opportunity cost of picking one more apple is 0.5 bananas Correct. Bill's opportunity cost of picking one more apple is 1 banana Correct. Anne Correcthas a comparative advantage in apple picking. Anne Correcthas an absolute advantage in apple picking. b. Assuming that only one fruit is picked in this economy, then the maximum number of each type of fruit that can be picked annually is either 42,000 42,000 Correct apples or 26,000 26,000 Correct bananas. c. If each worker fully specializes according to his or her comparative advantage, the maximum number of apples that can be picked annually is 32,000 32,000 Correct , and the maximum number of bananas is 10,000 10,000 Correct .

An economy has two workers, Anne and Bill. Per day of work, Anne can pick 100 apples or 25 bananas, and Bill can pick 50 apples or 50 bananas. Anne and Bill each work 200 days per year.

a. Anne's opportunity cost of picking one more apple is 1/4 banana Correct. Bill's opportunity cost of picking one more apple is 1 banana Correct. Anne Correcthas a comparative advantage in apple picking. Anne Correcthas an absolute advantage in apple picking. b. Assuming that only one fruit is picked in this economy, then the maximum number of each type of fruit that can be picked annually is either 30,000 30,000 Correct apples or 15,000 15,000 Correct bananas. c. If each worker fully specializes according to his or her comparative advantage, the maximum number of apples that can be picked annually is 20,000 20,000 Correct , and the maximum number of bananas is 10,000 10,000 Correct .

Suppose that Costa Rican worker Carlos can produce either 140 pounds of coffee or 1 computer per week, and a second worker, Maria, can produce either 240 pounds of coffee or 1 computer per week. Both Carlos and Maria work 50 weeks per year. A third worker, Pedro, joins the Costa Rican economy. Pedro can produce either 160 pounds of coffee or 1 computer per week. Like the other two workers, Pedro works 50 weeks per year.

a. Carlos' opportunity cost of producing a computer is 140 140 Correct pounds of coffee, Maria's opportunity cost of producing a computer is 240 240 Correct pounds of coffee, and Pedro's opportunity cost of producing a computer is 160 160 Correct pounds of coffee. If all three workers completely specialize in the production of one good, then together they can produce either 150 150 Correct computers or 27,000 27,000 Correct pounds of coffee per year. If the workers instead specialize according to their respective comparative advantage, and with one worker producing computers while the other two produces coffee, together they can produce 50 50 Correct computers and 20,000 20,000 Correct pounds of coffee per year. If two workers produce computers while only one produces coffee, together they can produce 100 100 Correct computers and 12,000 12,000 Correctpounds of coffee per year. b. Assume that world prices are such that 1 computer trades for 200 pounds of coffee on international markets and that Costa Rica is open to trade. If computers can either be produced domestically or imported from abroad in exchange for Costa Rican coffee, then the maximum number computers that the three workers can consume is 160 160 Correct . To obtain this number of computers, Carlos will produce computers Correct, Maria will produce coffee Correct, and Pedro will produce computers Correct. If coffee can either be produced domestically or imported from abroad in exchange for Costa Rican computers, then the maximum amount of coffee that the three workers can consume is 32,000 32,000 Correct pounds. To obtain this amount of coffee, Carlos will produce computers Correct, Maria will produce coffee Correct, and Pedro will produce computers Correct. c. Assume instead that world prices are such that 1 computer trades for 250 pounds of coffee on international markets and Costa Rica is open to trade. If computers can either be produced domestically or imported from abroad in exchange for Costa Rican coffee, then the maximum number computers that Carlos, Maria and Pedro can consume is 150 150 Correct . To obtain this number of computers, Carlos will produce computers Correct, Maria will produce computers Correct, and Pedro will produce computers Correct. If coffee can either be produced domestically or imported from abroad in exchange for Costa Rican computers, then the maximum amount of coffee that Carlos, Maria and Pedro can consume is 37,500 37,500 Correct pounds. To obtain this amount of coffee, Carlos will produce computers Correct, Maria will produce computers Correct, and Pedro will produce computers Correct.

Suppose that Costa Rican worker Carlos can produce either 150 pounds of coffee or 1 computer per week, and a second worker, Maria, can produce either 60 pounds of coffee or 1 computer per week. Both Carlos and Maria work 50 weeks per year.

a. Carlos' opportunity cost of producing a computer is 150 pounds of coffee, and Maria's opportunity cost of producing a computer is 60 pounds of coffee. If both workers completely specialize in the production of one good, then together they can produce either 100 computers or 10,500 pounds of coffee per year. If both workers instead completely specialize according to their respective comparative advantage, then together they can produce 50 computers and 7,500 pounds of coffee per year. b. Assume that world prices are such that 1 computer trades for 100 pounds of coffee on international markets and that Costa Rica is open to trade. If computers can either be produced domestically or imported from abroad in exchange for Costa Rican coffee, then the maximum number computers that Carlos and Maria can consume is 125 . To obtain this number of computers, Carlos will produce coffee and Maria will produce computers. If coffee can either be produced domestically or imported from abroad in exchange for Costa Rican computers, then the maximum amount of coffee that Carlos and Maria can consume is 12,500 pounds. To obtain this amount of coffee, Carlos will produce coffee and Maria will produce computers. c. Assume instead that world prices are such that 1 computer trades for 200 pounds of coffee on international markets and Costa Rica is open to trade. (Hint: Note that in this scenario, both Carlos and Maria now have opportunity costs per computer of over 100 pounds of coffee.) If computers can either be produced domestically or imported from abroad in exchange for Costa Rican coffee, then the maximum number computers that Carlos and Maria can consume is 100 . To obtain this number of computers, Carlos will produce computers and Maria will produce computers. If coffee can either be produced domestically or imported from abroad in exchange for Costa Rican computers, then the maximum amount of coffee that Carlos and Maria can consume is 20,000 pounds. To obtain this amount of coffee, Carlos will produce computers and Maria will produce computers.

The problems of externalities and poorly formed property rights are:

among several rationales for the existence of government.

An economy that does NOT trade with the rest of the world is a(n)

closed economy

A good or service that is rival but nonexcludable is called a ______, and a good or service that is nonrival but excludable is called a ______.

commons good; collective good

If a good is nonrival, then:

consumption of the good by one person does not diminish its availability to others.

Opening this economy to trade would benefit ______ and harm _____.

domestic car consumers; domestic car producers

A society could achieve a higher level of production if ______.

each person specializes according to their comparative advantage

Free trade is ______, because it ______ the size of the pie available to the economy.

efficient; increases

Beyond the provision of public goods, government exists to address:

externalities and property rights.

In competitive labor markets, _____ demand labor and ______ supply labor.

firms, workers

In an open economy, a society's consumption possibilities are typically ____ its production possibilities.

greater than

Protectionism is the view that free trade is ______ and should be _______.

harmful; restricted

If all taxpayers pay the same dollar amount, the tax is termed a:

head tax.

Suppose that, a country with a closed economy opens itself to international trade and becomes a net exporter. In that case, the price of that good will ____ when the economy goes from closed to open for trade.

increase

To derive the market demand curve for a private good, one sums the ______. For a public good, one sums the ______.

individual quantities at various prices; individual prices at various quantities

Union membership in the United States probably ______ an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively ______.

is not; low

In a competitive labor market, the equilibrium wage rate is determined by:

labor demand and labor supply.

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

labor union.

National defense is an example of a good that is:

largely nonrival and nonexcludable.

Males major in engineering much more frequently than females. Starting salaries for engineers (male or female) are much higher than average. As a result, the observed gender wage gap for all college graduates will be ______ than the gender wage gaps in specific majors because ______.

larger; males and females choose different majors

Imposing a minimum wage above the equilibrium wage:

makes some workers worse off.

The value of marginal product of labor equals the

marginal product of labor times the net price for which each unit of output sells.

The additional output a firm gets from hiring an additional unit of labor is the

marginal product of labor.

The production possibility curve (PPC) shows the _____ production of one good for ______ production level of the other good.

maximum; every possible

A welfare payment that is reduced when the recipient earns more income is a(n):

means-tested benefit.

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a(n):

negative income tax.

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. Voter Marginal Benefit Kyle $420 Dylan $360 Fran $350 Ronnie $190 Sam $170 Dylan proposes that the city let a private company build the pool and charge residents a one-time fee to use the pool as much as they like. Only residents who pay the fee would be allowed to use the pool. If the private company were allowed to set a single fee, then:

no private company would offer to build the pool.

If a good can be consumed by one person without reducing its availability to others, then it is a ______ good.

nonrival

Jobs in which there is a higher risk of injury or death will:

pay more than otherwise similar jobs.

In 1996, the Personal Responsibility Act:

placed a five-year lifetime limit on welfare payments to any given recipient.

A good or service that is both rival and excludable is a:

private good.

The current U.S. income tax system requires taxpayers to pay a higher marginal tax rate on higher levels of taxable income. Suppose that the tax rate is 10 percent on the first $15,000 of taxable income, 15 percent on the next $45,000 of taxable income, 30 percent on the next $60,000 of taxable income, and 35 percent on taxable income above $120,000. This income tax system is:

progressive.

If the government uses a head tax to finance a public good, then the:

proportion of income paid in taxes declines as income rises.

If all taxpayers pay the same percentage of their income in taxes, the tax is termed a(n):

proportional tax.

A good or service that is highly nonrival and highly nonexcludable is a(n) ______ good.

pure public

A legal limit on the quantity of a good that may be imported is called a(n) ________.

quota

Those who do not favor programs aimed at reducing inequality argue that these programs:

reduce people's incentive to work hard.

If taxpayers pay a smaller fraction of their income in taxes as their incomes rise, the tax is ______ and if taxpayers pay a larger fraction of their income in taxes as their income rise, the tax is ______.

regressive; progressive

The socially unproductive efforts of people or firms to win a prize is called:

rent-seeking

The government should only provide a pure public good if ______ and ______.

the good's benefits exceed its costs; there is no less costly way to provide it

To say that a given welfare program is means-tested implies that:

the more income one earns, the smaller the size of the benefit.

In the market for labor, the demand function describes

the number of workers a firm is willing to hire at each wage.

A proportional tax results in:

the same percentage of income going to taxes for all taxpayers.

The optimal number of workers for a perfectly competitive firm to hire occurs when

the wage rate equals the value of marginal product of the last worker.

If Atlantis has an open economy, then it:

trades with other countries

The price at which a good or service is traded on international markets is called the ________ price.

world