MICRO FINAL

A socially optimal public health policy should expand the proportion of the population vaccinated: whenever the marginal benefit of an additional vaccination is positive. until the marginal cost of an additional vaccination equals the marginal benefit of an additional vaccination. until the marginal benefit of an additional vaccination equals zero. until the marginal benefit of an additional vaccination is greater than the marginal cost of an additional vaccination.

until the marginal cost of an additional vaccination equals the marginal benefit of an additional vaccination.

If the marginal benefit of additional spending on a public health measure is greater than its marginal cost, then total economic surplus will decrease if the government increases spending on the health measure. will increase if the government increases spending on the health measure. has been maximized. is equal to zero.

will increase if the government increases spending on the health measure.

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

world

What is the amount of tariff imposed on a ton of sugar? $1 $50 $500 $1,000

$1,000

What is the world price of sugar without the tariff? $500/ ton $1,000/ton $1,500/ton $2,000/ton

$1,000/ton

If this is an open economy, the price of a car will be ________. $6,000/car $8,000/car $10,000/car $14,000/car

$10,000/car

What is the price of cars if this were a closed economy? $6,000/car $8,000/car $10,000/car $14,000/car

$14,000/car

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. 10 20 30 40

20

If this is an open economy, quantity supplied of cars by the domestic producers will be ________. 20,000 40,000 60,000 80,000

20,000

How many cars will this country import in an open economy situation? 20,000 40,000 60,000 80,000

40,000

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. If pollution is unregulated, then a total of ______ tons of smoke will be emitted each day. 1 2 4 8

8

Compared to an open economy without a tariff, the amount of imported sugar will drop from _____ tons to _____ tons after the tariff is imposed. 20; 10 40; 20 60; 30 80; 40

80; 40

When Cody went to the physician with a sore elbow, after hearing Cody's symptoms and examining the elbow manually, Cody's physician had two options: (1) prescribe an anti-inflammatory drug and advise Cody to abstain from vigorous physical activity for a period; or (2) advise Cody to undergo a magnetic resonance imaging (MRI) exam, a costly diagnostic procedure. Which of the following physicians is more likely to recommend option 2? A physician who is compensated under a conventional health insurance plan. A physician who is part of an HMO. A physician who is concerned about the marginal cost of an MRI. All physicians would recommend option 2.

A physician who is compensated under a conventional health insurance plan.

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-though window? No, because it is not socially efficient to operate a drive-through. Yes, because Quick Burger's payoff is higher when it operates a drive-through. No, because it would lower the payoff for The Sunshine Café. It cannot be determined.

Yes, because Quick Burger's payoff is higher when it operates a drive-through.

The growth of medical insurance in general and first-dollar coverage specifically has reduced the marginal cost of treatment to the consumer. Therefore, the current level of medical treatment in the United States is: equal to the efficient level. less than the efficient level. greater than the efficient level. less than or equal to the efficient level.

greater than the efficient level.

According to the textbook, the percentage of gross domestic product devoted to healthcare between the years 1940 and 2013: declined from 4% to less than 2%. increased from 4% to about 6%. increased from 4% to more than 17%. increased from 4% to more than 40%.

increased from 4% to more than 17%.

The benefits of specialization can be used to explain why: workers prefer to work on a variety of tasks during the day. machines are more productive than human workers. individuals and nations benefit from trade. big companies take advantage of smaller ones.

individuals and nations benefit from trade.

In the United States, the emergence of the third-party payment system has: led health care costs to decrease over time. led health care costs to increase over time. had almost no impact on health care costs. led people to consume less than the socially optimal level of health care.

led health care costs to increase over time.

An external benefit implies that private markets will provide ______ than the socially optimal quantity, and an external cost implies that private markets will provide ______ than the socially optimal quantity. more; more less; less more; less less; more

less; more

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) ______. positive income tax. in-kind transfer. unearned income tax credit. negative income tax.

negative income tax.

Refer to the table below. According to the table, Martha has the absolute advantage in: pies. neither pies nor cakes. cakes. both pies and cakes.

neither pies nor cakes.

If the price of a good in a closed economy is greater than the world price, then if the country opens its markets to world trade the country will be a ______ of that good. net importer net exporter importer and exporter producer

net importer

If coal mining produces a negative externality because it leads to environmental damage, then the socially optimal quantity of coal is zero. quantity of coal produced at the market equilibrium will be less than the socially optimal quantity. quantity of coal produced at the market equilibrium will be greater than the socially optimal quantity. cost to society of producing an additional ton of coal will be less than the cost to coal mining companies of producing an additional ton of coal.

quantity of coal produced at the market equilibrium will be greater than the socially optimal quantity.

If fewer families choose to purchase medical insurance because of rising health insurance premiums, then: those who remain insured will tend to spend less on health care. those who remain insured will tend to have higher-than-average rates of illness. the frequency of illness in the general population will fall. those who remain insured will tend to have lower-than-average rates of illness.

those who remain insured will tend to have higher-than-average rates of illness.

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. Suppose pollution is initially unregulated. If the City Council requires each firm to reduce emissions by 50 percent, then the total cost to society of this policy will be ______ per day. $360 $380 $490 $870

$360

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. Suppose Leo earns $10. He will lose ______ from each benefit, for a total loss of _____. $.75; $1.00 $7.50; $7.50 $7.50; $15.00 $.75; $1.50

$7.50; $15.00

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. f Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would have to pay Quick Burger at least ______ per month to NOT operate a drive-through window. $9,000 $11,000 $15,000 $24,000

$9,000

The figure below shows Ava's demand curve for days in the hospital. The marginal cost of an additional day in the hospital is $200. If Ava had to pay the entire marginal cost of spending a day in the hospital, then she would choose to stay ______ day(s). 0 1 2 3

2

Refer to the table below. Martha's opportunity cost of making of a pie is: 3/4 of a cake. 4/3 of a cake. 8 cakes. 80 cakes

3/4 of a cake.

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. Suppose pollution is initially unregulated. If the City Council imposes a tax of $91 per day on each ton of smoke emitted, then total emissions will fall to ______ tons of smoke per day. 1 2 4 8

4

Kate and Ali can live together a two-bedroom apartment for $600 per month, or they can each rent a one-bedroom apartment for $400 per month. Apart from the rent, they are indifferent between living together and living apart, except for one problem: Kate hates Ali's taste in music. Kate would be willing to pay up to $100 a month to avoid hearing Ali's music. Ali would give up listening to her music for no less than $300 per month. Which, if any, of the following ways of splitting the total monthly rent would induce them to live together? Kate pays $150 per month and Ali pays $450 per month Kate pays $250 per month and Ali pays $350 per month Kate pays $375 per month and Ali pays $125 per month There is no way to split the rent to induce them to live together

Kate pays $250 per month and Ali pays $350 per month

Refer to the table above. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes. Martha; Martha Julia; Julia Martha; Julia Julia; Martha

Martha; Julia

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Is it socially optimal for Quick Burger to operate a drive-through window? No, because The Sunshine Café's payoff is lower when Quick Burger operates a drive-through window. No, because total payoffs are higher when Quick Burger does not operate a drive-through window. Yes, because Quick Burger's payoff is higher when Quick Burger operates a drive-though window. Yes, because total payoffs are higher when Quick Burger operates a drive-through window.

No, because total payoffs are higher when Quick Burger does not operate a drive-through window.

Kate and Ali can live together a two-bedroom apartment for $600 per month, or they can each rent a one-bedroom apartment for $400 per month. Apart from the rent, they are indifferent between living together and living apart, except for one problem: Kate hates Ali's taste in music. Kate would be willing to pay up to $100 a month to avoid hearing Ali's music. Ali would give up listening to her music for no less than $300 per month. If Kate and Ali decide to live together, is it socially optimal for Ali play her music in the apartment? Yes, because the benefit to Ali of listening to her music is greater than the cost to Kate. No, because the benefit to Ali of listening to her music is less than the cost to Kate. Yes, because the benefit to Ali of listening to her music is less than the cost to Kate. No, because the benefit to Ali of listening to her music is greater than the cost to Kate.

Yes, because the benefit to Ali of listening to her music is greater than the cost to Kate.

Given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates ______ externality, and burning tires generates ______ externality. a positive; a negative a negative; a positive a positive, no no; a negative

a positive; a negative

A tariff is a tax imposed on ______ good. an imported a luxury an illegal a domestic

an imported

When the government transfers resources to the poor in the form of a good or service, it is called: the Earned Income Tax Credit (EITC). Temporary Assistance to Needy Families (TANF). an in-kind transfer. a regressive tax.

an in-kind transfer.

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates: a negative externality. a positive externality. neither a positive nor a negative externality. both a positive and a negative externality.

both a positive and a negative externality.

The Coase theorem states that if private parties can negotiate the purchase and sale of the right to perform activities that cuase externalities, then they: can always arrive at efficient solutions to the problems caused by externalities. will never arrive at efficient solutions to the problems caused by externalities. will never perform activities that generate negative externalities. will always perform activities that generate positive externalities.

can always arrive at efficient solutions to the problems caused by externalities.

Protectionism is the view that: a country's free trade agreements should be enforced. free trade is harmful and should be restricted. a country can best defend itself against foreign attack if it opens itself to trade. free trade agreements best protect a nation's economic interests.

free trade is harmful and should be restricted.

The earned income tax credit (or EITC): reduces the tax rate on investment income. provides tax credits to firms who hire low-income workers. reduces the sales tax paid by low-income workers. gives low-income workers credits on their federal income taxes.

gives low-income workers credits on their federal income taxes.

Numerous studies have shown that breathing second-hand cigarette smoke is harmful to your health. This suggests that a tax on cigarettes will: increase total economic surplus. decrease total economic surplus. have no effect on total economic surplus. lead to a decrease in the price of cigarettes.

increase total economic surplus.

The overconsumption of medical care due to first-dollar health insurance coverage is: larger the lower the elasticity of demand for medical care. smaller the higher the elasticity of demand for medical care. larger the higher the elasticity of demand for medical care. small regardless of the elasticity of demand for medical care.

larger the higher the elasticity of demand for medical care.

The most efficient distribution of pollution abatement is such that the: extent of pollution abatement is the same across all geographic regions. extent of pollution abatement is the same across all polluters. largest reductions in pollution are made by the largest polluters. marginal cost of abatement is the same across all polluters.

marginal cost of abatement is the same across all polluters.

A cost of an activity that falls on people not engaged in the activity is call a(n): external benefit. prisoner's dilemma. negative externality. positive externality.

negative externality.

The essential cause of the tragedy of the commons is the fact that: marginal costs are increasing. one person's use of a commonly held resource imposes an external cost on others. people do not always specialize according to their comparative advantage. governments may choose not to tax activities that generate negative externalities.

one person's use of a commonly held resource imposes an external cost on others.

The tragedy of the commons refers to the: overuse of resources that have no price. overuse of resources that have no cost. under production of goods that have external benefits. failure of the Coase theorem when negotiation is costly.

overuse of resources that have no price.

Refer to the table below. Based on their comparative advantage, Martha should specialize in _______ while Julia should specialize in _______. pies; cakes cakes; pies neither pies nor cakes; both pies and cakes both pies and cakes; neither pies nor cakes

pies; cakes

Private markets will lead to a ______ vaccination rate because: socially optimal; price serves as a signal of marginal benefit and marginal cost. suboptimally high; the external cost of being vaccinated would not fully be taken into account by decision makers. suboptimally low; the external benefit of being vaccinated would not fully be taken into account by decision makers. inequitable; health care services should not be provided based on ability to pay.

suboptimally low; the external benefit of being vaccinated would not fully be taken into account by decision makers.

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Suppose Quick Burger has the legal right to operate a drive-through window, and Quick Burger and the Sunshine Café can negotiate with each other at no cost. Which of the following arrangements would lead to the socially optimal outcome? Quick Burger pays The Sunshine Café $12,500 per month to operate the drive-through window. Quick Burger pays The Sunshine Café $10,500 per month to operate the drive-through window. The Sunshine Café pays Quick Burger $12,500 per month not to operate the drive-through window. The Sunshine Café pays Quick Burger $10,500 per month not to operate the drive-though window.

The Sunshine Café pays Quick Burger $10,500 per month not to operate the drive-though window.

An individual has an absolute advantage in producing pizzas if that individual: has a lower opportunity cost of producing pizzas than anyone else. can produce more pizzas in a given amount of time than anyone else. has a higher opportunity cost of producing pizzas than anyone else. charges the lowest price for pizzas.

can produce more pizzas in a given amount of time than anyone else.

If the marginal cost of pollution abatement is smaller for large firms than it is for small firms, then it is efficient for: small firms to reduce pollution by more than large firms. small firms and large firms to reduce pollution by a fixed proportion. small firms and large firms to increase pollution by a fixed proportion. large firms to reduce pollution by more than small firms.

large firms to reduce pollution by more than small firms.

If an activity generates a positive externality, the government can increase total economic surplus by ______ the activity, and if an activity generates a negative externality, the government can increase total economic surplus by ______ the activity. taxing; banning subsidizing; banning subsidizing; taxing publicizing; taxing

subsidizing; taxing

To say that a given welfare program is means-tested implies that: in order to qualify, one must have the means. the size of the payment reflects the mean value of consumption based on family size. in order to qualify, one must show that one means to find a job. the more income one earns, the smaller the size of the benefit.

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

If the marginal cost of reducing pollution is positive, then: pollution should be reduced as much as technically feasible. the marginal benefit of reducing pollution is zero. the optimal amount of pollution is zero. the optimal amount of pollution is greater than zero.

the optimal amount of pollution is greater than zero.

When a nation reduces the barriers to international trade: each individual citizen becomes better off. each individual citizen becomes worse off. the total value of all goods and services produced by the nation falls. the total value of all goods and serviced produced by the nation rises.

the total value of all goods and serviced produced by the nation rises.

Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. The buffet in Jamie's dorm is an example of: an efficient subsidy. the tragedy of the commons. excess supply in the market. a good with positive externalities.

the tragedy of the commons.

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that: firms are earning an economic loss. firms are earning a positive economic profit. there is a positive externality associated with this good. there is a negative externality associated with this good.

there is a negative externality associated with this good.

if you have a comparative advantage in a particular task, then: you are better at it than other people. you give up more to accomplish that task than do others. you give up less to accomplish that task than do others. you have specialized in that task, while others have not.

you give up less to accomplish that task than do others.