Micro Test 3-Williamson
Def.- this states that the private market will reach the efficient outcome on its own... if property rights can be defined and transactions costs are low.
Coase theorem
How will an increase in labor productivity affect equilibrium in the labor market? (Affects demand curve, increases demand) a. The demand for labor will increase and the equilibrium wage and quantity of labor will increase. b. The supply of labor will increase and the equilibrium wage and quantity of labor will increase. c. The demand for jobs will increase and the equilibrium wage and quantity of labor will increase. d. The demand for labor will decrease because fewer workers will be needed to produce the same output. The equilibrium wage and quantity of labor will decrease.
a. The demand for labor will increase and the equilibrium wage and quantity of labor will increase.
Positive externalities cause... a. The marginal social benefit to exceed the marginal private cost of the last unit produced. b. The marginal social benefit to be less than the marginal private cost of the last unit produced. c. The marginal private benefit to exceed the marginal social cost of the last unit produced. d. The marginal social benefit to be equal to the marginal private cost of the last unit produced.
a. The marginal social benefit to exceed the marginal private cost of the last unit produced.
The basic cause of deadweight losses from the existence of common resources and externalities is... a. a lack of clearly defined and enforceable property rights. b. the absence of government intervention. c. the self interested rationally of human beings. d. the use of a market system to deal with scarcity.
a. a lack of clearly defined and enforceable property rights.
If the supply curve for a product is horizontal, then the elasticity of supply is: a. equal to infinity b. greater than 1 but less than infinity c. equal to 1 d. equal to zero.
a. equal to infinity
If US immigration consists of mainly low skilled workers, then an increase in immigration ____________ the wages of low skilled workers. a. will increase b. will reduce c. may increase or reduce d. will not affect
b. will reduce
The longer the time period considered, the more the elasticity of supply tends to: a. decrease b. remain constant c. increase d. converge to zero
c. increase
If immigration consists of mainly high skilled workers, then a ____________ in immigration will ____________ the wages of high skilled workers. a. increase; decrease b. increase; not affect c. decrease; decrease d. decrease; increase
d. decrease; increase
Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy? a. Women are, on average, less motivated than men and therefore tend to avoid taking on more responsibilities. b. Women do not work as hard as men because of cultural influences. c. Women tend to take riskier jobs and earn compensating wage differentials. d. Women have, on average, less workforce experience than men of the same age.
Women have, on average, less workforce experience than men of the same age.
Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1000 feet above ground. Larry's higher wage rate is the result of... a. a compensating differential b. a negative feedback loop c. economic discrimination d. a higher marginal revenue product
a compensating differential
Which is true about tax incidence? a. if demand is more inelastic than supply, consumers bear much of the tax burden. b. if demand is more inelastic than supply, sellers bear much of the tax burden. c. the tax burden is equally shared by consumers and sellers. d. If supply is more inelastic than demand, consumers bear much of the tax burden.
a. If demand is more inelastic than supply, consumers bear much of the tax burden.
Which of the following summarizes the impact of population growth on the labor market? (Affects labor supply) a. This will increase the labor supply, reduce the equilibrium wage and increase the quantity of labor demanded. b. There will be an increase in both the demand for labor and the supply of labor. As a result, the equilibrium wage will not change. c. There will be an increase in the demand for jobs. This will result in an increase in the equilibrium wage rate and a movement along the labor supply curve. d. There will be an increase in the demand for labor. As a result, the wage rate will rise and the quantity of workers supplied will decrease.
a. This will increase the labor supply, reduce the equilibrium wage and increase the quantity of labor demanded.
Using the term "spillover" is a less formal means of describing... a. an externality b. social costs c. private costs d. market failure
a. an externality
If a 5% increase in income leads to a 10% decrease in quantity demanded for a product, this product is... a. an inferior good b. an income elastic good c. a luxury good d. a necessity
a. an inferior good
The government proposes a tax on halogen light bulbs. Sellers will bear the entire burden of the tax if the... a. demand curve for halogen bulbs is horizontal. b. supply curve of halogen bulbs is horizontal. c. demand curve for halogen bulbs is vertical. d. demand curve is downward sloping and the supply curve is upward sloping.
a. demand curve for halogen bulbs is horizontal.
The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the... a. demand curve for imported champagne is vertical. b. supply curve for imported champagne is vertical. c. demand curve is downward sloping and the supply curve is upward sloping. d. demand curve for imported champagne is horizontal.
a. demand curve for imported champagne is vertical.
If the supply curve for a product is vertical, then the elasticity of supply is: a. equal to zero b. equal to 1 c. greater than 1 but less than infinity d. equal to infinity
a. equal to zero
Which of the following would an economist identify as a difficulty to environmental command-and-control regulations? a. high degree of inflexibility b. clear distinctions drawn between firms. c. lack of incentive to reduce pollution. d. obvious lack of loopholes.
a. high degree of inflexibility
An import quota or tariff on French wine that raises the prices for wine will probably... a. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. b. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities. c. hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition. d. hurt domestic wineries, which will lose business as a result of the higher prices.
a. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.
In May 2011, the average price of gas in the US was $3.76 per gallon, and consumers purchased nearly 5 percent less gas than they had during May 2010, when the average price of gas was $2.79 per gallon. Based on these figures, when the price of gas rose from $2.79 to $3.76, total revenue a.increased b. there is not enough evidence to determine what happened to total revenue. c. did not change d. decreased
a. increased
The price elasticity of demand for tickets to local baseball games is estimated to be equal to .89. In order to boost ticket revenues, an economist would advise: a. increasing the price of game tickets because demand is inelastic. b. not changing the prices of game tickets because demand is unit elastic. c. increasing the price of game tickets because demand is elastic. d. decreasing the price of game tickets because demand is elastic.
a. increasing the price of game tickets because demand is inelastic.
If an alternative policy could encourage both _____________, instead of _________________, consumers would benefit. a. invention and competition; invention and monopoly. b. invention and monopoly; invention and public funding. c. invention and monopoly; invention and competition. d. invention and competition; invention and public funding.
a. invention and competition; invention and monopoly
Negative externalities and the tragedy of the commons are problems that have a common resource. What is this common source? a. a lack of clearly defined and enforced property rights. b. a lack of concern for human rights c. self-interest motives of producers and consumers. d. a lack of competition
a. lack of clearly defined and enforced property rights.
The efficient output level of a public good occurs where the... a. marginal cost of producing the last unit is equal to the marginal benefit realized by consumers. b. marginal cost of production is at its lowest. c. total cost of production is affordable.
a. marginal cost of producing the last unit is equal to the marginal benefit realized by consumers.
An economist is more likely to identify ____________ as a more efficient and flexible way for society to ____________. a. marketable permits; allow a limited, declining amount of pollution to occur. b. better defined property rights; to address issues of allowable levels of pollution. c. market-oriented environmental tools; enforce strict limits on emissions. d. better defined property rights; to shrink pollution levels over time.
a. marketable permits; allow a limited, declining amount of pollution to occur.
The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. a. price b. demand c. supply d. quantity
a. price
Government has a variety of policies that allow inventors to _____________, such as granting patents and _____________________. a. receive an increased rate of return; subsidization of research and development. b. protect their inventions; limited copyrights during the inventor's lifetime. c. register their inventions; unlimited copyrights during the inventor's lifetime. d. receive a reasonable rate of return; lifetime intellectual property rights.
a. receive an increased rate of return; subsidization of research and development
If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to: a. stay the same and the equilibrium quantity will fall. b. fall and the equilibrium quantity to fall. c. rise and the equilibrium quantity to stay the same. d. rise and the equilibrium quantity to fall.
a. stay the same and the equilibrium quantity to fall.
Governments can increase the consumption of a product that creates positive externalities by... a. Subsidizing the production of the product so that the supply is increased and market price is reduced. b. assigning property rights to the producers of the product. c. convincing everyone to consume the good. d. taxing the production and consumption of the product.
a. subsidizing the production of the product so that the supply is increased and market price is reduced.
Adrian Gonzalez and other star baseball players earn millions of dollars annually. These salaries are due to... a. The demand and supply of labor in the market for baseball players. b. the elastic demand for jobs in Major League Baseball. c. the irrational behavior of team owners. d. the greed of players and their games.
a. the demand and supply of labor in the market for baseball players.
A pollution charge is a form of tax imposed on: a. the quantity of pollution that a firm emits. b. pollution control technologies. c. every economy in the world. d. low-income market-oriented industries.
a. the quantity of pollution that a firm emits.
if cola and iced tea are good substitutes for consumers, then it is likely that: a. their cross price elasticities are greater than zero. b. their price elasticities of demand are less than one. c. their income elasticities are less than zero. d. their price elasticities of supply are less than one.
a. their cross price elasticities are greater than zero.
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: a. total revenue will decrease. b. total revenue will increase. c. total revenue will remain constant. d. the elasticity of demand will increase.
a. total revenue will decrease.
Suppose a negative externality exists in the market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem. a. Government intervention is necessary to reach an efficient and equitable solution. b. An efficient solution can be reached regardless of the initial assignment of property rights. c. An equitable solution can be reached only if property rights are assigned to the victims of pollution and not the polluters. d. An equitable solution can be reached only if property rights are assigned to polluters and not to the victims of pollution.
b. An efficient solution can be reached regardless of the initial assignment of property rights.
A product is considered to be non excludable if... a. you can keep those who did not pay for the item from enjoying its benefits. b. you cannot keep those who did not pay for the item from enjoying its benefits. c. your consumption of the product reduces the quantity available for others to consume. d. it is jointly owned by all members of a community.
b. You cannot keep those who did not pay for the item from enjoying its benefits.
Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons? a. persuade people to use less of the scarce resource through an advertising campaign. b. access to the commons can be restricted through community norms and laws. c. force people to move away from the commons. d. offer subsidies to consumers.
b. access to the commons can be restricted through community norms and laws.
Members of labor unions are able to use their ____________ to achieve better economic outcomes. a. cooperative nature b. bargaining power c. secret ballot votes d. excess supply of labor
b. bargaining power
As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a ____________ advantage and toward industries where it has a ___________ advantage. a. absolute; absolute b. comparative; comparative c. comparative; competitive d. comparative; absolute
b. comparative; comparative
A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that: a. elasticity of demand for potato chips is 3. b. cross price elasticity of demand for soda is -3. c. elasticity of demand for potato chips is 3. d. elasticity of demand for soda is 3.
b. cross price elasticity of demand for soda is -3.
In recent years, the US labor market has experienced a __________ in the earnings gap between men and women. One of the main factors behind this is _______________. a. big decline; men have steadily been less productive and their wages have fallen. b. decline; women's career focus and rewards gained with top level job expertise. c. increase; women are getting married and having children earlier in life. d. big decrease; an increase in gender-based discrimination in labor markets.
b. decline; women's career focus and rewards gained with top level Job expertise.
Which is not a positive externality? a. investing in a new technology b. deterring the renovation or modernization of homes in neighborhoods. c. investing in education d. being vaccinated against a disease
b. deterring the renovation or modernization of homes in neighborhoods
If an employer provides fringe benefits, such as health insurance, to employees, the costs of those fringe benefits are borne primarily by the... a. government b. employees c. employer d. all of the above bear the costs equally.
b. employees
If the labor supply is unchanged, an increase in the demand for labor will... a. increase the equilibrium wage and decrease the number of workers employed. b. increase the equilibrium wage and increase the number of workers employed. c. increase the equilibrium wage and increase the quantity of jobs demanded. d. decrease the equilibrium wage and increase the number of workers employed.
b. increase the equilibrium wage and increase the number of workers employed.
In May 2011, the average price of gas in the US was $3.76 per gallon, and consumers purchased nearly 5 percent less gas than they had during May 2010, when the average price of gas was $2.79 per gallon. Based on these figures, from May 2010 to May 2011, the demand for gas was a. perfectly elastic b. unit elastic c. inelastic d. elastic
b. inelastic
Which of the following activities create a negative externality? a. graduating from college b. keeping a junked car parked on your front lawn c. cleaning up the sidewalk on your block d. repainting the house you live in to improve its appearance.
b. keeping a junked car parked on your front lawn
Economists would say tariffs... a. protect domestic producers of exported goods. b. limit voluntary exchanges. c. protect foreign producers of goods. d. protect domestic consumers of goods.
b. limit voluntary exchanges
Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? a. high income, market-oriented economies b. low incomes and command economies c. the US d. European Union
b. low incomes and command economies
Which of the following could be evidence of a market failure? a. Resources in an economy are not fully utilized. b. Market prices do not reflect true production costs. c. The market price of a product is above the average cost of production. d. there are only a handful of firms competing against each other in an industry.
b. market prices do not reflect true production costs.
The main categories of market-oriented approaches to pollution control are: a. redefined property rights; pollution permits; marketable charges. b. marketable permits; better-defined property rights; pollution charges. c. pollution charges; extended property rights; marketable permits. d. pollution permits; defined property rights; marketable charges.
b. marketable permits; better defined property rights; pollution charges
Are markets always in equilibrium? a. no, they never "settle down" into a stable price and quantity. b. no, but if there is no outside interference, they tend to move toward equilibrium. c. yes, bc very few things tend to alter supply and demand. d. yes, they are always at the equilibrium point, or very close to it.
b. no, but if there is no outside interference, they tend to move toward equilibrium.
A public good is a good that is ___________, and thus is difficult for market producers to sell to individual consumers. a. excludable or rivalrous b. non excludable and nonrivalrous c. excludable and rivalrous d. unexcludable or unrivaled
b. non-excludable and non-rivalrous
Private producers have no incentive to provide public goods because... a. the government subsidy granted is usually insufficient to enable private producers to make a profit. b. once produced, it will not be possible to exclude those who do not pay for the good. c. they cannot avoid the tragedy of the commons. d. production of huge quantities of public goods entails huge fixed costs.
b. once produced, it will not be possible to exclude those who do not pay for the good.
Certain schools of economic thought suggest that a ___________ would reduce pollution in a _____________, when compared to command and control regulation. a. marketable permit; less cost-effective way. b. pollution tax; flexible, more cost-effective way. c. marketable permit; less flexible manner. d. pollution tax; less cost effective, but flexible way.
b. pollution tax; more cost-effective way.
Marketable permits can be viewed as a form of improved ___________. a. command and control regulations b. property rights c. refundable tax credits d. flat free pollution tax
b. property rights
Low-wage US workers suffer from protectionism in all the industries that they don't work in, because: a. protectionism provides a barrier to entry to the job markets that the low wage earners want entry to. b. protectionism forces them to pay higher prices for basic necessities like clothing and food. c. protectionism will encourage foreign workers to apply for American jobs. d. protectionism will prevent them from applying for those jobs in other industries.
b. protectionism forces them to pay higher prices for basic necessities like clothing and food.
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause equilibrium price to: a. rise and the equilibrium quantity to fall. b. rise and the equilibrium quantity to stay the same. c. rise and the equilibrium quantity to rise. d. stay the same and the equilibrium quantity to fall.
b. rise and the equilibrium quantity to stay the same.
Cathy can take either of 2 separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. the other is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is... a. non-rivalrous and excludable b. rivalrous and non-excludable c. non-rivalrous and non-excludable d. rivalrous and excludable
b. rivalrous and non-excludable
In general, the labor supply curve... a. slopes downward because firms will hire fewer workers at higher wages. b. slopes upward because as the wage rises the opportunity cost of leisure increases. c. is perfectly elastic at the equilibrium wage rate. d. is vertical at the equilibrium wage rate.
b. slopes upward because as the wage rises, the opportunity cost of leisure increases.
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of of dips fell 8 percent. This set of facts indicates that... a. the cross price elasticity between tortilla chips and dips is .8, so the 2 are substitutes. b. the cross price elasticity between tortilla chips and dips is -.8, so the 2 are complements. c. the cross price elasticity between tortilla chips and dips is -.4, so the 2 are complements. d. the cross price elasticity between tortilla chips and dips is .4, so the 2 are substitutes.
b. the cross price elasticity between tortilla chips and dips is -.8, so the 2 are complements.
If large numbers of individuals choose to behave as free riders, a. more of a public good will be available for paying riders. b. the public good may never be provided. c. public goods will quickly be privatized. d. public domain technologies become more difficult to obtain.
b. the public good may never be provided.
If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include... a. Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. b. The real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall. c. the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. d. the price of rice in Japan will fall.
b. the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
Which of the following would be expected if the tariff on foreign produced automobiles were increased? a. the domestic price of automobiles would fall. b. the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise. c. the number of unemployed workers in the domestic automobile industry would rise. d. the demand for foreign produced automobiles would increase, causing the price of automobiles to increase in other nations.
b. the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
If there are no externalities a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because... a. A deadweight loss will occur that is equal to the area under the demand curve for the good. b. too much of the good will be produced. c. too little of the good will be produced. d. economic surplus is maximized.
b. too much of the good will be produced. negative externality= too much production
Why do externalities arise?
because something of value has no price attached to it. And also because of incomplete property rights
Which of following is a source of market failure? a. Unforeseen circumstances which leads to the bankruptcy of many firms. b. An inequitable income distribution c. Incomplete property rights or inability to enforce property rights. d. A lack of government intervention in a market
c. Incomplete property rights or inability to enforce property rights
If the social benefit of consuming a good or a service exceeds the private benefit... a. The market achieves economic efficiency. b. the sum of the consumer surplus and producer surplus is maximized. c. a positive externality exists. d. a negative externality exists.
c. a positive externality exists
The imposition of a price ceiling on a market often results in: a. an increase in investment in the industry. b. a surplus c. a shortage d. a decrease in discrimination on the part of sellers.
c. a shortage
Union members earn __________ than non-union members, even after adjusting for factors such as ________________. a. about 10 percent more; racial discrimination and immigration. b. about the same; union dues and cost of lawyers for collective bargaining. c. about 20 percent more; years of work experience and education level. d. about 30 percent more; healthcare and retirement benefits.
c. about 20 percent more; years of work experience and education level
Which of the following will not result in a rightward shift of the market supply curve for labor? a. a decrease in non-wage income. b. an increase in the working-age population. c. an increase in labor productivity. d. an increase in immigration.
c. an increase in labor productivity
Which of the following will not result in a leftward shift of the market demand curve for labor? a. a decrease in labor productivity b. a decrease in demand for the firms product c. an increase in the wage rate d. a decrease in the firms product price
c. an increase in the wage rate
Market-oriented environmental tools _____________ for firms to take the social costs of pollution into account and ___________ in reacting to these incentives. a. draw distinctions; lower the social costs incurred. b. lack incentives; prohibit firms from having flexibility c. create incentives; allow firms some flexibility. d. specify particular technology; lower the social costs incurred.
c. create incentives; allow firms some flexibility.
The labor ________ curve will shift ____________ if there is an increase in productivity or an increase in the demand for the final product. a. demand; left b. supply; left c. demand; right d. supply; right
c. demand; right
The property rights approach to environmental issues often becomes highly relevant in cases involving ______________. a. greenhouse gas emissions b. harmful affects of acid rain c. endangered species d. fresh water resources
c. endangered species
Why do US economists commonly refer to externalities as an example of market failure? a. firms that are required to pay social costs of externalities produce more. b. externalities present a case where markets consider all social costs. c. externalities present a case where markets only consider some social costs. d. firms avoid having to pay social costs of externalities by lowering prices.
c. externalities present a case where markets only consider some social costs
Market failure describes a situation in which the market itself ___________ in a way that balances social costs and benefits. a. remains outside the transaction b. incurs the costs outside the production process. c. fails to allocate resources efficiently d. avoids externalities
c. fails to allocate resources efficiently
parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as... a. excludability b. public rivalry c. free riding d. internalizing an external cost
c. free riding
Raising an existing tariff on grapes from Argentina will: a. increase domestic production of grapes. b. increase total American consumption of grapes. c. increase American consumption of domestically produced grapes. d. increase American imports on grapes from Argentina.
c. increase American consumption of domestically produced grapes.
Improvements in the productivity of labor will tend to: a. decrease wages b. decrease the supply of labor. c. increase wages d. increase the supply of labor.
c. increase wages
Import tariffs generally __________ the output of domestic producers of the affected products and also ___________ the output of domestic exporters. a. decrease; decrease b. decrease; increase c. increase; decrease d. increase' increase
c. increase; decrease
If the demand for software engineers _________ slower than does supply, then wages of some engineers will _________. a. increases; remain constant b. increases; rise c. increases; fall d. decreases; fall
c. increases; fall
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is: a. unit elastic b. elastic c. inelastic d. perfectly elastic
c. inelastic
taxes on goods with __________ demand curves will tend to raise more tac revenue for the government than taxes on goods with _________ demand curves. a. elastic; unit elastic b. elastic; inelastic c. inelastic; elastic d. unit elastic; inelastic
c. inelastic; elastic
An advantage of imposing a tax on the producer that generates pollution is that... a. The government can keep tabs on exactly what is produced in an industry. b. it will eliminate pollution. c. it forces the polluting producer to internalize the external cost of the pollution. d. a producer can pass the cost of the pollution to consumers.
c. it forces the polluting producer to internalize the external cost of the pollution.
A 10 percent increase in income leads to a 15 percent decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume: a. macaroni is a normal good and price elasticity of demand is greater than 1. b. macaroni is an inferior good and price elasticity of supply is equal to zero. c. macaroni is an inferior good and price elasticity of supply is infinite. d. macaroni is an inferior good and price elasticity of demand is less than 1.
c. macaroni is an inferior good and price elasticity of supply is infinite.
When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of: a. command and control regulation b. pollution tax c. permit to pollute d. inflexible, costly regulation.
c. permit to pollute
For a positive externality, ______________ than the social benefits. a. private benefits of an action are more. b. social benefits of an action are more. c. private benefits of an action are less. d. social costs of an action are less.
c. private benefits of an action are less
The objective of imposing a pollution tax is to... a. ensure firms pollution charge credits for all reduced emissions. b. provide incentive for firms to maintain regulation emisson levels. c. provide adequate incentive for firms to reduce their emissions by more. d. ensure firms must pay the pollution charge for all reduced emissions.
c. provide adequate incentive for firms to reduce their emissions by more.
If a firm raised its price and discovered that its total revenue fell, then the demand for its product is... a. perfectly inelastic b. relatively inelastic c. relatively elastic d. perfectly elastic
c. relatively elastic
The price elasticity of demand measures the: a. responsiveness of quantity demanded to a change in quantity supplied. b. responsiveness of price to a change in quantity demanded. c. responsiveness of quantity demanded to a change in price. d. responsiveness of quantity demanded to change in income.
c. responsiveness of quantity demanded to a change in price
If the cross-price elasticity of demand between beer and wine is .31, then beer and wine are... a. price inelastic goods b. complements c. substitutes d. necessities
c. substitutes
As the ___________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. a. high-skill labor b. lower wage c. technology d. market
c. technology
Which of the following would most likely be recognized as a defining characteristic of a public good? a. the good is a non-rivalrous item b. the good is a non-excludable item c. the good is both a and b above d. the good is a separate and identifiable item
c. the good is both a and b above
As gas prices increased throughout 2010 and into 2011, consumers began to explore alternatives to driving their cars and more people eventually ended up using public transportation. This exemplifies that for a specific product, the longer the time period involved,... a. the closer the price elasticity of demand is to reaching a value of zero. b. the smaller (in absolute value) the price elasticity of demand. c. the larger (in absolute value) the price elasticity of demand. d. the more people come to rely on that product.
c. the larger (in absolute value) the price elasticity of demand.
Tariffs result in a decrease in consumer surplus because... a. the price and the quantity consumed of the protected good increases. b. the price and the quantity consumed of the protected good decreases. c. the price of the protected good increases and quantity consumed decreases. d. the price of the protected good decreases and quantity consumed increases.
c. the price of the protected good increases and quantity consumed decreases.
Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,... a. sellers bear the entire burden of the tax. b. the tax burden will be shared among the government, buyers, and sellers. c. the tax burden will be shared by buyers and sellers. d. buyers bear the entire burden of the tax.
c. the tax burden is shared by buyers and sellers
Common resources differ from public goods in that... a. common resources are resources that cannot be renewed but the production of public goods can be increased any time. b. common resources are collectively owned by a group of people while public goods are government owned. c. unlike public goods, common recourses are rivalrous in consumption. d. common resources are non-excludable while public goods are excludable to those who do not pay for the good.
c. unlike public goods, common resources are rivalrous in consumption.
If no externalities of pollution exist in a particular industry, the interaction of demand and supply ___________. a. is based on benefits individuals perceive while maximizing utility. b. is based on choices about production relative to total average costs. c. will coordinate social costs and benefits. d. shifts so supply has no relation to social costs.
c. will coordinate social costs and benefits
International trade is fundamentally a... a. win lose situation b. lose lose situation c. win win situation d. war which is won by the strongest
c. win win situation
If the government altered its invention patent policy from a monopolistic policy to a competitive policy, then consumers. a. would face higher prices and less quantity in the long run. b. would face lower prices and less quantity in the short run. c. would benefit from the lower price and greater quantity sold. d. would benefit from lower prices due to increased public investments.
c. would benefit from the lower price and greater quantity sold.
Def.- a difference in wages that arises to offset the non monetary characteristics of different jobs.
compensating differentials
Some policymakers have argued that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. If the government decided to impose a tax on soda, the government will cause... a. producers to internalize the externality. b. the external cost to drinking soda to become a private cost paid by the government. c. consumers to internalize the externality. d. the external cost to drinking soda to become a private cost paid by producers.
consumers to internalize the externality
Def.- this measures the response of quantity demanded for one good to changes in the price of another good.
cross price elasticity of demand
Michael Spence proposed the signaling hypothesis. According to this hypothesis... a. Workers signal their desire to work for a particular firm by the way they answer questions in job interviews. b. High wages are a signal that workers have skills that are highly valued by employers. c. Employers signal their preferences for the type of employee they wish to hire through job ads and the questions they ask during job interviews. d. Employers view a college education as a signal that potential workers have certain desirable qualities.
d. Employers view a college education as a signal that potential workers have certain desirable qualities.
One implication of compensating differentials is that laws passed to to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws. Why is this so? a. In non-competitive markets, workers are unlikely to receive a compensating differential to compensate for jobs with extra risk. As a result, after the laws are passed their wages will not change. b. The principal-agent problem that exists in the workplace may cause workers to shirk more after the work environment becomes safer. c. Workers may suffer from cognitive dissonance, which means that the perception workers have that their jobs are hazardous is not true. d. If the laws make the work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs.
d. If the laws make their work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs.
Which of the following results in a rightward shift of the market demand curve for labor? a. a decrease in labor productivity. b. a decrease in the firms product price c. an increase in the wage rate d. an increase in demand for the firms product.
d. an increase in demand for the firms product
Which of the following would be classified as a positive externality? a. a surcharge for ambulance service is shifted to property taxes. b. reselling outdated textbooks to under-funded public schools. c. removing government education subsidies for public schools. d. converting a derelict empty lot to a public vegetable garden.
d. converting a derelict empty lot to a public vegetable garden.
A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that: a. elasticity of demand for soda is 0.5 and is inelastic. b. elasticity of demand for iced tea is 2 and is elastic. c. cross-price elasticity of demand for soda is -0.5. d. cross-price elasticity of demand for iced tea is -2.
d. cross-price elasticity of demand for iced tea is -2.
A price cut will increase the total revenue a firm receives if the demand for its product is: a. unit inelastic b. unit elastic c. inelastic d. elastic
d. elastic
As environmental protection increases,... a. the biggest marginal benefits are achieved first, smaller marginal benefits follow. b. inexpensive and easy methods of reducing pollution begin to dwindle. c. the more costly and innovative methods can be readily avoided. d. in addition to a and b above, the quality of environmental protection increases.
d. in addition to a and b above, the quality of environmental protection increases.
The arguments presented by economists regarding US environmental command and control regulations generally... a. accept the goal of reducing pollution. b. question the regulations as being the best policy tools for meeting reducing goals. c. assert that these laws are clear of the usual fine print, loopholes and exceptions. d. lack flexibility and a and b above.
d. lack flexibility and a and b above
Other things being equal, a _________ supply of workers tends to ___________ real wages. a. smaller; not change b. larger; increase c. smaller; decrease d. larger; decrease
d. larger; decrease
Low and middle income societies correctly point out that high income countries have historically... a. been the primary contributors to greenhouse warming. b. been the primary contributors to reduced biodiversity. c. failed to put environmental protection ahead of corporate profits. d. legitimately lacked moral standing in addition to all of the above.
d. legitimately lacked moral standing in addition to all of the above.
When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being... a. unexcludable b. free rider c. public good d. non-excludable
d. non-excludable
Property rights are the legal rights of ownership on which other are: a. allowed to infringe by paying the property owner's pollution tax. b. able to enforce the use of pollution control technologies. c. able to specify allowable quantities of pollution. d. not allowed to infringe without paying compensation.
d. not allowed to infringe without paying compensation.
The demand for labor is different from the demand for final goods and services because... a. the demand for labor is more inelastic than the demand for the goods and services produced with this labor. b. the law of demand does not apply to the demand for labor. c. it is a demand for people, not inanimate objects. d. the demand for labor is derived from the demand for the good or service the labor is used to produce.
d. the demand for labor is derived from the demand for the good or service the labor is used to produce
Which of the following statements is true? a. in general, if a product has few substitutes it will have an elastic demand. b. the demand curve for a necessity is more elastic than the demand curve for a luxury. c. the more time that passes the more inelastic the demand for a product becomes. d. the more narrowly we define a market, the more elastic the demand for a product will be.
d. the more narrowly we define a market, the more elastic the demand for a product will be.
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: a. each would create less pollution. b. each would lower production to decrease pollution levels. c. their supply curves will represent all of those social costs. d. the price of goods will rise and a and b above.
d. the price of goods will rise and a and b above
Which of the following is viewed as a fundamental building block of the US economic way of thinking? a. the principle of setting high toxic emission limits to preserve a healthy environment. b. the belief that industry must be allowed to prevail over the environment. c. the needs of both parties to a voluntary exchange must be completely satisfied. d. the principle that a system of voluntary exchange benefits both parties.
d. the principle that a system of voluntary exchange benefits both parties.
Discrimination in labor markets arises if ___________, as measured by education, receive different pay because of their _____________. a. workers with different skill levels; race or gender. b. workers with no experience; race or marital status. c. workers with work experience; race or marital status. d. workers with the same skill levels; race or gender.
d. workers with the same skill levels; race or gender
Def.- this kind of demand is derived from a firm's decision to supply a good in another market.
derived demand
Def.- this means selling goods below their cost of production.
dumping
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
Def.- this type of demand is when the percentage change in quantity demanded is GREATER than the percentage change in price. It is GREATER than 1 in absolute value.
elastic demand
Def.- this measures how much one variable responds to changes in another variable.
elasticity
Which of the following is an example of a common resource? a. public transportation b. lions in a zoo c. elephants in the wild d. a college education
elephants in the wild
what is the formula for calculating percentage change?
end value - start value/ start value, then x 100%
Def.- the situation in which anyone who does not pay for a good cannot consume it.
excludability
Def.- this is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service. (aka the uncompensated impact of one person's actions on the well being of a bystander). they cause a market to be inefficient.
externality
An individual who wants others to Pay for public goods, but plans to use those goods for their own purposes, is often referred to as a __________.
free rider
For normal goods, income elasticity is ________ than 0.
greater
If domestic price is __________ than world price, the country does not have comparative advantage, and under free trade, the country imports the good.
greater
A negative externality causes the market equilibrium quantity to be too _______.
high (it will produce more than is socially optimal)
A perfectly elastic supply curve is __________.
horizontal
Def.- this measures the response of quantity demanded to changes in income.
income elasticity of demand
After the USA introduces a tariff in the market for gigastraps, the price of gigastraps in the USA will... a. decrease b. increase c. remain the same d. change in an indeterminate manner
increase
Demand is said to be _________ when the quantity demanded is not very responsive to changes in price.
inelastic
Def.- this type of demand is when the percentage change in quantity demanded is LESS than the percentage change in price. It is LESS than 1 in absolute value.
inelastic demand
If labor markets determine equilibrium compensation, a reduction in employer contributions for health insurance should... a. increase supply of labor b. decrease total worker compensation c. lead to an offsetting increase in wages d. decrease demand for labor
lead to an offsetting increase in wages
For inferior goods, income elasticity is _________ than 0.
less
If domestic price is __________ than world price, the country has comparative advantage in the good, and under free trade, the country exports the good.
less
What are some examples of command and control regulations by the government?
limits on quantity of pollution emitted and requirements that firms adopt a particular technology to reduce emissions.
Positive externalities cause the market equilibrium quantity to be too _________.
low
List the types of private solutions:
moral codes and social sanctions, charitable organizations, integrating different types of businesses, and contracting between parties
_____________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
negative externality
In order for a good to be classified as ___________, when one person uses the good, others are also able to use it.
nonrivalrous
what is the formula for finding price elasticity of demand?
percentage change in quantity demanded/percentage change in price
what is the formula for measuring price elasticity of supply?
percentage change in quantity supplied/percentage change in price
Def.- the cost borne by the producer of a good of service.
private cost
In market efficiency, the supply curve shows __________ _______, the costs directly incurred by sellers.
private costs
In market efficiency, the demand curve shows __________ ________, the value to buyers.
private value
What are the 2 main functions of government?
provide law and order and property rights (incentives for self-monitoring)
Def.- the situation that occurs when one person's consuming a unit of a good means no one else can consume.
rivalry
Def.- total cost of producing a good or service, including both the private cost and any external cost.
social cost
What are the 2 government policies that restrict trade?
tariff (a tax imposed by a government on imports) and a quota (a numerical limit a government imposes on the quantity of a good that can be imported into the country.
Def.- this is the actual division of the burden of the tax between buyers and sellers.
tax incidence
Def.- this explains that property held in common leads to individual incentives to overuse, depleting the resource.
tragedy of the commons
Demand is said to be ____________ when the quantity demanded changes at the same proportion as the price.
unit elastic
Def.- this type of demand is when the percentage change in quantity demanded is EQUAL to the percentage change in price. It is EQUAL to 1 in absolute value.
unit-elastic demand
With labor supply, there is a trade-off Between work and leisure. The more time you spend working, the less time you have for leisure. The opportunity cost of leisure is the __________.
wage
Def.- this is the price that prevails in world markets.
world price
