Microeconomics exam #4

Refer to the given data. The marginal revenue product of the fourth worker is: A. $8 B. $52 C. $2 D. $4

a

If the nominal wage rises by 4 percent, and the price level rises by 7 percent, the real wage will: A.be unaffected. B. rise by 3 percent. C. fall by 3 percent. D. rise by 11 percent.

c

Interest rates are the payments needed to entice individuals to: A. Accept insurable risk B. Accept uninsurable risk C. Sacrifice their present consumption D. Sacrifice their future consumption

c

Refer to the given data. If the market wage rate is $8, this firm will employ: A. 2 workers. B. 3 workers. C. 4 workers. D. 5 workers.

c

Assume the Environmental Protection Agency imposes an excise tax on polluting firms. In which of the following situations would we expect the additional costs to be borne most heavily by consumers? A. Demand is highly elastic and supply is highly inelastic. B. Demand and supply are both highly elastic. C. Demand and supply are both highly inelastic. D. Demand is highly inelastic and supply is highly elastic.

d

Entrepreneurs normally do all of the following except: A. Take the initiative in combining other resources to produce goods or services B. Make the basic, nonroutine policy decisions for their organization C. Bear the risks involved in introducing new product or production innovations D. Avoid accepting risks associated with a business

d

Housing subsidies for low-income households A. represent a cash transfer. B. are a part of the U.S. social insurance programs. C. represent a noncash transfer D. conflict with the leaky-bucket analogy

c

If Congress were to pass a law exempting interest on saving from taxation, the A. equilibrium interest rate would be unaffected. B. demand for loanable funds would increase and the equilibrium interest rate would rise. C. supply of loanable funds would increase and the equilibrium interest rate would fall. D. supply of loanable funds would decrease and the equilibrium interest rate would

c

. Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be A) borne primarily by sellers of tires. B) borne by resource suppliers that provide the inputs for manufacturing tires. C) borne primarily by buyers of tires. D) shared about equally by buyers and sellers of tire

c

. Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are A. 14 percent and 20 percent, respectively B. 1.4 percent and 11.8 percent, respectively. C. 14 percent on both loans. D. 18.8 percent on both loans

c

A profit-maximizing firm will: A. expand employment if marginal revenue product equals marginal resource cost. B. reduce employment if marginal revenue product equals marginal resource cost. C. reduce employment if marginal revenue product is less than marginal resource cost. D. expand employment if marginal revenue product is less than marginal resource cost.

c

An example of a social insurance program is, whereas an example of a public assistance program is. A. Temporary Assistance for Needy Families;unemployment compensation B. Supplemental Security Income;unemployment compensation C. Social Security;Supplemental Nutrition Assistance Program D. Medicaid;Medicare

c

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is A. 5 percent. B. 12 percent. C. 35 percent. D. 42 percent.

c

Assume that you pay $10,000 of tax on a taxable income of $50,000. If your taxable income were $150,000, your tax payment would be $25,000. This suggests the tax is A. progressive. B. proportional. C. regressive. D. discriminatory

c

Construction workers and their unions frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason for this is to: A. restrict the supply of construction workers. B. increase the elasticity of demand for construction workers. C. increase the demand for construction workers. D. increase the price of substitute inputs.

c

Economic profits are not payments received for: A. Taking uninsurable risks B. Making product or production innovations C. Ownership of large stocks of capital resources D. Exercising monopoly power

c

If the interest rate is 15%, what is the future of value of $10,000 two years from now? A. $13,225 B. $225 C. $13,000 D. $7,576

a

If the price elasticity of supply is 0 and the market demand curve is downward sloping: A. The producer bears the full burden of a per-unit tax upon the good B. The consumer bears the full burden of a per-unit tax upon the good C. The economic incidence of a per-unit tax upon the good is borne by the consumer and the producer D. Although the economic incidence is uncertain, a per-unit tax upon the goodwill shift the supply curve leftward

a

Income mobility A. makes lifetime income inequality among income receivers in the United States less than income inequality in any single year. B. is less in the United States than in most developing nations. C. refers to the movement of wage earners from one job to another. D. reduces the total percentage of households in the lowest quintile of the income distribution over time.

a

Other things equal, the monopsonistic employer will pay a: A. lower wage rate and hire fewer workers than will a purely competitive employer. B. higher wage rate but hire fewer workers than will a purely competitive employer. C. lower wage rate but hire a larger number of workers than will a purely competitive employer. D. higher wage rate and hire a larger number of workers than will a purely competitive employer.

a

Pure economic rent is the price of a resource with a perfectly: A. Inelastic supply schedule B. Elastic supply schedule C. Elastic demand schedule D. Inelastic demand schedule

a

Refer to the income tax schedule given in the table. The tax represented is A) progressive. B) regressive. C) proportional. D) optimal.

a

The largest single share of all income earned by Americans consists of: A. wages and salaries. B. interest. C. rents. D. corporate profits

a

Which of the following represents an uninsurable risk to a business firm? A. the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product B. the possibility that a tornado will damage the plant and stop production for a month C. the possibility that several of its workers will be injured at work D. the possibility that its warehouse will burn down

a

Which of the following taxes is most likely to be shifted? A. a general sales tax B. a flat-rate state income tax C. a progressive Federal income tax D. a property tax on an owner-occupied residence

a

Which one of the following best exemplifies the principal-agent problem in the employer-employee relationship? A. A worker takes 20-minute coffee-breaks although the employer allots only 15 minutes for this purpose. B. A worker is on the job 50 hours per week although only 40 hours are required for promotion. C. A worker opts for early retirement in response to the firm's incentive plan. D. A worker's productivity is independent of the wage paid.

a

A craft union attempts to increase wage rates by: A. equating the MRP and the MRC curves. B. shifting the labor supply curve to the left. C. shifting the labor supply curve to the right. D. shifting the MRP curve to the right.

b

If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is A) 30 percent, but average tax rates cannot be determined from the information given. B) 40 percent, and the average tax rate is about 23 percent at the $30,000 income level. C) 40 percent, and the average tax rate is 25 percent at the $25,000 income level. D) 50 percent, and the average tax rate is 40 percent at the $30,000 income level.

b

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by consumers is shown by areas. A. A + B + F B. A + B C. A + B + C D. E + F

b

One cause of income inequality in the United States is A. the free public school system. B. differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work. C. anti-discrimination laws. D. a system of taxes and government transfers that redistributes income away from the lowest earners.

b

Refer to the diagram. If line (c) represents the pretax and transfer distribution of income in the United States, the post-tax and transfer distribution is best represented by A. line (a). B. line (b). C. line (c) because taxes and transfers have no effect on income distribution. D. line (d).

b

Since 1900, the relative share of income paid to American resource suppliers as corporate profits, interest, and rent has been about: A. 10 percent B. 20 percent C. 50 percent D. 80 percent

b

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are: A. 14 percent and 20 percent, respectively. B. 14 percent on both loans. C. 18.8 percent on both loans. D. 1.4 percent and 11.8 percent, respective

b

The Federal personal income tax is based on the: A. Benefits-received principle of taxation B. Ability-to-pay principle of taxation C. Law of comparative advantage D. Fallacy of limited decisions

b

The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the A. smaller is the Gini ratio and the greater is the degree of income inequality. B. larger is the Gini ratio and the greater is the degree of income inequality. C. smaller is the Gini ratio and the lesser the degree of smaller income inequality. D. larger is the Gini ratio and the lesser is the degree of income inequality.

b

Wealth in the United States is A. distributed in a way that reduces the degree of income inequality. B. more unequally distributed than is income. C. less unequally distributed than is income. D. distributed in a way that has no effect on income inequality.

b

Which of the following best reflects the ability-to-pay philosophy of taxation? A. a tax on residential property B. a progressive income tax C. an excise tax on gasoline D. an excise tax on coffee

b

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total tax payment to government is shown by area(s) A. A only. B. A + B + C + E + F C. A + B + C D. E + F

c

Refer to the given data. At the profit-maximizing level of employment, this firm's total labor cost will be: A. $16. B. $30. C. $24. D. $32.

c

The average tax rate is the: A. Sum of all individual tax rates B. Tax rate paid by middle-income households C. Total tax paid divided by a comparison base D. Increase in taxes as a percentage of an increase in income

c

The idea of efficiency wages is that: A. the wages of each type of labor must be proportionate to their marginal products. B. the wages of each type of labor must be equal to their marginal products. C. firms might get greater work effort by paying above-equilibrium wage rates. D. workers are more diligent when paid below-equilibrium wages.

c

The incidence of a tax pertains to: A. the degree to which it alters the distribution of income. B. how easy it is to evade the tax. C. who actually bears the burden of a tax. D. the progressiveness or regressiveness of tax rat

c

Which of the following Gini ratios indicates the lowest degree of income inequality? A. 0.71 B. 0.55 C. 0.31 D. 0.45

c

If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of: A. A progressive tax B. A regressive tax C. The ability-to-pay principle of taxation D. The benefits-received principle of taxation

d

In the diagram, S is the before-tax supply curve and St is the supply curve after excise tax is imposed. The efficiency loss of the tax is shown by areas A. A + B + C + E + F B. A + B + C C. A + B + F D. E + F

d

On January 1, 2016, Alex deposited $5,000 into a savings account that pays interest of 5 percent, compounded annually. If he makes no further deposits or withdrawals, how much will Alex have in his account on December 31, 2018 (3 years later)? A) $5,813. B) $5,825. C) $5,750. D) $5,788.

d

Refer to the diagram, where curves (a) through (e) are for five different countries. Of the countries listed below, income is most unequally distributed in country. A. a. B. b. C. c. D. d

d

Refer to the income tax schedule given in the table, The tax represented is A. optimal. B. proportional. C. regressive. D. progressive

d

The basic economic argument for greater income equality is that A. an equal distribution of income is the logical outcome of any tax-transfer program. B. because citizens enjoy political equality, they are also entitled to economic equality. C. a more equal distribution of income will tend to maximize incentives to work, invest, and assume risk. D. a more equal distribution of a given amount of income will increase the total utility of consumers.

d

The rent paid for the pasture land used to graze cattle would increase if: A. the productivity of the land increased. B. people decided to consume more beef. C. oil deposits were discovered on the land. D. any of the above occurred

d

Which of the following is not a source of loanable funds? A. the saving of households B. business saving C. commercial bank lending D. government budget deficit

d