Mirco Exam 3

On the Price Is Right, Bob Barker (and now Drew Carey) encourages people to "Help control the pet population. Have your pets spayed or neutered." An overly large pet population leads to many stray animals that are not only depressing but are also prone to spread disease. Concerning pet ownership, Barker and Carey are attempting to do what? a.internalize some of its benefits b.internalize some of its costs c.use the Coase theorem d.employ Pigouvian taxes

B

Sugar quotas: a.lead to lower prices and increased output, and thus are opposed by the sugar industry. b.cost the typical family about $6 per year but provide millions of dollars of benefits to Florida sugar producers. c.harm U.S. sugar farmers at the benefit of the candy and soda industry. d.are not an issue in the United States despite rationally ignorant voters.

B

Table: Government SpendingRefer to the table. According to the median voter theorem and the data in this table, candidates will position their ideal level of spending at: a.$1 trillion. b.$2 trillion. c.$3 trillion. d.$2.5 trillion.

B

The median voter is the person/voter who is exactly in the middle of the population, when one is counting the population in numbers. a.False b.True

B

When government makes it possible to push the costs of a good onto other people, we get too much of the good. a.False b.True

B

Which statement about taxes is INCORRECT? a.Both taxes and tradable allowances in a market that has external costs can lead to the efficient quantity. b.Taxes in markets always cause deadweight losses .c.If the good causes an external cost, taxes actually reduce deadweight loss. d.Taxes on producers cause the supply curve for the product to shift to the left.

B

ust before the 1972 election, ________ sent a letter to 24 million Social Security recipients informing them of automatic cost of living increases in the future. a.Richard Nixon b.Jimmy Carter c.John F. Kennedy d.Ronald Reagan

B

Democracy typically brings about more efficient outcomes because: a.democracies are common practice in developed countries. b.citizens in democracies are rationally ignorant. c.citizens in democracies are better informed and have the power to vote. d.democracies create a demand for wealth.

C

Economists Besley and Burgess found that a government is more responsive to food crises when there is: a.more political competition .b.more newspapers. c.both more political competition and more newspapers. d.either more political competition or more newspapers.

C

One reason for the good record of democracies on economic growth is that: a.people can become rich by competing for the limited economic resources. b.people can become rich by gaining economic resources in their favor. c.the public as a whole can become rich by equally dividing the economic resources. d.the public as a whole can become rich by supporting efficient policies that generate economic growth.

C

Personal disposable income: a.does not follow any sort of predictable pattern .b.grows most quickly during election years. c.is even throughout the political business cycle. d.grows most quickly during nonelection years.

C

Tradable allowances for pollution: a.decrease the availability of resources able to be utilized in other areas of production. b.seem good in theory but have never been successfully enacted in market economies. c.typically decrease firms' profits. d.allow firms to reduce pollution levels at lower costs.

C

When the government intervenes in markets with external costs, it does so in order to: a.ensure all the costs are born by consumers. b.ensure all the costs are born by producers. c.protect the interests of bystanders .d.increase the welfare losses of producers.

C

A compensating differential is mainly a cause of a difference in wages because: a.of differences in working conditions. b.all workers should be paid the same wage rate .c.of differences in human capital. d.of differences in productivity.

a

A firefighter is likely to earn ________ than a receptionist because ________. a.more; the job is more dangerous. b.more; the job is more prestigious .c.more; the job is more fun. d.less; the job has unattractive characteristics.

a

A firm should be willing to pay $20 to hire a worker with a marginal product of $15. a.True b.False

a

A jump rope is a: a.rival good .b.public good .c.nonrival good. d.common good.

a

A public good is a good produced in the public sector. a.True b.False

a

An efficient equilibrium occurs when: a.social costs equals social benefits .b.private costs equals social benefits .c.private costs equals private benefits. d.social costs equals private benefits.

a

An excludable good is: a.one that producers will exclude from production .b.not necessary to consume (i.e., a luxury). c.one that is excluded from the common basket of goods consumed by households. d.one where people can be prevented from using the good

a

An individual's labor supply curve might be backward bending. a.True b.False

a

Augusta National is an exclusive country club in Augusta, Georgia, that does not allow women to be members. The primary reason for this is most likely that: a.the members of Augusta National do not want women on their course—an example of customer discrimination. b.the workers at Augusta National don't want to wait on women—an example of employee discrimination. c.the chairman of Augusta National discriminates against women—an example of employer discrimination .d.the town of Augusta discriminates against women—an example of government discrimination.

a

For an efficient equilibrium, the Coase theorem does NOT require that: a.the government sets a Pigouvian tax equal to the external cost. b.private bargains are possible. c.property rights are clearly defined. d.transaction costs are low.

a

Goods can be classified as private goods or public goods, depending on the circumstances. a.False b.True

a

Human capital refers to tools such as computers and telecommunication. a.False b.True

a

In the presence of external costs, the social cost curve lies ______ the supply curve. a.above b.sometimes above and sometimes below c.below d.with

a

One reason office cleaners in India earn less than office cleaners in the United States is because: a.the U.S. economy is more productive than the Indian economy .b.American office cleaners possess higher education levels than Indian office cleaners do. c.the Indian economy is more productive than the U.S. economy. d.American office cleaners work harder than Indian office cleaners do.

a

The environment is an example of a: a.public good .b.common resource .c.private good .d.club good.

a

The marginal product of labor is: a.the increase in a firm's revenues created by hiring an additional laborer .b.the decrease in a firm's revenues created by hiring an additional laborer. c.the revenue created by the average worker. d.the revenue created by a firm's entire workforce.

a

The tragedy of the commons is often the result of: a.nonexcludability and nonrivalry .b.excludability and nonrivalry .c.excludability and rivalry. d.nonexcludability and rivalry.

a

Tragedy of the commons problems have been solved through command and control policies. a.False b.True

a

Tuna overfishing is an example of a tragedy of the commons. a.True b.False

a

Unions raise wages by: a.decreasing supply of labor in the industry .b.putting price controls on wages in the industry. c.increasing demand for labor in the industry. d.increasing employment in the industry.

a

When someone receives the benefits of cable TV service, the benefit others can receive from this service gets reduced. a.False b.True

a

Which of the following is MOST likely to improve the productivity of workers? a.federal legislation mandating benefits b.investment in human capital labor market issues c.an increase in the minimum wage d.an increase in unionization

a

Which of the following is NOT a potential result of unionization? a.a poorer economy as a result of work stoppages b.higher wages across all industries c.higher wages in the unionized industry d.lower employment in the unionized industry

a

Which of the following is an example of a club good? a.a new episode of a cable TV show b.a radio station c.interstate roadways d.national defense

a

Which of the following would NOT be considered an example of a public good? a.public roads b.asteroid deflection c.mosquito control d.national defense

a

Explain in your own words: (1) What is an externality? and (2) What is the difference between a positive and negative externality. Provide examples.

an exterality is a cost or benifent caued by a producer that is not finachalyy received. The diffrence beetween a positive and negative externality is between what spills over. When it is postive, benifets will spell over. However, when it is negative; the cost will spill over. Examples of a positive externaity is when you consume education. Examples of negative externality is when over consumptition leads to a third party issue, like air polution

. (Figure: Budget Constraint) Refer to the figure. The slope of the budget constraint in the figure is equal to: a. the price of sneakers divided by the price of flip-flops. b. the price of flip-flops divided by the price of sneakers. c. the quantity of flip-flops divided by the quantity of sneakers. d. the quantity of sneakers divided by the quantity of flip-flops.

b

An example of a transaction cost for a shirt is the price you pay for a shirt. a.True b.False

b

Asteroid deflection is a good that would be profitable for an insurance company to provide. a.True b.False

b

Free riders are people who: a.pay for public goods but do not end up enjoying them. b.enjoy public goods without paying for them .c.ride public transportation without paying. d.pay for both private and public goods.

b

If the marginal product of labor is decreasing in labor, then a firm-level labor demand curve is: a.flat .b.negatively sloped .c.positively sloped. d.varied.

b

In How Economics Saved Christmas, economist Art Carden retold the Dr. Seuss story of the Grinch who hated Christmas and stole the decorations, food, and presents from neighboring Whoville. Complete this passage from Carden's poem:He reached for his textbooks; he knew what to doHe'd fight them with ideas from A. C. PigouThis idea has merit, he thought in the frostA ____ that was equal to _____ cost. a.subsidy; private b.tax; external c.tax; total d.subsidy; social

b

In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by: a.subsidizing both markets. b.taxing Market Y and subsidizing Market X .c.taxing both markets .d.a tax of $5 in Market X and a subsidy of $10 in Market Y.

b

In the presence of significant externalities, a market equilibrium maximizes: a. social surplus. b. nothing. c. consumer surplus plus producer surplus plus everybody else's surplus. d. consumer surplus plus producer surplus.

b

Many individuals refer to education as a public good. How is education NOT a public good? a.Its acquisition is excludable .b.Its acquisition is both rival and excludable. c.Its acquisition is usually rival and rarely excludable. d.Its acquisition is rival.

b

One way to achieve political success is to: a.concentrate benefits and costs .b.concentrate benefits and diffuse costs .c.diffuse costs and benefits. d.concentrate costs and diffuse benefits.

b

Suppose that there is discrimination against women by employees at a workplace. Which of the following would be the LEAST likely result(s)? a.Some men may leave for other jobs if a woman is hired. b.Fewer men would apply to the job. c.Fewer women would apply to the job. d.Employers are less likely to hire women.

b

The efficient equilibrium maximizes private surplus. a.True b.False

b

The problem of free riders is most apparent for: a.private goods. b.public goods .c.textbooks .d.club goods.

b

When benefits are highly concentrated but costs are diffused across a large number of people: a.the market tends to underproduce these goods. b.the market tends to overproduce these goods. c.the government tends to overproduce these goods. d.the government tends to underproduce these goods.

b

When externalities are present in a market, social surplus is maximized. a.False b.True

b

Which of the following goods is nonexcludable? a.a concert at Radio City Music Hall b.national defense c.an apartment building d.a can of Coke

b

Which of the following is the explanation for why wild animals are often hunted to the point of extinction? a.cost-benefit analysis b.public goods c.There is no known explanation. d.tragedy of the commons

b

Workers in many foreign countries such as India are paid much less for work that is very similar to the work done by workers in the United States. One reason for this is that: a.India is a more productive economy. b.India is a less productive economy. c.workers in the United States are greedy. d.workers in India are less materialistic.

b

A firm is willing to hire a worker when the marginal product of labor is: a.equal to or less than the wage. b.less than the wage .c.efficient .d.greater than the wage.

d

By assuming diminishing marginal utility, we mean that: a. consumers get less overall value from goods as their income rises. b. consumers value some goods more than others. c. the cost of producing goods declines as output increases. d. consumers value additional units of a good less and less.

d

Externalities are: a. benefits received by people other than the producers and consumers exchanging in the market. b. costs paid by people other than the producers and consumers exchanging in the market. c. found either in the form of external benefits or external costs. d. All of these statements are correct.

d

In the case of broadcast, antenna television, the ______ problem is partly overcome through the use of advertising. a.accessibility b.revenue stream c.liquidity d.free-rider

d

Refer to the figure. How many workers will this firm hire at a wage of $29? a.1 b.3 c.0 d.2

d

The external benefit of honey production is internalized when: a.beekeepers pay farmers to pollinate farmers' crops. b.beekeepers receive tax breaks from the government .c.farmers receive tax breaks from the government .d.farmers pay beekeepers to pollinate their crops.

d

The government spends more on foreign aid than: a.Social Security. b.health care. c.welfare. d.None of the answers is correct.

d

The incumbent party tends to win elections when: a.inflation is high. b.unemployment is high. c.the incumbent party has not been in power for very long .d.consumers' disposable income is high.

d

There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree? a.It would decrease because most of what you learn in college does not make you more productive .b.It would increase because more people would be identified as hard working .c.It would increase because the marginal product of labor would increase. d.It would decrease because it would be more difficult to differentiate workers.

d

Which of the following is an example of discrimination? a.David shops around to find the lowest price on an item he is looking to purchase. b.Mary makes a marketing decision based on past sales data. c.Bob does not play poker in Las Vegas because he thinks the odds are against him. d.You assume your next-door neighbor Louise is a slow driver because she is 89 years old.

d

Which statement correctly describes what a Pigouvian subsidy is? a.Taxes on producers creating negative externalities are called Pigouvian subsidies. b.Subsidies received by the producers are called Pigouvian subsidies .c.Lower corporate tax rates are also known as Pigouvian subsidies. d.Pigouvian subsidies are awarded to producers whose goods have external benefits

d

in the case of an external benefit, the social value curve lies ______ the demand curve. a.sometimes above and sometimes below b.with c.below d.above

d

1. (Table: Costs of Antibiotics) Refer to the table. The marginal social cost of the fifth unit is: a. $15. b. $5. c. $35. d. $25.

c

After Napster was introduced in 1999 as a peer-to-peer file-sharing Internet service, people could cheaply distribute music. Thanks to this and other innovations (e.g., "ripping" CDs, torrents, YouTube), music is becoming increasingly: a.private. b.nonrival .c.nonexcludable. d.taxable.

c

Antibiotic use carries an external ______ of building bacterial resistance against drugs. a.cost b.revenue c.benefit d.price

c

Aside from your skills and how hard you work, what does your marginal product of labor reflect? a.nothing b.your supply of labor c.the productivity of everyone else in your economy d.your chance of death on the job

c

Command and control refers to: a.a market-based solution to the externality problem. b.government taxes and/or subsidies in markets that generate externalities .c.military maneuvers that actually increase economic efficiency. d.government regulations that directly limit the production or use of a good.

c

Evidence from an important study of media ownership concludes that: a.public ownership of the press increases information flows to the public, which increases the quality of the government. b.private ownership of the press restricts information flows to the public, which reduces the quality of the government. c.government ownership of the press restricts information flows to the public, which reduces the quality of the government. d.there is little correlation between media ownership and the efficiency of government.

c

Labor market issues are: a.something we are born with. b.negatively correlated with an individual's wage rate. c.ultimately leading to lower wage premiums over time .d.produced by investing time and other resources in education, training, and experience.

c

Ocean tuna is an example of a: a.common resource. b.public good .c.private good. d.club good.

c

Private goods are both: a.nonrival and excludable. b.nonrival and nonexcludable. c.rival and excludable. d.rival and nonexcludable.

c

Private goods are: a.nonexcludable and rival .b.nonexcludable and nonrival. c.excludable and rival .d.excludable and nonrival.

c

Refer to the table. A Major League Baseball team is trying to increase the quality of its pitching staff by hiring all-star quality pitchers. If the team hires three all-star pitchers, what is the going salary for an all-star pitcher? a.more than $7 million per season b.less than $3 million per season c.between $3 million and $7 million per season d.$42 million per season

c

Refer to the table. What is the marginal product of labor for the fifth worker? a.$135 b.$1,760 c.$180 d.$1,580

c

The proposition that private parties with clearly defined property rights and low transaction costs can resolve externalities problems on their own is called the: a. voluntary tax theorem. b. Bee theorem. c. Coase theorem. d. transaction cost theorem.

c

The sun has features of a: a.public good—it shines on everyone b.private good since solar energy can be marketed. c.common resource—everyone in society can use it for warmth and light .d.rival good that can easily be made excludable.

c

Under the EPA's tradable allowances program, clean energy is ______ and dirty energy is ______. a.taxed; subsidized b.taxed; taxed c.subsidized; taxed d.subsidized; subsidized

c

When labor supply increases, the wage is expected to: a.remain the same. b.change in an indeterminate direction. c.increase .d.decrease.

c

Which of the following best explains the term rational ignorance? a.It is the rational weighing of costs versus benefits. b.It is the decision to search for and acquire information only if there is enough time. c.It is the decision to stay uninformed on certain topics because of the prohibitive cost of gathering information. d.It is the decision to ignore free information that is vital in making the correct decision.

c

Which of the following programs are the two largest sources of the U.S. government budget? a.defense and interest on the federal debt b.welfare and foreign aid c.health care and Social Security d.defense and Social Security

c

Which of the following types of discrimination tends to break down most easily? a.discrimination by government b.discrimination by employees c.discrimination by employers d.discrimination by culture

c

Asteroid deflection is an example of a:

public good

In a market, the presence of an external cost causes the market equilibrium output to exceed the efficient level of output. true false

true

It is sometimes rational to be ignorant.

true

In a democratic society, the idea that there is a tendency for a given policy to reflect the middle view of all political ideals is called the: a.median voter theorem. b.voting paradox .c.arrow impossibility theorem. d.public choice theorem.

A

In the case of radio, the ______ problem is partly overcome through the use of advertising. a.free-rider b.revenue stream c.liquidity d.accessibility

A

The median voter is the voter such that half of the voters are on one side of the issue and the other half of the voters are on the other side of the issue. a.True b.False

A

The paper industry and brewery industry each emit 60 tons of particulates into the air. It costs the paper industry $1,000 to remove 1 ton of particulates, and it costs the brewery industry $1,400 to remove 1 ton of particulates. In an effort to reduce particulate pollution, the government gives each industry tradable allowances worth 50 tons of particulates. We would expect that: a.the brewery industry will buy tradable allowances from the paper industry at a cost between $1,000 and $1,400 per allowance .b.the paper industry will buy tradable allowances from the brewery industry at a cost between $1,000 and $1,400 per allowance .c.the brewery industry will buy tradable allowances from the paper industry at a cost greater than $1,400 per allowance. d.the paper industry will buy tradable allowances from the brewery industry at a cost greater than $1,400 per allowance.

A

Arguably, one of the best ways to explain why Americans seemingly know very little about current government policies or the state of the economy is that: a.people are irrationally ignorant. b.the time and resources it costs to attain and process this information is more than the benefit received from having this information .c.the quality of American education is poor. d.this information is not readily available to the general public.

B

Why are special interest groups so powerful? a.Because voters are rationally ignorant about how laws designed to help special interest groups are harmful to everyone else. b.Both because voters are rationally ignorant about how laws designed to help special interest groups are harmful to everyone else and because special interest groups have a self-interest in passing favorable legislation—they stand to gain millions of dollars, while each taxpayer loses only several dollars .c.Neither because voters are rationally ignorant about how laws designed to help special interest groups are harmful to everyone else nor because special interest groups have a self-interest in passing favorable legislation—they stand to gain millions of dollars, while each taxpayer loses only several dollars. d.Because special interest groups have a self-interest in passing favorable legislation—they stand to gain millions of dollars, while each taxpayer loses only several dollars.

D

The political power of farmers ________ as the share of farmers in the population decreased because the benefits from farm subsidies became ________ concentrated. a.increased; less b.decreased; more c.decreased; less d.increased; more

D

groups tend to favor more efficient policies. a.Large b.Elite c.Oligarchical d.Small

ELITE