Unit 5 Test Review

Countries can gain from trade as long as the differences in the prices of a trade good between two countries is:

A) greater than the cost of transporting it between the countries.

. In the market for surfboards in the graph, with a $100 tariff per imported surfboard, the government collects a total of _____ in tariff revenues.

A) $4,000

If Costa Rica is able to produce 50,000 pounds of bananas a day, while Nicaragua can produce 30,000 pounds of bananas a day, which statement must be true?

A) Costa Rica has an absolute advantage over Nicaragua in banana production.

Which statement describes a public good?

A) It is nonrival in consumption and nonexcludable.

When people place a high value on ensuring a cleaner environment for future generations, which statement is true?

A) The future is discounted at a relatively low rate

Which policy would a Rawlsian economist not support?

A) a reduction in capital gains taxes benefiting high-income earners

. Suppose Canada forms a free-trade agreement with the Netherlands and increases the quantity of tulips it imports. Canadian tulip consumers will be _____ and Canadian tulip producers will be _____.

A) better off; worse off

. During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good?

A) core user

. Which of these is a pure public good?

A) environmental protection

Unlike positive externalities from physical goods, network externalities affect:

A) existing and potential users.

The argument that industries should be temporarily protected by tariffs or quotas to allow firms to develop a competitive product is called the:

A) infant industry argument.

Global climate change is described as a public good because:

A) it is subjected to the free rider problem.

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then:

A) production of the good is greater than the socially efficient amount.

Which of these is an example of interconnection?

A) sending a package to another country using the U.S. Postal Service

AT&T offers high-speed Internet service to new subscribers for $29.99 per month for the first six months and then raises the price to $49.99 per month. This offer is an example of a(n):

A) teaser strategy.

Which of these is not a common cause of income inequality?

A) the choice of city where one lives

Facebook experienced a _____ when a large increase in subscribers made the network more appealing, encouraging even more members to join the network.

A) virtuous cycle

If the poverty threshold for a family of four is $24,000 and the Shoenfelds earned $21,000, their income deficit is _____ and their ratio of income to poverty is _____.

B) $3,000; 0.875

In the market for surfboards seen in the graph, in autarky this country imports _____ units, while with free trade the country imports _____ units.

B) 0; 60

When an activity has a private marginal benefit of D1, a private marginal cost of S1, and a positive externality, which curve best represents the social marginal benefit?

B) D2

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands?

B) Demand and supply both shift right.

Which statement is not a common argument against free trade?

B) It causes prices of imported goods to rise.

Which statement would describe a network effect?

B) Your workout partner cancels her gym membership, so you end up doing so as well.

In order for someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of:

B) a switching cost

Which of these is not a market-based policy to reduce pollution?

B) carbon restrictions

Paying $5 on Amazon to stream a movie is an example of a service that is:

B) excludable and nonrival in consumption.

When one makes a call to someone using a different cellular provider, what must occur between the two networks in order for the call to be connected?

B) interconnection

Your grandma finally buys an iPad only after being convinced of the benefits of using it to communicate with the rest of her family who already have iPads. Her demand for an iPad would be represented:

B) on the downward-sloping portion of the network demand curve.

As more people rely on a travel app to book reservations, the quality of the app improves, encouraging more people to use the app. This type of network is best described as a _____ network.

B) virtual

In the figure, the opportunity cost of one ton of steel in terms of aluminum is:

C) 0.5 tons.

Based on this table, the opportunity cost of one kilogram of coffee in Kenya is:

C) 30 kilograms of cocoa.

If the amount of emissions being produced is E1, what would be the area representing the deadweight loss to society?

C) Area eba

Based on this table, which statement is true?

C) Both countries have comparative advantages.

In international trade, when we say that Brazil is "dumping" in the United States, this is indicating that:

C) Brazil's firms are selling goods at prices below what they charge in Brazil or below their production costs.

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is true?

C) The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking.

Which statement is most likely to be a true one?

C) Wages are the most common form of income in the U.S. economy

Poverty is least likely to be eliminated when using which form of measurement?

C) a relative poverty threshold

A tariff of 15% on imported artwork is an example of a(n):

C) ad valorem tariff.

The speed by which a network good can enter into a virtuous or vicious cycle is generally _____ that of a non-network good.

C) faster than

If a government creates a market of tradable permits for greenhouse gases, the price of these permits would _____ if environmentalists buy up permits to reduce the total amount of greenhouse gases.

C) increase

The free rider problem typically results in a production of output that is:

C) less than the social optimal quantity.

. If the poverty threshold for a household of 3 persons is $20,000 and the Shermans earn $22,000, they would be classified as:

C) near poor.

The value of cloud storage has risen as more people use it. This effect is best described as a:

C) network effect.

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but priced at $199 per night the rest of the year. This type of pricing is called:

C) peak-load pricing.

If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity.

D) less; greater

Which Gini coefficient corresponds to a Lorenz curve that is bowed furthest away from the 45-degree line?

D) 0.71

. Suppose that the five residents of a small village have the following incomes: $10,000; $20,000; $30,000; $40,000; $50,000. The proportion of total income earned by the lowest two quintiles is _____ and the proportion earned by the highest two quintiles is _____.

D) 20%; 60%

Which of these typically occurs when a new tariff is imposed on the import of foreignmade steel as a result of a national defense argument?

D) Consumers will pay higher prices while deadweight loss is created.

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

D) Foreign companies tend to reduce the overall number of jobs available in developing countries.

Which of these is nonexcludable but rival?

D) a common property resource

Where would be the range where the network effect dominates the price effect?

D) a-c

Most new smartphones come pre-installed with a selection of free apps, including a weather app, health app, and news app. Which marketing strategy is the phone provider using?

D) bundling

. Income redistribution efforts such as progressive taxation and transfer payments will typically _____ income inequality, which means that the Gini coefficient will _____.

D) decrease; fall

The poverty thresholds in the United States are largely based on an adjusted measure of prices of which category or categories of goods?

D) food

In order to ensure that no firm has exclusive access to a set of customers, governments try to promote:

D) interconnection.

Movies are typically only shown in theaters for months before they are released on online streaming sites at a lower price. This is an example of:

D) intertemporal pricing.

A country in autarky would consume at a point _____ its PPF, while a country that engages in trade would consume at a point _____ its PPF.

D) on; to the right of

What type of government policy is generally used when a positive externality is present?

D) subsidies

When a new gym opens up in town with the capacity of serving 500 new members, the supply curve for this network would be:

D) vertical.

In which situation would regulation be most likely to be effective?

D) when a dominant network firm can prevent interconnection with smaller firms