ECON EXAM TWO SAPLING

Suppose that the gini coefficient in Costa Rica is 0.35 and is 0.47 in the US. Based on this info, what is true?

The income distribution in Costa Rica is more equal than in the US

if the government guarantees sugar farmers a price of $1 per pound when the market equilibrium price is actually $0.50 per pound, which of the following will occur?

a surplus will occur, increasing inefficiency

Apple macbooks have become increasingly popular among college students. when a college student purchases a macbook, it comes with a 1 year guarantee that any and all issues will be fixed by apple free of charge. after that 1 year you are on your own. In addition, the college student can purchase applecare, which extends the guarantee to 3 years at an additional cost. the 1 year guarantee is an example of... the 3 year extended guarantee is an example of...

a warranty a service contract

A _____ is a person who _____ a public good that others _____

Free rider enjoys pay for

When Lin receives a flu vaccination, it reduces the chance of him receiving the flu as well as the chance that his sister will get sick. His flu vaccination creates a(n):

external benefit

Since Dick always texts while he drives, he is generating a ____ to others, resulting in a shift of the supply curve to the ____

external cost; left

Bob can pay to support his local public radio station, which depends on donations to be as effective as possible. bob listens to the radio station several hours per day but never donates since he suspects that other people will donate enough to the station on air. free ride or not?

free riding

Why does the US government provide tax breaks related to the amount of money companies spend on research and development?

to provide incentives for companies to conduct research and development to involve less government scrutiny than a government funded project

is income or wealth more unequally distributed in the US?

wealth

Jim is working on a group project for a class in which he wants a high grade. Since the grades are assigned to the group as a whole and he knows that the other group members will pick up most of the extra work, Jim calls in sick and plays video games on his Dream Station 64. Free ride or not?

free riding

Drew always buys the lunch special for $5 at the restaurant across the street from where he works. if he decided to eat at the restaurant after 3 pm he would be unable to get the lunch special, and would instead have to pay $10 for the same food. free ride or not?

not free riding

Karl never drives at night, and get no benefit from street lamps. Street lamps are nonexcludable and nonrival in consumption. When the community group tires to collect money to build street lamps, karl does not donate any money. free ride or not?

not free riding

which condition is crucial for advertising to solve free-rider problem?

people cannot cheaply avoid the advertisements

In economics, what is the meaning of the phrase 'the tragedy of the commons'?

people will overuse or misuse a common resource that is not excludable but is rivalrous

If the equilibrium price of solar panels is $200 per panel, but a price ceiling of $150 per panel is imposed, what happens to the market for solar panels?

quantity demanded exceeds quantity supplied and a shortage occurs

What government policies would not be effective in reducing poverty rate?

raising the poverty threshold

a chronically ill person opts to purchase health insurance without disclosing his or her illness what type of asymmetric information is this? assuming the insurance company either never discovers the deception or that it cannot change the policy after discovering the deception, what is the result?

adverse selection

How can advertising solve a free rider problem?

advertising acts in a method similar to a fee. People who watch TV broadcasts must watch ads, which they would rather not. TV stations turn this into money by selling airtime to advertisers

A common method by which the government controls pollution?

advertising the harmful effects of pollution to encourage firms to pollute less

poverty

refers to a condition where someone cannot afford the basic necessities of life

poverty trap

refers to a situation where a region lacks the resources to have self-sustaining economic growth

inequality

refers to disparity between high-income and low-income earners

compared to other economically advanced nations, income inequality in the US is...

relatively high

compared to less-developed nations, income inequality in the US is..

relatively low

Alice is willing to spend $30 on a pair of jeans, and has a coupon for $10 off. she selects and purchses a pair of jeans which cost $35 pre-discount... Alice experiences a ____ Alice's surplus: $___

consumer surplus $5

poverty line

represents the income level needed for a basic standard of living

example of a public good

snowplowing the streets

what is an example of a free rider problem common among public goods?

some students choose not to recycle their soda bottles after class, instead leaving them in the classroom

Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often vandalized with graffiti. In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month. Timmy's car has recently veen vandalized and he is concerned it may happen again. Although he believes that he will benefit from the extra police patrols, Timmy has decided to take a free-rider approach. Given his thinking, how much will Timmy contribute to the fund? Assume the neighborhood has the same mentality as Timmy. What will occur?

$0 No one will contribute to the community fund, resulting in no charges

Suppose you search for a used bicycle online, and are willing to pay at most $100. However, you successfully find one for sale priced at $80. What is the value of consumer surplus?

$20

If Avery is willing to pay $10 for pizza, Pia is willing to pay $13 and Sylvio is willing to pay $15, how much consumer surplus is achieved when the price of pizza is $12?

$4

Suppose the hot dog market is made up of 3 buyers: Ana, who is willing to pay $10 for a hot dog, William, who is willing to pay $8, and Mara, who is willing to pay $6. If the hot dogs sell for $7, then consumer surplus in this market would be:

$4

which of the following prices would be a binding price floor for strawberries if the current equilibrium price is $3 per pound?

$4

Sam's willingness to pay for pizza is $15. If the price of pizza is $10, Sam's consumer surplus after buying the pizza is:

$5

suppose the market for tshirts has 3 sellers: Martin, whose willingness to sell is $6, Adam, whose willingness to sell is $10, and Clara, whose willingness to sell is $12. If the tshirts sell for $11 each, then producer surplus in this market is:

$6

The management at moosewoods park is trying to decide whether to replace their portable toilets with flush toilets at the very popular Moosewoods campground, as well as how many flush toilets to install, if they do choose to install them. They concluded that they will install flush toilets if the total surplus is great than $50 in relation to the number of flush toilets at the equilibrium and cost per campsite per night. Installing flush toilets will involve an increase in the cost per campsite per night. Researchers have calculated the demand and supply curves for flush toilets at this park and discovered that they are both perfectly straight lines. At $35 per campsite per night, no one will want to flush toilets. At $0 per campsite per night, campers will demand seven flush toilets. Managers are willing to supply no flush toilets at the current campsite cost $5 per night, but are willing to supply eight flush toilets at $25 per campsite per night. Use supply, demand, and total surplus info to answer What is the number of flush toilets desired at the equilibrium point? what is the total surplus? will the managers install the number of flush toilets determined in the first question?

1) 4 2) $60 3) yes

Jeff finds some steaks for $16 for which he would have been willing to pay $20. The butcher notices the meat is near the expiration date and gives him an extra 75% off Jeff experiences a ____ Jeff's surplus: $___

Consumer surplus $16

relative to the 1970s, women today are participating in labor markets at ___ rates

higher

Joes owns a dog whose barking annoys Jose's neighbor Amy. Suppose that the benefit of owning the dog is worth $400 to Jose and that Amy bears a cost of $200 from the barking. Assuming Amy has the legal right to keep Jose from having a dog, a possible private solution to this problem is that:

Jase pays Amy $350 for her inconvenience and keeps the dog

Miranda and Jason are in the tutoring business. Miranda is willing to tutor as long as she gets $20, while Jason will not tutor unless he gets $35. If the most that someone would pay for tutoring is $30, how much producer surplus is earned?

Miranda= $10 Jason= $0

Suppose the solar-powered car technology advances to the point that solar- powered cars become affordable for the average consumer. Due to the cost saving advantage compared to internal combustion vehicles, consumers begin to purchase more solar-powered vehicles in place of traditional, gas powered cars. Which type of externality is likely to result from a consumer's decision to purchase a solar powered vehicle instead of a gas powered vehicle, and how does it arise? Suppose the government is interested in moving the market closer to the socially optimal quantity. which policy would likely result in desired outcome?

There will be a positive externality, because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution a subsidy to consumers who choose to purchase solar-powered vehicles

Example of an externality

a student voluntarily asks a question during class

What is an example of a free rider problem?

a person without mental health insurance visiting an emergency room since they cannot be turned away

example of tragedy of commons

a severe traffic jam on the freeway

producer surplus is shown graphically as the area

above the supply curve and below the market price

suppose the gini coefficient is calculated for 3 countries as follows: alphaland= 0.65; betaland= 0.57; and gammaland= 0.36. Which country has the most unequal distribution of income? which country has the least amount of income inequality?

alphaland; gammaland

why might california require furniture upholsters to obtain occupational licenses?

as a way to provide reassurance about the quality of the furniture upholsterer's work

the air we breath is: rival and nonexcludable nonrival and excludable rival and excludable nonrival and nonexcludable

nonrival and nonexcludable

Carolina is trying to sell her car and the lowest amount she is willing to accept is $2000. Abdul is interested in buying the car, and although he is willing to pay $2500, he negotiates a price of $2100. How much consumer surplus does Abdul achieve, and what is total surplus?

consumer surplus= $400 total surplus= $500

suppose the government sets the maximum price for a normal doctor's visit at $20, but the current market price is $40. As a result of this government action, doctors will see:

fewer patients

The country of flipland has a gini coefficient of 0.40, while smartland has a gini coefficient of 0.35. Which country has greater income inequality and poverty?

flipland has higher income but the poverty rate is unknown

Income is a ___ variable. Wealth is a ___ variable

flow stock

together, the two previous factors have contributed to ___ income inequality

growing

Grapes are used as an input in the production of wine, and wine and red meat are compliments. A decrease in the price of grapes will ____ the total surplus in the market for red meat

increase

poverty rate

indicates the percentage of people that cannot afford the basic necessities of life

investment in human capital is best described as

investing in education and training to improve a worker's productivity

what should the government do in order to reduce the effects of a shortage caused by a price ceiling?

it should raise the price ceiling

if the city equityville decides to raise the minimum wage to $20 per hour, while raising the property tax rate on homes worth more than $500000 what is likely to happen to equityville's lorenz curve?

it will become less bowed

generally, the amount of public goods available in a society is ____ what is actually desired

less than

the private consumption of services that generate positive externalities, such as getting a college education, is usually _____ the socially optimal level of consumption

less than

example of positive externality

making improvements to your house

A toll road in normal traffic: rival and nonexcludable nonrival and excludable rival and excludable nonrival and nonexcludable

nonrival and excludable

high income people are ____ likely to marry other high income people than their poorer counterparts

more

Nicole has a hockey puck from the 2018 winter olympic games and puts it up for sale on Ebay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid stands at $501. Nicole experiences ___ Nicole's surplus: $___

producer surplus $1

A sports team tshirt is: rival and nonexcludable nonrival and excludable rival and excludable nonrival and nonexcludable

rival and excludable

atlantic bluefin tuna in the mediterranean sea is: rival and nonexcludable nonrival and excludable rival and excludable nonrival and nonexcludable

rival and nonexcludable

example of public good with exclusion

satellite radio service

which step often taken to minimize the information asymmetry in these types of transactions?

sellers will offer a home warranty

policies most likely to reduce income inequality?

strengthening laws to prevent wage discrimination

What could be a possible reason why a person earning $20000 a year in redland be considered living in blueland it might not?

the cost of living in redland might be much higher than in blueland

Freeway 405 in LA is constantly congested, causing traffic to move very slowly. Why would this freeway be considered a Tragedy of the Commons?

the inability to exclude drivers from using the freeway causes it to be overused

accurate character of information asymmetry

the person selling a house has better knowledge about the condition of the house and the need for repairs than the person buying the house

producer surplus is the difference between

the market price and the minimum price a seller is willing to accept

consumer surplus is equal to the difference between..

the maximum price a buyer is willing to pay and the market price

if the market equilibrium wage for entry-level fast-food workers is $10 an hour, while the minimum wage is $8, what impact does the minimum wage have in this industry?

the minimum wage has no effect in this market

suppose that the city of Rentville sets a price ceiling of $800 a month on all apartments, despite the market equilibrium rent being $1000. Which of the following is least likely to occur?

there will be an increase in the quantity of existing apartments in rentville

consumer surplus is shown graphically as the area...

under the demand curve and above the market price

moral hazard

when people who are not responsible for the entire costs of their actions take riskier actions than they would otherwise take

example of a positive externality resulting from the production of a good by a new technology

when people who neither paid for developing the technology nor the good produced by the new technology are better off from the advancement

Assuming wikipedia thinks they have too many free riders, which solution would not reduce, or setoff, the free rider problem?

wikipedia creates a duplicate website, wekepedia, with the same content as wikipedia, but costs $25 a year. wikipedia would remain free to the public