econ final

Suppose the government wants to levy a new excise tax. For each of the following goods, determine whether you would expect an excise tax to result in large or small deadweight loss. 1. Alcohol Deadweight loss is relatively a. large b. small 2. Milk Deadweight loss is relatively a. large b. small 3. Diamonds Deadweight loss is relatively a. large b. small 4. Tropical vacations Deadweight loss is relatively a. large b. small 5. Socks Deadweight loss is relatively a. large b. small

1. b 2. b 3. a 4. a 5. b

Imagine a person who makes $400 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income equal to or less than $20,000, that gives her $800 a year. No such program is available to people with income above $20,000 per year. Her boss offers her a promotion that would increase her wage by 25 cents per hour. a. Her total income before the promotion is __________ b. Her total income if she accepts the promotion is _________ c. She (should or should not) accept the promotion if she wants to have higher income.

20800, 20500 should not

Suppose the quantity of apples supplied in your market is 2,400. If there are 60 apple producers, each with identical cost structures, how many apples does each producer supply to the market? _______ apples

40

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - chocolate producers will ______ the market A. enter B. Exit

B

Public-opinion polls in a small city have revealed that citizens want more resources spent on public safety, an annual fireworks display, and more community swimming pools. Which of these three citizen requests could be privatized by assigning property rights?

Community swimming pools. correct

For which product would you expect producers to have a stronger reaction to a ban on advertising: music artists or fast-food burgers?

Fast-food burgers because their products are less differentiated. (find other answers)

Suppose you manage a firm in a monopolistically competitive market. Which of the following strategies will do a better job of helping you maintain economic profits: Option A: Obtaining a celebrity endorsement for your product. Option B: Supporting the entry of firms that will compete directly with your biggest rival.

Option A because consumers may have positive feelings about a good that is endorsed by a celebrity correct.

when to operate

Produce if P ≥ ATC Because Profit = (P - ATC)*Q Profit ≥ 0 if P ≥ ATC Exit in the Long Run if P < ATC Profit < 0 if P < ATC Shut Down in the Short Run if P < AVC

Your neighbor never mows her lawn. You don't have any legal right to force her to mow, but the mess in her front yard is making your neighborhood unsightly and reducing the value of your house. The reduction in the value of your house is $5,000, and the value of her time to mow the lawn once a week is $1,000. Suppose you offer her a deal in which you pay her $3,000 to mow. How does this deal affect surplus?

The deal increases both your surplus and your neighbor's.

Suppose that the government decides to start regulating use of its forests, charging anyone who wants to log. Which of the following ways of calculating the price to charge for each acre will lead to an efficient quantity of logging?

The external cost that logging an acre imposes on all citizens

Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). a. Income tax The primary public policy goal is most likely a. raising revenue b. to change behavior and raise revenue c. to change behavior

a

Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). c. Payroll tax The primary public policy goal is most likely raising revenue correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior

a

Curling is a sport that involves sliding a granite stone over a patch of ice. The Winter Olympics has generated a lot of excitement about the fascinating sport of curling. As a result, demand for curling stones has increased. Curling stones are made from blue Trefor granite. There are limited deposits of blue Trefor, and other types of granite are poor substitutes. If the increase in demand for curling stones persists, do you expect the long-run equilibrium price to increase, decrease, or stay the same? a. increase b. stay the same c. decrease

a

Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. A gated community passes a bylaw requiring all homeowners to mow their lawns once a week during the summer: a. Increase supply b. decreasing demand

a

Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. a. A city government increases the frequency of street sweeping: a. Increase supply b. decreasing demand

a

Determine whether each of the following taxes is proportional, regressive, or progressive. A fee of $500 per year for municipal services, charged to everyone who lives within the city limits. This tax is a. regressive. b. progressive c, proportional

a

Determine whether each of the following taxes is proportional, regressive, or progressive. A payroll tax of 10 percent on income under $200,000. This tax is a. regressive. b. progressive c, proportional

a

For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: A nonprofit organization spray-paints signs on storm drains reminding everyone that it "drains to the ocean" with a picture of a fish: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.

a

Identify whether each of the following goods is a. rival b. nonrival.

a

Identify whether each of the following goods is a. rival b. nonrival.

a

Identify whether each of the following goods is usually a. excludable b. nonexcludable.

a

Identify which way the labor supply curve would shift under the following scenarios. Changes in technology increase the marginal productivity of labor: a. no shift, movement along the labor supply curve. b. right c. left

a

In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. In response to concerns about chewing gum in schools, the government raises the tax on packs of gum from 20 cents per pack to 30 cents per pack. Before the tax increase, 50 million packs were sold each year. After the tax increase, 40 million packs are sold each year. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates

a

In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. The government raises taxes on the 10 million iPods sold each year from $10 per iPod to $20 per iPod. The new equilibrium quantity is 9 million iPods. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates

a

In each of the following scenarios, will wages rise above the market equilibrium or fall below it? All the software engineers in Silicon Valley organize into a union and go on strike: a. rise b. fall

a

Indicate which of the following are means-tested programs. Canada begins to pay half of the cost of public transportation for people who do not own a car. This ________ a means-tested program. a. is b. is not

a

Indicate which of the following are means-tested programs. The United Kingdom decides to start giving out pension benefits based on individuals' prior amount of savings. This _______ a means-tested program. a. is b. is not

a

State whether each of the following primarily causes an external cost or an external benefit. Occupying a seat on a bench in a crowded park: a. External cost b. external benefit

a

State whether each of the following primarily causes an external cost or an external benefit. Fishing at a popular lakeside vacation spot: a. External cost b. external benefit

a

State whether each of the following primarily causes an external cost or an external benefit. Littering: a. External cost b. external benefit

a

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - the long run supply curve will A. not change B. shift left C. shift right

a

You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes external costs. more then one answer. a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none

a

there are imperfect substitutes for the goods a. monopolistic competition b. monopoly c. oligopoly

a

Suppose a country where capital is scarce and most of industry is labor-intensive with low-skilled labor moves from autarky to free trade. Which of the following do you expect to happen? may be more then one answer a. Wages for labor increase b. Owners of capital become wealthier c. the returns to capital (surplus) decrease

a, b

You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes private costs. benefits. more then one answer a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none

a, b

Johnston Forest in Rhode Island has a cave that houses thousands of fruit bats. Bat droppings are highly acidic and have ruined the paint on many Rhode Island cars. The flying radius of the Johnston Forest bats encompasses two towns, Johnston and Foster. The residents of Johnston collectively value bat removal at $400,000. Foster residents collectively value bat removal at $500,000. Pest control experts estimate that the cost of bat removal would be $450,000. Which of the following scenarios would lead to removal of the bats? Check all that apply. a. Foster pays Johnston $50,000 to contribute to bat removal. b. Foster and Johnston evenly split the cost of bat removal. c. a,b,cJohnston contributes nothing toward bat removal.

a, b, c

Nature's Crunch is currently the only certified organic produce grower in a region that produces lots of non-organic produce alternatives. Which of the following scenarios would increase Nature's Crunch's profits? (choose all that apply) a. A tomato blight affecting chemically treated plants. b. An increase in the cost of chemical pesticides. c. A new report about the environmental dangers of chemically treated plants. d. Income tax cuts for all consumers. e. A new report showing that there is no nutritional difference between organic and non-organic produce.

a, b, c, d

Which of the following subway announcements are attempts to establish or enforce a social norm? a. "Loud music and phone conversations are discourteous to fellow riders. Please keep the noise down." b. "If you see something, say something." c. "Please watch your step as you exit. Be careful of the gap between the train and the platform edge." d. "Please be patient and allow others to exit the train before you attempt to enter." e. "The train is being held at the station due to traffic ahead. We apologize for the inconvenience."

a, b, d

Consider the following government-provided goods. Which of these goods necessarily require funding via general taxation (as opposed to direct user fees)? a. Street lights b. A park c. A fireworks display d. Public radio e. A library

a, c, d

In a perfectly competitive market, MR = (may be more then 1 answer) a. price b. total revenue c. average revenue d. change in total revenue / change in quantity

a, c, d

From the list below, which of the following do you expect to suffer from a free-rider problem? Check all that apply. a. Pay-what-you-can yoga classes. b. Unlimited yoga classes with monthly membership dues. c. Fundraiser for public television. d. Neighborhood park cleanup day. e. Housecleaning business operating in your neighborhood. f. Suggested museum-admission donation.

a, c, d, f

Suppose Ghana discovers it has lost its comparative advantage in the production of maize. Which of the following could explain the loss of comparative advantage? may be more then one answer a. Maize-processing technology developed in Ghana spreads to other maize-producing countries. b. Decline in global demand for maize. c. Immigration of cheap labor into Ghana. d. Growth of low-skill service jobs in Ghana.

a, d

Recently, some college alumni started a moving service for students living on campus. They have three employees and are debating hiring a fourth. The hourly wage for an employee is $18 per hour. An average moving job takes three hours. The company currently does three moving jobs per week, but with one more employee, the company could manage five jobs per week. The company charges $80 for a moving job. a. The new employee's marginal product of labor is moving jobs. b. The value of that marginal product is $. c. should they hire a fourth worker.

a. 2 b. 160 c. yes

In much of the United States and Canada, logging takes place in both privately owned and government-owned forests. a. Privately owned forests are: ____________ b. Suppose that anyone is legally allowed to enter a government-owned forest and start logging. These forests are:____________ c. The rate of logging in a government-owned forest would be____________ correct the efficient level.

a. private, rival, and excludable. b. common resources. c. faster then

Consider community safety or defense, meaning freedom from crime and threats, to answer the following questions. a. Community safety is a _________ good. b. If you lived in a place with no government-funded police force, you would expect community safety to be __________ c. Suppose that some neighbors get together and organize a block watch group. What term do economists use to describe someone who lives in the neighborhood but chooses not to volunteer as part of the block watch? Economists refer to this person as__________

a. public b. undersupplied c. Free rider

Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). b. Cigarette tax The primary public policy goal is most likely to change behavior and raise revenue correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior

b

Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. London begins charging a toll to all vehicles that drive within the city limits: a. Increase supply b. decreasing demand

b

Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. The National Park Service increases the cost of a pass to enter the Everglades: a. Increase supply b. decreasing demand

b

Determine whether each of the following taxes is proportional, regressive, or progressive. A capital gains tax that charges a flat rate of 40 percent, but only on capital gains over $1 million. This tax is a. regressive. b. progressive c, proportional

b

Determine whether each of the following taxes is proportional, regressive, or progressive. An income tax with three brackets and corresponding marginal tax rates: 10 percent for income up to $50,000; 20 percent for income up to $100,000; and 30 percent for income over $100,000. This tax is a. regressive. b. progressive c, proportional

b

Identify whether each of the following goods a. rival b. nonrival.

b

Identify whether each of the following goods is a. rival b. nonrival.

b

Identify whether each of the following goods is usually a. excludable b. nonexcludable.

b

Identify which way the labor supply curve would shift under the following scenarios. A country experiences a huge influx of immigrants who are skilled in the textile industry a. no shift, movement along the labor supply curve. b. right c. left

b

In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. Worried that Americans are addicted to coffee, the government raises the 5 cent tax on a cup of coffee to 10 cents. Before the tax increase, 10 billion cups were sold each year. Afterward, 5 billion cups are sold each year. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates

b

In each of the following scenarios, will wages rise above the market equilibrium or fall below it? A major grocery store chain buys out all the other stores in the city a. rise b. fall

b

In each of the following scenarios, will wages rise above the market equilibrium or fall below it? All but one of the factories in a town go out of business: a. rise b. fall

b

Indicate which of the following are means-tested programs. A government decides to give tax credits to anyone who purchases computers made domestically. This ________a means-tested program. a. is b. is not

b

Indicate which of the following are means-tested programs. a. A local public university starts to give financial aid to individuals who score above the 98th percentile on the SAT. this ______ a means-tested program. a. is b. is not

b

State whether each of the following primarily causes an external cost or an external benefit. Spaying or neutering your pet: a. External cost b. external benefit

b

State whether each of the following primarily causes an external cost or an external benefit. Buying a fax machine: a. External cost b. external benefit

b

State whether each of the following primarily causes an external cost or an external benefit. Conducting research to find an AIDS vaccine: a. External cost b. external benefit

b

Suppose the market for bottled water and the market for soft drinks both have large numbers of buyers and sellers. Which of these markets is likely to be more competitive? a. soft drinks b. bottled water

b

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - Demand will a. not shift b. shift left c. shift right

b

there are no substitutes for the goods a. monopolistic competition b. monopoly c. oligopoly

b

Suppose two countries are considering a new agricultural trade agreement with each other. Country A has abundant low-skill labor and scarce land. Country B has abundant arable land but little population. Land owners support a trade agreement in n/r incorrect. a. Country A b. Country B Workers support a trade agreement in n/r incorrect. a. County A b. Country

b, a

Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). d. Income tax exemption for charity donations The primary public policy goal is most likely to change behavior correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior

c

Determine whether each of the following taxes is proportional, regressive, or progressive. a. An income tax of 25 percent on income from all sources. This tax is a. regressive. b. progressive c, proportional

c

For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. In England, municipal-waste authorities are given a percentage of an overall limit that can be put in the landfill each year. These percentages can be traded among municipalities: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.

c

Identify which way the labor supply curve would shift under the following scenarios. Wages increase in an industry that requires similar job skills: a. no shift, movement along the labor supply curve. b. right c. left

c

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - profits for chocolate producers in the short run will A. not change B. increase C. decrease

c

Which (if any) of the following scenarios is the result of a natural monopoly? (select all that may apply) a. Patent holders of genetically modified seeds are permitted to sue farmers who save seeds from one planting season to the next. b. Doctors in the United States are prohibited from practicing without a medical license. c. There is one train operator with service from Baltimore to Philadelphia. d. Coal is used as the primary energy in a country with abundant coal deposits.

c

You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes private benefits. more then one answer a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none

c

the goods may or may not be standardized a. monopolistic competition b. monopoly c. oligopoly

c

For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. A city starts a free program that collects recyclable glass, paper, and plastic from residents' doorsteps: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.

d

You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes external benefits. a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none

d

Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The b. The "Flatulence Tax": Proposed, but ultimately not adopted in New Zealand to help reduce methane emissions from livestock. tax_____did_or_did_ not______ address a market failure.

did

Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The d. The Cowardice Tax: Introduced in medieval England and applied to people who refused to defend the country at request of the king. tax_____did_or_did_ not______ address a market failure.

did

Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The c. The Window Tax: Levied by English King William III on the number of windows in a house, which tended to be more numerous in wealthier homes. tax_____did_or_did_ not______ address a market failure.

did not

Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. a. The Hat Tax: Adopted by the British government, requiring every hat to bear a stamp on the inside showing it was legal. The tax_____did_or_did_ not______ address a market failure.

did not

For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. American bison, which once roamed freely across the Great Plains, are now raised on ranches for commercial purposes: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.

e

The United States Postal Service maintains a monopoly on mail delivery in part through its exclusive right to access customer mailboxes. Which barrier to entry best describes this situation?

government intervention

You would expect ________correct to be more likely to give up their seat on a bus to an elderly person.

locals

Suppose a country has abundant capital but scarce labor. __________would be more harmed by a trade embargo.

owners

Suppose a monopolist discovers a way to perfectly price-discriminate. Under this scenario, consumer surplus is ___________ What are the efficiency costs (deadweight loss)? ____________

zero, zero