econ final
The government auctions off 500 units of pollution rights. They sell for $50 per unit, raising total revenue of $25,000. This policy is equivalent to a corrective tax of per unit of pollution.
$50
Public Goods
Goods that are neither excludable nor rival in consumption
____________________________ often have deductibles, which is an amount that the insurance policyholders must pay out of their own pocket ____________________ .
Insurance companies; before the insurer pays its portion of the claim
_____________________ is a particular type of spending that mainly benefits a single political district.
Pork-barrel spending
_____________________ are numerically small, but well-organized groups that are able to exert a disproportionate effect on political outcomes.
Special interest groups
imperfect information
a situation where either the buyer or the seller, or both, are uncertain about the qualities of what they are buying and selling
If the production of a good yields a negative externality, then the social-cost curve lies [a] (above/below) the supply curve, and the socially optimal quantity is [b] (greater/less) than the equilibrium quantity.
above, less
shift in supply
number of workers required education government policies
Investments in private education raise your country's standard of living.
positive externality
You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds.
positive externality
value of the marginal product
the marginal product of an input times the price of the output
voting cycle
the situation in which a majority prefers A over B, B over C, and C over A
logrolling
the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor
poverty
the situation of being below a certain level of income one needs for a basic standard of living
On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?
Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.
In England during the Middle Ages, each village had an area of pasture, known as a commons, on which any family in the village was allowed to graze its cows or sheep without charge. Was the common land used optimally?
Grazing created a negative externality, resulting in the commons being overused.
Which of the following is an example of a positive externality?
Hillary's newly cut lawn makes her neighborhood more attractive.
What happens to the equilibrium wage and quantity of labor if output price rises?
The equilibrium wage and the equilibrium quantity of labor rise.
Suppose the government enacts legislation which reduces the amount of legal immigration into the country. What is likely to happen to the equilibrium wage and quantity of labor?
The equilibrium wage rises and the equilibrium quantity of labor falls.
median voter theory
The theory that governments pursue policies that make the median voter as well off as possible.
Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create _________________________.
a poverty trap
When _____________________ occurs, the result will be determined by the order in which choices are presented and voted on, not by _____________________, because every choice is both preferred to some alternative and also not preferred to another alternative.
a voting cycle; majority rule
_________________________ allows the government to collect wealth for redistribution based on the amount of stored wealth that is being passed on in the form of an inheritance.
an estate tax
Which of the following will not result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
All of the following will shift the labor supply curve except
an increase in the wage rate.
poverty trap
antipoverty programs set up so that government benefits decline substantially as people earn more income - as a result, working provides little financial gain
marginal product of labor
change in output divided by change in labor
shifts in demand
demand for an output good education and training technology (high/low skill) number of companies needing labor increases/decreases government regulations price/availability of other inputs
The labor __________ curve(s) will shift ____________ if there is an increase in productivity or an increase in the demand for the final product.
demand, right
All but one of the following is a mechanism intended to provide reassurance against imperfect information. Which is it?
financial capital markets
Private Goods
goods that are both excludable and rival in consumption
Club Goods
goods that are excludable but not rival in consumption
Common Resources
goods that are rival in consumption but not excludable
An insurance company is likely to believe that having a major accident is a signal of being a _____________, and thus try to _________________.
high-risk driver; raise this driver's insurance premiums
The problem of _________________ arises when an antique dealer knows more about the quality of an item than the potential buyer, and as a result the buyer with less knowledge must worry about ending up at a ________________.
imperfect information; disadvantage
In the market for high-skill labor, improvements in technology will tend to:
increase wages.
In the U.S., comparisons of high and low incomes raise issues of economic _________________________.
inequality and poverty
A _____________________ is an organization of workers that negotiates with employers as a group over wages and working conditions.
labor union
Other things being equal, a _____________ supply of workers tends to _________ real wages.
larger; decrease
_____________________ occurs when a group of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor.
logrolling
When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called a _____________________ .
moral hazard
Which of the following is an example of a public good?
national defense
Trash dumped upstream flows downstream right past your home.
negative externality
Your neighbor paints his house a hideous color.
negative externality
Your roommate is a smoker, but you are a nonsmoker.
negative externality
The theory of _____________________ holds that people won't bother incurring the costs of becoming informed and voting, because they know that their vote _____________________.v
rational ignorance; won't be decisive in the election
redistribution
taking income from those with higher incomes and providing income to those with lower incomes
If buyers become reluctant to purchase high-quality goods because they can't be confident of purchasing a high-quality product, then
the equilibrium price and quantity will be adversely affected by a thin market.
rational ignorance
the theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election
An externality is best defined as
the uncompensated impact of one person's actions on the well-being of a bystander
adverse selection
when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system
moral hazard
when people have insurance against a certain event, they are less likely to guard against that event occurring
Consider the market for tickets to the AMP in Rogers. This is an outdoor music venue that can be heard well outside of the venue, allowing local businesses to enjoy the music without entry. Answer the following questions about this market.
positive externality externality from supply the supply curve shifts right the social equilibrium Quantity is higher than the private equilibrium quantity the government could implement a subsidy to reach the social equilibrium quantity
