Exam 2 ECON 2301
Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of
A. an external cost as the community, not the factory, is paying for the clean up.
A cost or benefit of an economic activity that has an impact on an individual's well-being, even though the individual was not directly involved in the activity, is known as a(n)
A. externality.
Marisa has just graduated from college and is seeking a job comma but hasn't found one yet.Marisa has just graduated from college and is seeking a job, but hasn't found one yet. Which type of unemployment is this?
A. frictional unemployment
Subsidizing medical services through Medicare
A. makes medical services available to a large percentage of the population, who otherwise could not afford them. B. drives a wedge between the price received by providers and the price perceived by consumers.
The study of collective decision making, or the process through which voters, politicians and other interested parties influence nonmarket choices is known as
A. public choice theory.
Market failure occurs because
B. the market system does not make individuals responsible for the social costs/benefits of their actions.
The theory of public choice is the study of
B. the process through which voters, politicians, and other interested parties interact to influence nonmarket choices.
Which of the following is most likely to gain from unanticipated inflation?
C. A consumer with a five year auto loan.
Which of the following measures will lower the natural rate of unemployment?
C. More high school graduates enter college without looking for employment right away.
A good that has been deemed socially desirable through the political process is known as
C. a merit good.
The type of unemployment that rises as the economy goes into a recession is called
C. cyclical.
Consider an economy with only two groups of people: Wage earners and Goods sellers. If the price level increases by 20% while the nominal wages remains the same,
C. income will be redistributed from wage earners to goods sellers.
Which of the following statements is true concerning the historical picture of business activity in the United States?
D. The frequency and size of fluctuations around the trend has decreased since World War II.
Other than correcting externalities, other economic functions of government include
D. providing a legal system, allocating public goods, promoting competition, and stabilizing the economy.
Full employment means
D. there is a level of unemployment consistent with "normal" frictions in the labor market.
Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as
D. transfer payments.
A true public good must be provided by the government. Which of the following goods provided by the government is a true public good?
Flood control.
