final econ
Labor contracts are incomplete because
-The firm cannot contract an employee not to leave. -The firm cannot specify every eventuality of a contract. -The firm cannot observe exactly how an employee fulfills the contract.
The intergenerational elasticity provides the percentage difference in a child's status given a 1% difference in their parents status. In the US today it is approximately ____, while in a perfect meritocracy it would be ____
0.5; 0.
According to the World Bank, real per capita income in the U.S. increased from $57,640 in 2015 to $58,030 in 2016. What was the approximate annual growth rate?
0.7%
Which of the following statements regarding Pareto efficiency is correct?
A Pareto-efficient allocation maximizes the total surplus
Which of the following is an example of a negative externality?
A commuter driving to work instead of taking public transportation
In which of the following markets is the equilibrium efficient?
A competitive market for a homogenous good that has no external effect
In a labor contract, one side of the contract has the power to issue orders to the other side.
A labor contract gives the employer the authority to direct the activities of the employee. This distinguishes it from a sale contract that transfers property rights and does not bind the parties to further actions.
In their study of a firm during 2006-2010 that includes the financial crisis, Lazear and his co-authors found that (i) the firm's productivity increased dramatically as unemployment rose, and (ii) the wage level was kept unchanged. Based on this information, which of the following statements are correct?
A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.
Which of the following statements regarding Adam Smith are correct?
Adam Smith argued that coordination among large number of economic actors, often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it.
A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold.
Definition of Nash equilibrium
Which of the following best explains the gender wage gap?
Differences in social norms
The poorest decile in the US earns more than the richest decile in some poor countries.
Disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions.
Which of the following statements about merit goods is correct?
Emergency healthcare is a merit good.
Employment contracts
Employees' effort levels cannot be the basis of an enforceable contract.
Which of the following statements regarding employment rents is correct?
Employers use high employment rents to exert power over workers.
Which of the following is the best example of a non-excludable public good?
Free WiFi
Which of the following statements regarding Karl Marx are correct?
He argued that capitalism created atomised individuals instead of integrated communities.
Which of the following goods is not allocated by markets in the U.S. because doing so is widely viewed as repugnant?
Human kidneys
Which of the following statements regarding Nash equilibrium are correct?
In a Nash equilibrium, no player has an incentive to change their strategy given the other player's strategy.
Which of the following statements regarding bargaining power is correct?
In a dictator game, the Proposer has all the bargaining power.
Which of the following statements regarding the Malthusian model are correct when there is a permanent, positive technological shock (such as an improved seed)?
Income initially rises but then falls back to the subsistence level.
Which of the following statements most accurately summarizes recent trends in global income inequality, as presented in Unit 19.1?
Inequality between countries is declining, while inequality within countries is rising, with the net effect being falling global inequality.
Market failures occur when market prices do not fully account for the effect that actions have on others.
Market failures occur whenever there are (positive or negative) externalities from market transactions.
Wealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in transfers from the state. Which of the following is its market income and its disposable income?
Market income is $83,000 and disposable income requires us deduct taxes ($12,000) and to add any cash transfers received ($7,000).
According to Malthus, which of the following are the causes of diminishing average product of labor?
More labor is devoted to a fixed quantity of land, or new land brought into cultivation is of inferior quality.
Capitalism is an economic system based on
Private property, markets, and firmsPrivate property, markets, and firms
A firm's fixed cost is $0 and marginal cost is $20. P is the price of the unit and Q represents the number of units produced. Which of the following statements is correct?
Producing 2,000 units with a price of $40 (Q=2000, P=40) and producing 20,000 units with a price of $22 (Q=20,000, P=22) are both points on the same isoprofit curve.
In Guadeloupe and Martinique, the use of pesticide chlordecone on banana plantations devastated fishing communities downstream. Which of the following statements is correct?
Social dilemma
Which of the following is a non-excludable public good?
Streetlights
Reductions in the amount of resources (labor, machines, land, energy, time) required to produce a given amount of the output is known as
Technological progress
Gini coefficient
The Gini coefficient takes the value of 1 when a single individual receives all income.The Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality), which would be the case when one person receives all income.
A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct?
The bakery faces a flat demand curve.
Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct?
The best response curve describes the effort that the employee would choose for any hourly wage..
Which of the following factors contribute to a firm's diseconomies of scale?
The difficulty of monitoring workers' effort as the number of employees increases.
In which of the following cases would a firm be maximizing profits?
The firm minimizes the cost per unit of effort.
Consider the perfectly competitive market for bread analyzed in Unit 8. Why is the competitive equilibrium Pareto efficient?
The gains from trade are likqmaximized.o
Suppose that the unit cost of producing a t-shirt is $5, regardless of the level of output and there are no fixed costs. Which of the following statements is correct?
The marginal cost curve is a horizontal line
Consider a student whose final grade increases with the number of hours spent studying. Her choice is between more free time and higher grades, both of which are 'goods'. Which of the following is not the same as her marginal rate of transformation between the two goods?
The number of percentage points the student is willing to give up for another hour of free time. MRS=MRT is feasible frontier
Figure 1.2 shows the distribution of income across and within countries in 2014. The height of each bar represents the annual income of the population (for each decile), measured in 2005 US$, while the width of each country's bar represents its population. The red countries were the poorest countries in 1980, while the green countries were the richest in 1980.
The poorest decile in the US earns more than the richest decile in some poor countries.
In Britain before 1870, both wages and hours worked rose, while after 1900 working hours fell as wages continued to rise. Based on this information, which of the following statements is correct?
The substitution effect dominated the income effect before 1870, but the income effect dominated the substitution effect after 1900.
Consider the figure in Question 1. Suppose instead the government decides to impose a specific (or fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct?
The supply curve shifts up in a parallel manner.
The number of percentage points the student is willing to give up for another hour of free time.
To have 16 hours of more free time, your wage rate needs to increase by £8.
There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are £5, £6, £8, £12, and £15, respectively. Based on this information, which of the following statements is correct?
To sell three books, the maximum price that can be charged is £8.
Wealth is usually more unequally distributed than earnings. This is mainly because:
Wealth is accumulated savings that can be passed on from parents to children.
Which of the following statements regarding social preferences is correct?
Which of the following statements regarding social preferences is correct?
Diminishing average product of labor means
as more labor is used in a production process, the amount produced per worker decreases.
The 1978 law that protected Bengali sharecroppers from eviction and increased their share of the crop from 50% to 75% did all the following except
generate a Pareto improvement.
Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct?
he tax may increase social welfare.
Which of the following statements regarding monopolistic and competitive markets is correct
in a monopolistic market, the firm is a price-setter.
In economics, institutions refer to
the rules of the game