Intro to Microeconomics - Final Exam

Which one of the following government actions is intended to generate positive externalities? a. Taxing polluting industries b. Speed limits on the highways c. Requiring autos to meet minimum emissions regulations d. Subsidies for planting trees on hillsides

d. Subsidies for planting trees on hillsides

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. The total social benefit of the swimming pool is: a. $1,490. b. $1,000. c. $1,590. d. $1,120.

a. $1,490.

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. The total social benefit of the swimming pool is: a. $1,490. b. $1,000. c. $1,590. d. $1,120.

a. $1,490.

Broadcast television is an example of: a. a collective good provided by the government. b. a private good provided by private firms. c. a private good provided by the government. d. a public good provided by private firms.

d. a public good provided by private firms.

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. At the private market equilibrium, the price of each dose is: a. $50. b. $60. c. $70. d. $80.

a. $50

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a private good, then at a price of $4, market demand is ______ units. a. 60 b. 30 c. 10 d. 5

a. 60

Which of the following is an example of a positional arms control agreement? a. Campaign spending limits b. Highly selective admissions standards at colleges c. Prohibiting speech that causes more harm than good d. Public education

a. Campaign spending limits

Which of the following is NOT an example of an activity with external benefits? a. Eating a sandwich in the dining hall b. Planting flowers in your front yard c. Installing smoke alarms in your house d. Having your car's faulty exhaust system repaired

a. Eating a sandwich in the dining hall

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. If the original curves are MB0 and MC0, the optimal quantity of information about this product is: a. I1. b. I2. c. I3. d. I4.

a. I1.

Which of the following items is an example of a good that is nonrival but excludable? a. Pay-per-view movies b. Corn c. National defense d. Broadcast television

a. Pay-per-view movies

In which of the following markets is the presence of asymmetric information of little concern to the buyer? a. The market for used textbooks b. The market for used houses c. The market for used computers d. The market for used cars

a. The market for used textbooks

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates: a. a negative externality. b. a positive externality. c. neither a positive nor a negative externality. d. both a positive and a negative externality.

a. a negative externality.

Curly is offered the following gamble: a 25 percent chance of winning $1,500 and a 75 percent chance of losing $500. This is a(n): a. fair gamble. b. unfair gamble. c. almost-fair gamble. d. better-than-fair gamble.

a. fair gamble.

In a perfectly competitive labor market, if the value of marginal product of the last worker hired is $20 and the wage rate is $25, then the firm should: a. hire fewer workers. b. hire more workers. c. not change the number of workers it hires. d. either hire more or fewer workers, depending on the price of the firm's output.

a. hire fewer workers.

The growth in income inequality in the United States since the early 1980s has been driven primarily by the dramatic: a. increase in real incomes for the top 1 percent of earners. b. increase in real incomes for the top 10 percent of earners. c. increase in real incomes for the top 20 percent of earners. d. decrease in real incomes for the bottom 20 percent of earners.

a. increase in real incomes for the top 1 percent of earners.

The essential reason some species of whales have nearly been driven to extinction is that: a. it is difficult to define and enforce property rights to whales. b. the demand for whales is extremely high. c. the price of whales is very low. d. experienced whalers find it easy to catch whales.

a. it is difficult to define and enforce property rights to whales.

If it is difficult, or costly, to prevent people who do not pay for a good from consuming the good, then the good is a ______ good. a. nonexcludable b. pure public c. private d. nonrival

a. nonexcludable

The tragedy of the commons refers to the: a. overuse of resources that have no price. b. overuse of resources that have no cost. c. under production of goods that have external benefits. d. failure of the Coase theorem when negotiation is costly.

a. overuse of resources that have no price.

Suppose that there are two employers in Tinytown. CareCo offers a generous health insurance package to all employees, while ApathyInc pays slightly higher wages than CareCo, but does not offer health insurance. All else equal, a person who is unhealthy and expects to have high healthcare costs will: a. prefer to work for CareCo. b. stop going to the doctor. c. be equally happy working for either firm. d. prefer to work for ApathyInc.

a. prefer to work for CareCo.

A firm's demand for labor will increase if the: a. price of the firm's output increases. b. price of the firm's output decreases. c. marginal product of labor decreases. d. wage rate rises.

a. price of the firm's output increases.

The table below shows the marginal benefit and marginal cost of purchasing an additional unit of 3 different public goods. The government is spending the socially optimal amount on: a. public good 1. b. public good 2. c. public good 3. d. public good 1 and public good 2.

a. public good 1.

The table below shows the marginal benefit and marginal cost of purchasing an additional unit of 3 different public goods. The government is spending the socially optimal amount on: a. public good 1. b. public good 2. c. public good 3. d. public good 1 and public good 2.

a. public good 1.

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ______, and the wages of nonunionized workers to ______. a. rise; fall b. rise; remain unchanged c. remain unchanged; fall d. fall; remain the same

a. rise; fall

Morgan lives in San Francisco and likes to dine out. Morgan has noticed that prices at restaurants near popular tourist destinations in the city tend to be higher than at restaurants of the same quality in other neighborhoods. One reason for this is that: a. search costs are higher for people who are unfamiliar with the area. b. residents don't like to eat in restaurants frequented by tourists. c. tourists don't worry about money while on vacation. d. restaurant meals are a small fraction of the total cost of a vacation.

a. search costs are higher for people who are unfamiliar with the area.

A firm is unlikely to hire a worker if: a. the additional revenue generated by hiring the worker is less than his or her wage. b. the additional output a firms gets by hiring the worker is greater than his or her wage. c. there are diminishing marginal returns to labor. d. the minimum wage set by law is less than the equilibrium wage in the market.

a. the additional revenue generated by hiring the worker is less than his or her wage.

Under a head tax, the amount of tax paid is: a. the same for all taxpayers. b. proportional to each taxpayer's income. c. a linearly increasing function of the taxpayer's income. d. the same for all taxpayers who use the public good.

a. the same for all taxpayers.

A minimum wage law prohibits employers from paying workers less than a specified hourly wage. If the minimum wage is above the equilibrium wage: a. there will be an excess supply of labor. b. there will be an excess demand for labor. c. it creates a price ceiling. d. employment levels will not fall.

a. there will be an excess supply of labor.

Suppose Joe has a reliable two-year old Honda Civic that's in excellent condition and that he would be willing to sell for $13,000. Lauren, who is risk-neutral, is considering whether to buy Joe's car. She's willing to pay $14,000 for a two-year Honda Civic that is reliable and only $10,000 for one that's not reliable. Lauren cannot tell whether Joe's car is reliable, but she believes that only 20 percent of two-year old Hondas for sale in the market are reliable and that the other 80 percent are not reliable. To Lauren, Joe's car looks just like every other two-year Honda that's for sale. What's the most Lauren is willing to pay for Joe's car? a. $10,000 b. $10,800 c. $13,000 d. $14,000

b. $10,800

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. In the absence of any earnings, Leo will receive ______ in cash from each program, for a total of ______ in benefits. a. $225; $225 b. $225; $450 c. $225; $400 d. $200; $400

b. $225; $450

Assume that this graph illustrates a perfectly competitive labor market. Equilibrium in this labor market is at a wage of ______ per hour and an employment level of ______ person-hours per day. a. $30; 100 b. $30; 150 c. $20; 200 d. $20; 125

b. $30; 150

Alison decides to play the lottery. She has a 5 percent probability of winning $100 and a 95 percent probability of winning zero. The expected value of playing the lottery is: a. $100 b. $5 c. $10 d. $50

b. $5

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a public good, then the marginal benefit of the 30th unit is: a. $30 b. $9 c. $4 d. $2

b. $9

Consider the accompanying payoff matrix. What is player A's dominant strategy? a. Up b. Down c. Left d. Right

b. Down

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The socially optimal quantity of the vaccine is ______ doses per day. a. 50 b. 75 c. 100 d. 125

c. 100

According to the textbook, the real mean income of the top 5 percent of families increased by ______ percent from 1980 to 2016. a. 10 b. 13 c. 75 d. 55

c. 75

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Is it socially optimal for Quick Burger to operate a drive-through window? a. No, because The Sunshine Café's payoff is lower when Quick Burger operates a drive-through window. b. No, because total payoffs are higher when Quick Burger does not operate a drive-through window. c. Yes, because Quick Burger's payoff is higher when Quick Burger operates a drive-though window. d. Yes, because total payoffs are higher when Quick Burger operates a drive-through window.

b. No, because total payoffs are higher when Quick Burger does not operate a drive-through window.

Better information about consumers' reservation prices generally leads to: a. a reduction in producer surplus. b. acquisition of goods by consumers who are willing to pay the highest price. c. equitable distribution of goods among low income consumers. d. acquisition of goods by consumers with the greatest need.

b. acquisition of goods by consumers who are willing to pay the highest price.

If the government needs to raise revenue to pay for a public good, the ideal tax structure would tax a. all citizens by the same amount. b. all citizens in proportion to their willingness to pay for the public good. c. all citizens by the same proportion of their income. d. only citizens who state that they will use the public good.

b. all citizens in proportion to their willingness to pay for the public good.

Suppose that this graph describes the current labor market for high school teachers: Suppose supply of labor decreases. At the new equilibrium, wages would be ______ and ______ teachers would be hired. a. higher; more b. higher; fewer c. lower; fewer d. lower; more

b. higher; fewer

Spike pays $14,000 in taxes and earns $100,000. Ace earns $120,000. If the tax system is progressive, Ace will pay ______ in taxes. a. $15,500. b. more than $16,800. c. more than $15,500 but less than $16,800. d. $16,800.

b. more than $16,800.

Consider the accompanying payoff matrix. Is this game a prisoner's dilemma? a. yes b. no c. It's a prisoner's dilemma for player A, but not for player B. d. It's a prisoner's dilemma for player B, but not for player A.

b. no

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. Suppose the marginal cost and marginal benefit curves were MC0 and MB0 several decades ago. However, because information about this product is now available online, the: a. optimal amount of information will decrease. b. optimal amount of information will increase. c. optimal amount of information will stay the same, but it will cost less to acquire. d. demand for information will increase.

b. optimal amount of information will increase.

When someone buys a movie on DVD, the DVD is a ______ good. a. public b. private c. collective d. commons

b. private

When an individual is judged by the characteristics of the groups to which he or she belongs rather than on his or her own characteristics, it is called: a. adverse selection. b. statistical discrimination. c. the lemons model. d. moral hazard.

b. statistical discrimination.

In order to achieve the socially optimal level of output, goods that entail positive externalities should be: a. required. b. subsidized. c. taxed. d. deregulated

b. subsidized

The three elements of a game are: a. the firm, the consumers, and the profit. b. the players, the strategies, and the payoffs. c. the model, the graph, and the costs. d. the costs, the revenue, and the profit.

b. the players, the strategies, and the payoffs.

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it. What is the most a contractor can charge to pave the driveway and still be assured of being hired by at least one of them? a. $600 b. $900 c. $1,500 d. $2,400

c. $1,500

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price, then what will be Mega's economic profit? a. $0 b. $50 c. $100 d. $150

c. $100

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. As a result of the imposition of the minimum wage, total economic surplus falls by ______ per day a. $6,000 b. $8,000 c. $12,000 d. $24,000

c. $12,000

Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the accompanying table. Suppose the government imposes a tax of $56 per day on each ton of smoke emitted. Assuming the revenue the government collects from the tax is used to offset other taxes, what's the total cost to society of this policy? a. $120 per day b. $180 per day c. $205 per day d. $225 per day

c. $205 per day

Curly pays $12,000 in taxes and earns $150,000. Moe pays $7,000 in taxes. If the tax system is proportional, then Moe's income is: a. $56,000. b. $125,000. c. $87,500. d. $98,000.

c. $87,500.

Refer to the figure below. Private markets will provide _____ units of this good per day, and the socially optimal number of units per day is ______. a. H; F b. H; G c. F; G d. G; F

d. G; F

Which of the following statements about the provision of public goods is true? a. The government should always provide public goods. b. The optimal level of a public good occurs when all taxpayers receive some of the good. c. If the marginal benefit of a public good exceeds its marginal cost, more should be provided. d. The total benefit of a public good should equal its total cost.

c. If the marginal benefit of a public good exceeds its marginal cost, more should be provided.

Consider the accompanying payoff matrix. Suppose both players make their choices simultaneously and independently. What is the Nash equilibrium of this game? a. Player A chooses Down and player B chooses Left. b. Player A chooses Up and player B chooses Right. c. Player A chooses Up and player B chooses Left. d. Player A chooses Down and player B chooses Right

c. Player A chooses Up and player B chooses Left.

Which of the following investments is part of a positional arms race? a. Watching your friend train for a soccer game b. Renting movies for the weekend c. Studying hard for your economics exam because your professor grades on a curve d. Playing golf for fun

c. Studying hard for your economics exam because your professor grades on a curve

Pure public goods: a. should always be provided by government. b. should always be provided by private firms. c. are frequently provided by the government, and are sometimes provided by private firms. d. are, by definition, goods and services provided by the government.

c. are frequently provided by the government, and are sometimes provided by private firms.

The most appropriate level of government to provide public goods is: a. local b. state. c. dependent on the specific public good in question. d. federal.

c. dependent on the specific public good in question.

Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. If Candidate X is running for office against Candidate Z, then: a. all voters to the left of Z will vote for X, and all voters to the right of Z will vote for Z. b. all voters who would have voted for Y will vote for X. c. Candidate Z will win. d. Candidate X might win.

c. didate Z will win

To derive the labor demand curve for a particular market, one should ______for all the firms in the market. a. vertically sum the value of the marginal product of labor curves b. vertically sum the marginal product of labor curves c. horizontally sum the value of the marginal product of labor curves d. horizontally sum the marginal product of labor curves

c. horizontally sum the value of the marginal product of labor curves

Refer to the figure below. If negotiation is impractical, the socially optimal level of production can be achieved by: a. banning production of paper. b. compensating those injured by the externality. c. imposing a tax on paper equal to the external cost. d. subsidizing paper by the amount of the the external benefit.

c. imposing a tax on paper equal to the external cost.

To derive the market demand curve for a private good, one sums the ______. For a public good, one sums the ______. a. individual quantities at various prices; individual quantities at various prices b. individual prices at various quantities; individual quantities at various prices c. individual quantities at various prices; individual prices at various quantities d. individual prices at various quantities; individual prices at various quantities

c. individual quantities at various prices; individual prices at various quantities

Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel finds that when Fran's consumption rises, Shel feels worse off. Fran feels the same way about Shel's consumption. Fran has bought a new Jaguar (a luxury car), and shortly thereafter, Shel bought a new Mercedes (also a luxury car). Shel and Fran seem to be: a. making independent rational consumption decisions. b. unaware of the other's actions. c. involved in a positional arms race. d. imposing external benefits on each other.

c. involved in a positional arms race.

The presence of an unregulated negative externality means that the unregulated market equilibrium quantity is: a. efficient. b. smaller than is optimal. c. larger than is optimal. d. greater than demand.

c. larger than is optimal.

Refer to the figure below. At the private market equilibrium quantity, the marginal cost of the last unit produced is ______ the social marginal benefit of the last unit produced. a. equal to b. greater than c. less than d. more important than

c. less than

The additional output a firm gets from hiring an additional unit of labor is the a. value of the marginal product of labor. b. total product of labor. c. marginal product of labor. d. average product of labor.

c. marginal product of labor.

Refer to the figure below. This graph suggests that the private market provides incentives to: a. eliminate the externalities generated by paper production. b. under-produce paper relative to the social optimum. c. over-produce paper relative to the social optimum. d. over-price paper relative to the social optimum.

c. over-produce paper relative to the social optimum.

The level of income below which the federal government classifies a family as poor is called the: a. relative measure of poverty. b. absolute measure of poverty. c. poverty threshold. d. median income threshold.

c. poverty threshold.

Sydney sells snow globes from a cart. When the cart is located on the sidewalk near a discount store, Sydney's customers have reservation prices of $5. When Sydney's cart is located on a sidewalk in an upscale mall, wealthier customers with reservation prices of $10 buy snow globes. Assume that Sydney can sell the same volume at either location and that marginal and average costs are $3 per globe at both locations. Total economic surplus will be maximized if Sydney: a. alternates between the two locations and price discriminates. b. sells only near the discount store and charges $5. c. sells only in the upscale mall and charges $10. d. alternates between the two locations and charges $5 at both locations.

c. sells only in the upscale mall and charges $10.

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The government could increase total economic surplus by: a. taxing production of the vaccine. b. encouraging people to pay each other to get the vaccine. c. subsidizing production of the vaccine. d. providing 250 doses of the vaccine for free.

c. subsidizing production of the vaccine.

The demand curve for a public good is constructed by: a. summing voters' desired quantity of the public good at each price. b. surveying voters on how much of a particular public good they would use at each price. c. summing voters' reservation prices at each quantity. d. dividing the total cost of providing the public good by the number of potential users.

c. summing voters' reservation prices at each quantity.

In the market for labor, the demand function describes a. the number of workers who are willing to work at each wage. b. the output of workers who are paid a given wage. c. the number of workers a firm is willing to hire at each wage. d. the demand for the firm's output.

c. the number of workers a firm is willing to hire at each wage.

One disadvantage of using the government to provide pure public goods is that everyone receives ______ of the public good and has ______ for the public good. a. a different amount; a different reservation price b. a different amount; the same reservation price c. the same amount; a different reservation price d. the same amount; the same reservation price

c. the same amount; a different reservation price

Consider a town with three residents. The residents' demand curves for various acres of a public park are shown below. The public's willingness to pay for the 2nd acre of parkland is ______. a. $6. b. $8. c. $14. d. $26.

d. $26.

The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is a. $2. b. $4. c. $12. d. $32

d. $32.

Suppose Vinnie is looking for a month-long vacation rental in San Diego. The first vacation rental Vinnie finds costs $800 per month. If he looks for another vacation rental, there's a 75 percent chance he'll find another one for $800 per month and a 25 percent chance he'll find one for $600 per month. Other than price, all of the vacation rentals are identical. Vinnie's marginal cost of searching for an additional vacation rental is $45. For Vinnie, the expected value of searching for another vacation rental is: a. $200. b. $50. c. $45. d. $5.

d. $5.

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The marginal product of the fourth worker is ______ cups of coffee per hour. a. 70 b. 60 c. 17.5 d. 10

d. 10

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The marginal product of the fourth worker is ______ cups of coffee per hour. a. 70 b. 60 c. 17.5 d. 10

d. 10

Consider the accompanying payoff matrix. If Column Cruises offers reduced rates, and Row Resorts keeps its rates high, then Row Resorts will earn ______, and Column Cruises will earn ______. a. 300; 300 b. 50; 50 c. 500; 10 d. 10; 500

d. 10; 500

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. If pollution is unregulated, then a total of ______ tons of smoke will be emitted each day. a. 1 b. 2 c. 4 d. 8

d. 8

Aaron's neighbor Cliff keeps his front yard well-manicured and plants beautiful flowers which Aaron enjoys. If local law prevents Cliff from fencing his yard, the beauty of Cliff's front yard is: a. nonrival b. a private good c. nonexcludable d. both nonrival and nonexcludable

d. both nonrival and nonexcludable

The following data show the relationship between the number of drivers who leave for work at 8 a.m., their average commute time, and their marginal benefit of commuting. One way for the government to increase economic efficiency would be for it to: a. require all 500 drivers to collectively decide when each should leave for work. b. subsidize gasoline consumption. c. require employers to allow workers to arrive late for work. d. charge a toll to use the highway during rush hour.

d. charge a toll to use the highway during rush hour.

When players cannot achieve their goals because they are unable to make credible threats or promises, the situation is called a: a. prisoner's dilemma. b. Nash equilibrium. c. failure of dominant strategies. d. commitment problem.

d. commitment problem.

A patch of edible mushrooms growing wild in a national forest is a ______ good. a. public b. private c. pure public d. commons

d. commons

The government subsidizes education because: a. it is a pure public good. b. private firms will not provide education. c. the government can provide a better education than can private firms. d. education is thought to have positive externalities.

d. education is thought to have positive externalities.

In competitive labor markets, _____ demand labor and ______ supply labor. a. firms; labor unions b. labor unions; firms c. workers; firms d. firms, workers

d. firms, workers

A decision tree is used when modeling: a. any type of game. b. simultaneous decisions. c. a prisoner's dilemma. d. games in which timing matters.

d. games in which timing matters.

According to John Rawls, if people had to choose an income distribution without any knowledge of their own talents and abilities, they would likely prefer an income distribution that: a. rewards hard work. b. rewards innate intelligence c. rewards creativity. d. gives everyone an equal share.

d. gives everyone an equal share.

If a good can be consumed by one person without reducing its availability to others, then it is a ______ good. a. nonexcludable b. pure public c. common d. nonrival

d. nonrival

The use of psychological incentives to solve commitment problems would be least effective in games played: a. repeatedly between strangers. b. once between family members. c. repeatedly between family members. d. once between strangers.

d. once between strangers.

A proportional tax results in: a. a larger percentage of income going to taxes as income rises. b. a smaller percentage of income going to taxes as income rises. c. the same dollar amount going to taxes for all taxpayers. d. the same percentage of income going to taxes for all taxpayers.

d. the same percentage of income going to taxes for all taxpayers.

The optimal number of workers for a perfectly competitive firm to hire occurs when a. total labor cost equals total revenue. b. diminishing marginal productivity is first experienced. c. the wage rate equals the marginal product of the last worker. d. the wage rate equals the value of marginal product of the last worker.

d. the wage rate equals the value of marginal product of the last worker.

Suppose Jack just booked a ticket to fly home to see his family for Thanksgiving. When he purchases the ticket, he decides to purchase travel insurance that allows him to get a full refund on his ticket if he's too sick to travel. Knowing this, Jack doesn't bother to take care of himself in the weeks leading up to the trip, reasoning that if he ends up being too sick to travel, then he can always get a full refund. Jack's failure to take care of himself in the weeks leading up to his trip is an example of: a. adverse selection. b. the lemons model. c. a positional externality. d. moral hazard.

moral hazard.