Micro

(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government wants to limit total emissions to 2,200 tons, it could impose an emissions tax of ________ on both firms. $100 $200 $300 $400

$300

(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government issued each firm 800 permits, each allowing the emission of one ton (a total of 1,600 tons of emissions), and allowed them to trade permits, the market price to purchase one permit would equal: $100. $200. $300. $400.

$400

(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government does not intervene in the pollution market, equilibrium will occur where firm A emits _____ tons and firm B emits _____ tons of pollution, for a total of _____ tons. 2,000; 2,000; 4,000 0; 1,000; 1,000 1,000; 0; 1,000 800; 1,400; 2,200

2,000; 2,000; 4,000

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of heavy metal coal waste products. The efficient quantity of pollution from these waste products is _____ tons. 0 2 4 8

4

A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. Reference: Ref 16-15 (Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. How many hours of lawn upkeep will occur in this community, and what will be the marginal private benefit of such upkeep? 50 hours; $50 45 hours; $20 50 hours; $25 100 hours; $50

50 hours; $25

A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. Reference: Ref 16-15 (Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. The community estimates the marginal social benefit from lawn upkeep to be $15. Given this information, what is the socially optimal amount of lawn upkeep for this community? 0 hours 45 hours 50 hours 65 hours

65 hours

Which of the following is (are) associated with poverty?

adequate employment, education, and proficiency in English

Sometimes healthy people drop their health insurance, leaving only sicker people to buy insurance. This creates a situation known as:

adverse selection

Programs associated with the welfare state are believed to cause deadweight loss, since they:

affect incentives to work and to save.

The adverse selection death spiral occurs when private insurance companies:

charge higher-than-average prices for health insurance, which in turn drives off healthy individuals and leaves only sicker, high-cost individuals, resulting in yet higher premiums the following period.

For the United States in 2012, a Gini coefficient of 0.57 suggests that:

compared to most European countries, the United States has unusually high levels of income inequality.

A Pigouvian subsidy is: designed to discourage activities generating externalities. designed to encourage activities generating external benefits. appropriate when the marginal social cost curve is above the marginal cost of production curve. appropriate when the marginal social cost curve and the marginal social benefit curve intersect at an inefficient level.

designed to encourage activities generating external benefits.

Becky works for a large grocery store that provides a health insurance program to all workers. This is an example of:

employment-based health insurance.

(Figure: Three Firms that Pollute) Three firms in a small city are responsible for mercury pollution, and the marginal benefit of the individual polluters is shown in the figure Three Firms That Pollute. If each company is allowed to emit only 300 tons of mercury per day, which company will be most adversely affected? firm A firm B firm C They are equally affected.

firm A

Since the 1960s, power plants have taken actions, such as switching to low-sulfur coal and installing scrubbers in their smokestacks, which have significantly reduced the problem of acid rain. Power plants took these actions mainly because: of concern about the environment. large firms in the United States have a history of being "good citizens" and doing what is best for society, even if this reduces their profits somewhat. government policies regulated the industry and provided power companies with incentives to take these actions. of concern about the environment and because government policies provided power companies with incentives to take these actions.

government policies regulated the industry and provided power companies with incentives to take these actions.

Although Mike has a legal right to listen to any kind of music, suppose his roommate John dislikes the heavy metal music Mike plays on his iPod dock. According to the Coase theorem, an efficient private solution to this negative externality can be found: even if both parties do not want to negotiate. even if the cost of hiring lawyers to negotiate a deal is high. if the transaction costs are low. by authorities confiscating Mike's iPod.

if the transaction costs are low.

In the United States in the first two decades following World War II:

income distribution became more nearly equal.

Which of the following is usually associated with a positive externality? smoking cigarettes listening to a new CD with earbuds innovation in the semiconductor industry an indoor classical music concert with tickets that cost $50

innovation in the semiconductor industry

A definition of poverty that compares the individual's level of income with that of other individuals in the country:

is a relative measure.

Compared to a generation ago, benefits from public aid programs, adjusted for inflation, are:

less.

The problem with community rating is that it:

may cause adverse selection.

There are six households in a rural community. Each household earns $40,000 per year. Suppose that a new resident builds a mansion in the community and that the income in the new household is $4 million per year. After the new resident arrives, the median household income has _____ and the mean household income has _____.

not changed; increased

If drivers decide to make phone calls without considering the costs imposed on others, the: number of phone calls made while driving will be more than the socially optimal quantity. number of phone calls made while driving will be fewer than the socially optimal quantity. marginal social cost curve will lie below the marginal cost of production curve. marginal social benefit curve will lie below the marginal social cost curve.

number of phone calls made while driving will be more than the socially optimal quantity.

Apartment dwellers near Wrigley Field in Chicago are often able to watch the Chicago Cubs baseball team play from the roof of their apartment building, without having to pay the cost of buying a ticket. This is an example of a: marginal social cost. negative externality. positive externality. deadweight loss.

positive externality.

Programs that are not means-tested:

provide benefits for people regardless of income level.

A popular explanation for the most important cause of the increase in income inequality in recent years is:

rapid technological change.

A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Qis again the number of hours engaged in lawn upkeep. Reference: Ref 16-15 (Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. The community decides that given all the benefits of lawn upkeep, it is important to maintain the socially optimal number of lawn upkeep hours. A market solution to achieve this is to: require community lawn service of 45 hours. subsidize everyone who contributes to lawn upkeep with a payment of $15. implement a Pigouvian lawn tax of $65. provide no additional funds to lawn upkeep.

subsidize everyone who contributes to lawn upkeep with a payment of $15

The welfare state can:

take up a large share of government spending in wealthy countries.

Which program was introduced in 1990 to replace the means-tested program Aid to Families with Dependent Children?

temporary assistance to needy families.

Health care in the United States is DIFFERENT FROM that of other wealthy countries in all of the following ways EXCEPT that:

the United States is the only country that provides government health care.

The efficient amount of polluting emissions occurs when: there is absolutely no damage done to a pristine environment. government forces zero emissions no matter what the cost. the marginal benefits of polluting emissions exceed the marginal costs of polluting emissions. the change in benefits and the change in costs due to an additional unit of emissions are equal.

the change in benefits and the change in costs due to an additional unit of emissions are equal.

A plastics manufacturing plant dumps wastewater into the Big River. This leads to higher costs and disruption for fishermen on the river, for which they are not compensated. In this situation: too little of society's resources is being used to produce plastic. too much of society's resources is being used to produce plastic. the ideal amount of society's resources is being used to produce plastic. there is an external benefit to society from plastic production.

too much of society's resources is being used to produce plastic.

Which of the following is NOT a major cause of poverty in the United States?

welfare