Unit 4 review Micro

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on a $8,485 loan. The interest rates on the two loans are:

14 percent on both loans

In the quintile distribution of income, the term "quintile" represents:

20 percent of the income receivers.

A merger between a maker of household detergents and a fast food chain would be an example of:

a conglomerate merger.

Price fixing is considered to be a per se violation of the antitrust laws because:

a guilty verdict requires proof that the activity was attempted, not that it unreasonably restrained trade.

All but which one of the following are cash transfer programs?

low-rent public housing

Henry George's single tax movement was based on the argument that:

a high tax on land rent is justified because land rent performs no incentive function.

Medicaid:

helps finance medical expenses for those participating in the TANF and Supplemental Security Income programs.

The main purpose of industrial regulation is to:

lower price to average total cost such that the firm earns a fair return.

The Sherman Act was designed to:

make monopoly and acts that restrain trade illegal.

A market in which the entire demand for a good or service can be satisfied at the least cost by a single firm is a:

natural monopoly

The "rule of reason" indicated that:

only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

In making an investment decision a business firm is most interested in the:

real interest rate

Suppose that in some year nominal interest rates are less than the rate of inflation. This means that:

real interest rates are negative.

Housing subsidies for low-income households:

represent a noncash transfer.

A normal profit is:

the "price" required to retain entrepreneurial talent in some particular line of production.

All of the following can file antitrust charges under the Sherman Act except:

the Federal Energy Regulatory Commission.

Pure or economic profit is:

the amount by which accounting profits exceed normal profits.

The "future value" of a sum of money refers to:

the amount to which some current sum of money will grow over time.

A firm charged with monopolizing a market is less likely to be convicted if:

the court accepts a broad definition of the market.

Effective usury laws cause:

the quantity of loanable funds demanded to exceed the quantity supplied.

In the United States, The lifetime distribution of income is more equal than the annual distribution. This statement is:

true, because there is considerable income mobility over time.

Interlocking directorates are:

illegal under provisions of the Clayton Act of 1914.

The Gini ratio of income inequality ranges between:

0 and 1.

Social, as distinct from industrial, regulation is the major focus of the:

Consumer Products Safety Commission.

The antitrust laws are enforced by the:

Federal Justice Department and the Federal Trade Commission.

All of the following are regulatory commissions dealing with industrial regulation (as distinct from social regulation) except the:

Food and Drug Administration.

The Clayton Act of 1914:

Outlawed certain anticompetitive practices not prohibited by the Sherman Act, including price discrimination, tying contracts, exclusive dealing, interlocking directorates, and buying the corporate stock of a competitor

For which of the following income-maintenance programs is aggregate spending the greatest?

Social Security

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of:

a tying contract.

A major purpose of usury laws is to make more funds available to low-income borrowers. Economic analysis suggests that usury laws:

allocate available funds to high-income borrowers.

The Celler-Kefauver Act of 1950:

amended the Clayton Act.

Standard Census data on the distribution of income:

are before taxes in that they do not account for personal income and payroll taxes.

Economic rent refers to the price paid for land and other natural resources that:

are fixed in total supply.

In the United States:

both taxes and transfers decrease income inequality.

A major criticism of industrial regulation is that:

by allowing a fair return price, it gives natural monopolists little incentive to contain costs.

Answer the Question on the basis of the following information. Suppose population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. Refer to the above information. Population B, consisting of Fred, George, Holly, Irma, and Joan, receive incomes of $4,000, $3,000, $1,250, $950, and $800, respectively. We:

can say that the income of population B is more equally distributed than that of population A.

Critics of a single tax on land oppose the idea because:

changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents.

The U.S. poverty rate for:

children under 18 years of age is higher than for the overall population.

One cause of income inequality in the United States is:

differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work.

Some economists advocate taxes on land because such taxes:

do not affect the supply of land

A unique characteristic of taxes on economic rents is that such taxes:

do not lead to a reallocation of the resource.

In his book Progress and Poverty, Henry George argued that:

economic rent could be heavily taxed without impairing the supply of land or therefore the productive capacity of the economy.

The legal cartel theory of regulation argues that:

firms in certain industries want to be regulated rather than face the rigors of competition.

Each of the following has contributed to growing income inequality in the United States since 1970 except:

government transfers

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation:

has produced large net benefits for consumers and society.

A firm is likely to be a natural monopoly:

if economies of scale are experienced over the full range of output.

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely:

ignore this merger because of the relatively small size of, and increase in, the Herfindahl index.

A function of the Federal Trade Commission is to:

investigate instances of faulty and misleading advertising.

The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the:

investment will be profitable.

Income:

is a flow concept

The Gini ratio:

is a numerical measure of the overall dispersion of income in a nation.

Economic profit is most closely associated with:

monopoly, innovation, and uninsurable risks

Some economists have criticized standard government figures on income inequality, arguing that these data:

overstate the degree of income inequality by failing to include noncash transfers as income.

The Lorenz curve:

plots graphically the distribution of income.

The Earned Income Tax Credit:

provides a cash payment to low-income working families if their tax credit exceeds their tax liability.

The amount to which some current amount of money will grow as interest compounds over time is known as:

the future value of that sum of money.

Critics of the regulation of natural monopolies contend that:

the industry may "capture" or control the regulatory commission.

The Lorenz curve portrays:

the personal distribution of income.

Economic or pure rent is:

the price paid for the use of land and other nonreproducible resources.

Interest is the:

the price paid for the use of money

Landowners will not receive any rent so long as:

the supply curve lies entirely to the right of the demand curve.

A merger between an automobile manufacturer and a maker of automobile tires is an example of a:

vertical merger

Economists who adhere to the laissez-faire antitrust perspective:

view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved.

People's incomes are relatively low when they are young, reach a peak in middle age, and then decline. This fact helps explain:

why the lifetime distribution of income is more equal than the distribution in any given year.

Responsibility for enforcing the antitrust laws rests:

with both the Department of Justice and the Federal Trade Commission.