econ 2106 learning curve
_____ judges the adequacy of resources relative to an unchanging standard.
Absolute poverty
The government imposes taxes equal to the damage (such as pollution) that electric companies do while producing electricity. What is the role of taxes in this example?
Taxes help firms internalize the externalities.
Which of these is NOT a way in which technological change contributes to inequality in some occupations? -The most skilled individuals can capture a large share of the rewards, leaving little for those who are just slightly less skilled. -The labor market becomes a winner-take-all market. -Technology makes it easy for the best to reach millions of customers. -Technology prevents the best from reaching millions of customers.
Technology prevents the best from reaching millions of customers.
What is a compensating differential?
The difference in wages required to offset the desirable or undesirable aspects of a job.
Which of the following represents a labor market in which a rising opportunity cost of work results in higher wages and fewer jobs?
The labor market for young people who enjoy playing video games.
Under a cap-and-trade system, what is a firm's opportunity cost of producing harmful gases?
The possible revenue from selling its permits
What is an effect of licensing requirements on the workforce?
They decrease labor supply.
An activity that has beneficial side effects for bystanders is called _____.
a positive externality
Society's interests include:
all costs and benefits to everyone, including you.
The forces of demand and supply often yield the best possible outcome for society. However, when externalities are involved, _____ must be accounted for as well as _____.
bystanders; buyers and sellers
Because free-riders do not pay for the benefits they consume, they are _____ and experience a _____ externality.
bystanders; positive
People _____ be prevented from appreciating the beautiful exterior of St. Patrick's Cathedral in New York City, so the building is _____.
cannot; nonexcludable
The government regulates the labor market in many different ways. Which option is NOT a way in which the government regulates the labor market? -compensating differentials -minimum wage laws -licensing requirements -safety standards
compensating differentials
Club goods are goods that are _____ in consumption.
excludable and nonrival
Just as labor demand is all about your marginal revenue product, your labor supply is all about the
marginal benefit of leisure.
Any solution to the externality problem involves getting _____ to consider _____ effects.
participants; external
A system in which individuals with higher incomes pay a higher share of income in taxes is called a _____ system.
progressive tax
The poverty line is a:
somewhat arbitrary threshold.
All businesses want to hire productive workers, but how else can they create more productive workers?
use better management practices
The idea that the government should try to maximize total utility in society is known as:
utilitarianism.
_____ are inefficient outcomes that are not in society's best interest.
Market failures
What would happen if the government redistributed until we all got the same income no matter what?
People would have no incentive to work hard or start a new business.
The Rational Rule for Society may be thought of as an application of the _____, when externalities are considered.
Rational Rule
_____ measures poverty by judging if you have the resources necessary to participate in your society.
Relative poverty
When Congress passes an immigration bill restricting the number of foreigners with computer science degrees who can move to the United States, what happens to the labor market for computer programmers?
Wage will increase, and fewer jobs will be available.
The positive externalities enjoyed by free-riders using nonrival goods:
do not hurt others.
A locked car is considered to be _____, and an airport people-mover is _____.
excludable; nonexcludable
A solution to the free-rider problem is the government's power to _____, which is something businesses and individuals _____ have the power to do.
force people to pay for the goods they benefit from; do not
The _____ measures how people's choices change when they have more income.
income effect
A(n) _____ in demand for the product you sell will increase the labor demand of your business and shift the labor demand curve to the _____.
increase; right
Utilitarians believe that government redistribution is beneficial because transferring $100 from a billionaire to a single mom at the bottom of the income distribution will:
lead to more utility in society.
The minimum wage is a poorly targeted antipoverty policy because:
many minimum-wage workers are either part of a higher income household or will quickly find a higher wage job.
The _____ is the extra production that results from hiring an extra worker.
marginal product of labor
The _____ measures the extra revenue that results from hiring an additional worker.
marginal revenue product
Which career is NOT part of a "winner-take-all" market? -athlete -teacher -actor -author
teacher
Your labor supply is
the time you spend working in the market.
One problem of redistribution is that means-tested benefits are taken away from people when:
they earn more income.
If you use the cost-benefit principle to decide whether to take a job, the presence of the safety net will lead you to:
turn down a miserable job.
Because free-riders are bystanders who receive benefits from goods, these types of goods tend to be:
underproduced.
Automakers follow the Corporate Average Fuel Economy (CAFE) standards to ensure that their vehicles don't use too much gas per mile. This is an example of _____ in order to _____.
using laws and regulations; reduce negative externalities
Employers want to hire more productive workers, so they are willing to pay a higher wage to people with these characteristics EXCLUDING: -veteran status. -valuable skills. -experience. -education.
veteran status.
Single parents often rely on _____, and many of the jobless get by with the help of _____.
welfare; food support
The externality problem can be summed up by saying that _____ outcomes occur when people don't account for the interests of _____.
worse; bystanders
Over the course of a lifetime, the average worker with a college degree will earn _____ more than those who stop their education at high school.
$1 million
Approximately what percent of U.S. workers are unionized?
11
_____ is the demand for an input based on the demand for the stuff that input produces.
Derived demand
Which of the following is NOT a key labor supply decision? -How many hours should you study? -How should you choose your occupation? -Should you work or do something else? -How many hours should you work?
How many hours should you study?
Which of the following is NOT considered an effect of income inequality? -It leads to weaker economic growth. -Income inequality tends to concentrate political power. -It is difficult for the government to make good policy. -Income inequality decreases the racial gap in learning.
Income inequality decreases the racial gap in learning.
What is one reason why teachers have lower salaries than people in jobs requiring similar skills?
It has desirable attributes.
What's one reason that nannies tend to make more than day-care workers?
It is harder for them to be monitored.
Which of the following is NOT true about the incidence of poverty in the Unites States? -Children and single moms are the most likely to be in poverty. -More than half of all Americans experience poverty at some point in their lives. -Most spells of poverty are permanent and recurrent. -Some people spend much of their lives in poverty, while others fall on hard times briefly.
Most spells of poverty are permanent and recurrent.
Which statement does NOT explain why positive externalities lead to market failure? -Positive externalities create side effects that are beneficial to other people. -People do not take full account of the positive effects of their choices on bystanders. -Better outcomes are possible if people take full account of positive effects of their choices. -People actually do less of socially useful activities than is in society's best interests.
Positive externalities create side effects that are beneficial to other people.
_____ measures poverty relative to the material living standards of your contemporary society.
Relative poverty
The purpose of _____ is to provide a safety net for individuals who _____, or to take care of orphaned minors.
Social Security; outlive their savings
Which of the following is NOT true about the labor supply and labor demand curves? -Businesses want to hire the best workers at the lowest price possible. -The supply curve represents the selling decisions of businesses. -The labor demand curve has the price of labor on the vertical axis. -The labor supply curve has the hours of work on the horizontal axis.
The supply curve represents the selling decisions of businesses.
Which example does NOT involve private bargaining to internalize an externality? -Google builds high-speed wireless internet networks to reach people outside of major cities. -To reduce maintenance costs, an electric company replaces overhead wires with underground wires capable of carrying the same load. -A health insurance company pays people to exercise. -Google buys another internet service provider.
To reduce maintenance costs, an electric company replaces overhead wires with underground wires capable of carrying the same load.
Income taxes are taxes collected on:
all income, regardless of its source.
All of these options are able to solve negative externality problems EXCEPT: -corrective subsidies. -lawsuits. -corrective taxes. -fines.
corrective subsidies.
The _____ measures how people respond to a change in relative price.
substitution effect
What's a possible drawback with using high-powered incentives?
Incentives can distort effort.
Your corporate culture shapes interactions between your workers. Salespeople are more productive when they're working at the same time and in the same location as other highly productive salespeople. Why?
When you care about what your co-workers think of you, this changes your incentives to work hard.
Which of the following is NOT true about labor supply? -Workers tend to work less when the wage is low. -Workers tend to work extra hours in response to a small change in wages. -Workers tend to work fewer hours when wages are very high. -A high wage provides a strong incentive to work, leading you to work longer hours.
Workers tend to work extra hours in response to a small change in wages.
A salon's owner used to have one hair stylist and she hired one more. The customers increased from 40 to 75 customers per week. She is paying each stylist $500 per week and charges $30 per haircut. If she adds one more hair stylist, she might get 30 extra customers per week. Should she hire a third hair stylist? Why?
Yes, the marginal revenue product of an extra worker exceeds the wage.
Firms offer health insurance partially because they tend to get a better deal than their workers do on their own. Why do firms tend to get a better deal than workers?
You are less likely to already be sick if purchasing insurance through an employer.
How do you describe a labor market in which many employers are competing to hire from a large pool of qualified workers with similar skills?
You describe the labor market as perfectly competitive.
Which is NOT an example of an activity with a positive externality? -You prepare before your study group meeting. -You spend your spare time trolling on social media. -You work hard in order to earn a pay raise. -You exercise regularly to stay healthy.
You spend your spare time trolling on social media.
Students, homemakers, and retirees decide not to work because
the benefit of not working is higher than the wage
Laws, rules, and regulations can be used to remove the externalities in all the following situations, EXCEPT: -laws banning smoking in public places. -school rules that require students are up-to-date on their vaccines. -the law that makes unsolicited "spam" calls to your cell phone illegal. -the government providing an incentive for installing solar panels.
the government providing an incentive for installing solar panels.
From the graph, the labor supply curve is vertical because
the income and substitution effects offset each other.
A higher wage means a bigger cost of losing your job, due to which fact?
the opportunity cost principle
People in long-term poverty represent _____ of the poor at any point in time and they often _____.
a large share; return to poverty
One reason that union membership has declined over time is that unions can lead to lower wages for individuals who:
are able to negotiate even higher wages.
Studies show that societies with _____ typically exhibit less trust and more crime.
greater income inequality
Proponents of a higher minimum wage believe that labor demand is very _____ and, as such, the minimum wage results in a _____ number of jobs being lost.
inelastic; small
Beyond teaching a person useful skills, a degree conveys _____ in the form of a(n) _____ to an employer that you are a good worker.
information; signal
Understanding labor demand is all about understanding the
marginal revenue product of labor.
Regarding the income effect, a higher wage increases your income leading you to choose _____ leisure and hence _____ work.
more; less
There is _____ inequality in annual income than in measured permanent income because some of income inequality in annual income reflects _____.
more; temporary ups and downs
Some safety net programs are _____ because they are insurance programs designed to cover everyone—the rich and the poor.
not means-tested
The _____ tells you that an important cost of working is what you must give up in order to work.
opportunity cost principle
The percent of the population that has a family income below the poverty line is referred to as the:
poverty rate.
One way to eliminate discrimination would be to literally hide the gender and race of job applicants. Which is an example of how this is achieved?
a "blind" audition using a screen to conceal identity of applicant
Education serves as _____, which is a costly action that a person takes to convey credible information that would otherwise be hard for someone else to verify.
a signal
Employers understand that there are ways to attract employees despite lower wages. Which is NOT something that employers are willing to offer to attract employees in this situation? -an efficiency wage -better training -fringe benefits -large incentives
an efficiency wage
Supply-based explanations focus on the different _____ of jobs.
attributes
A corrective tax can induce people to consider the external _____ of the _____ externalities they create.
cost; negative
Although there has been a decline in unions by more than two-thirds from their high point in the 1950s, unions remain quite relevant in many type of jobs EXCEPT: -utilities and telecommunications. -federal government and military. -public sector and education. -transportation and construction.
federal government and military.
Which of these is NOT a way in which governments influence the labor market? -following the laws of supply and demand -setting the minimum wage -setting training and experience requirements -allowing workers to negotiate with employers through a union
following the laws of supply and demand
When you exercise regularly, you create positive externalities because:
it does not only benefit you but also your health insurer.
Your _____ is the time you spend working in the market.
labor supply
According to diminishing marginal utility, your marginal utility may be _____ when you are poor, and it becomes _____ when you are richer.
large; smaller
The safety net provides poor families with:
minimum support.
When the decisions of bystanders are not considered, _____ often the result.
negative externalities are
If a piece rate isn't feasible (perhaps because you can't objectively measure what each employee produces), then all of these are other ways to provide incentives, EXCEPT: -supplementing the base wage with a healthy commission. -using bonuses to provide incentives. -paying all employees the same rate for just showing up for work. -offering employees a clearly defined career path, combined with a culture of promoting high-performing workers.
paying all employees the same rate for just showing up for work.
When people fail to factor in _____ externalities, they are less likely to engage in activities that are beneficial to _____.
positive; society
The well-being scores of a low-income person and a high-income person are 5.20 and 7.50 respectively. If $25,000 were redistributed from the high-income person to the low-income person, the well-being of the high-income person would fall by 0.05, while the well-being of the low-income person would rise by 0.80. Consequently, this redistribution causes total well-being to:
rise by 0.75.
In the face of positive externalities, the Rational Rule for Society says that the _____ occurs at the quantity where the marginal social benefit is equal to the _____.
socially optimal outcome; marginal social cost
