Econ Exam #2
Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. The new price domestic consumers pay for a TV is:
$500
What is an example of a quota?
A government limits the amount of a product that can be sold in a market.
The Gini Coefficient
A measure of income inequality within a population, ranging from zero for complete equality, to one if one person has all the income.
Poverty line
A method used to count the number of poor people, it considers what a family must spend for an "austere" standard of living.
Regressive tax
A tax for which the percentage of income paid in taxes decreases as income increases
Progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
Utility
Ability or capacity of a good or service to be useful and give satisfaction to someone.
Joachim produces and sells baskets. His marginal cost for one basket is $10, and his average cost is $7. He gains producer surplus every time that he sells a basket at a price:
Above $10
Trade deficit
An excess of imports over exports
According to diminishing marginal utility, which of the following people would gain the lowest marginal benefit from an extra $100 of income?
Ariana, an actress with an annual household income of $1,500,000
What conditions must be met for private bargaining to be effective in resolving an externality?
Bargaining costs must be low, and property rights must be clear.
Diminishing marginal utility
Decreasing satisfaction or usefulness as additional units of a product are acquired
What does it mean to be means-tested?
Eligibility is based on income and sometimes wealth
Public goods
Goods, such as clean air and clean water, that everyone must share.
Liability rules
Laws that require A to compensate B for damages imposed.
Which of the following is an example of an in-kind transfer?
Martin receives housing from the government due to his low income.
When people focus their efforts, on the tasks they have a comparative advantage in, what will happen to output?
More of all goods will be produced than if everyone produced everything for themselves.
By contrast with a market that produces the socially optimal output, a market with negative externalities will:
Overproduce
Social insurance
Programs in which eligibility is based on prior contributions to government, usually in the form of payroll taxes.
income taxes
Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes).
Marginal social benefit
The extra benefit or utility to society of consuming an additional unit of output, including both the private benefit and the external benefits.
Marginal social cost
The extra cost to society of producing an additional unit of output, including both the private cost and the external costs.
Which of the following claims reflects normative analysis?
The minimum wage should be higher so that workers earn a living wage.
Which of the following is an example of a negative externality?
When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.
Which of the following is NOT a correct rationale about why income redistribution programs do not always reduce efficiency?
When incomes are more equal, work incentive grows.
When do sellers bear a smaller incidence of tax?
When supply is more elastic relative to demand
Survey data for Americans are illustrated in a graph with the average level of well-being reported (on the vertical axis) at each level of income (on the horizontal axis). The slope of this curve indicates the relationship between well-being and income is consistent with _____ marginal benefit for additional income.
a diminishing
What is an import?
a good or service brought in from another country for sale
What's a proportional/flat tax?
a tax when everyone pays the same percentage of their income in tax
Injunction
an authoritative command or order
An increase in producer surplus would most likely occur if:
an effective price floor was imposed
What is a marginal private benefit?
an extra benefit enjoyed by the buyer of one extra unit of a good or service.
Positive externality
beneficial side effect that affects an uninvolved third party
To get maximum output, you should allocate each task to the person who:
can do the task with the lowest opportunity cost
What type of good is nonrival and excludable?
club goods
Red tape
complex bureaucratic rules and procedures that must be followed to get something done
A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____.
fairness; maximizing economic surplus
Private goods
goods that are both excludable and rival in consumption
Common resources
goods that are rival in consumption but not excludable
Utilitarianism
idea that the goal of society should be to bring about the greatest happiness for the greatest number of people
The distribution of wealth is _____ the distribution of income.
more unequal than
Buyers bear all the economic burden of a tax if the demand curve is _____, given an upward sloping supply curve.
perfectly inelastic
The percent of the population whose household income falls below the poverty line is known as the:
poverty rate
Marginal utility
satisfaction or usefulness obtained from acquiring one more unit of a product
What do common resources have?
shared gains but private costs
What is a social safety net?
system of government policies that provides social and economic supports to individuals and families (i.e. antipoverty and family support programs)
comparative advantage
the ability to produce a good at a lower opportunity cost than another producer
Negative externality
the harm, cost, or inconvenience suffered by a third party because of actions by others
Poverty rate
the percentage of people who live in households with income below the official poverty line
Trade surplus
when a country exports more than it imports
