Econ midterm 2

In 2012, health care expenditures in the United States accounted for _____ of GDP.

D) 15% to 20%

Which of the following programs is NOT an antipoverty program? A) Social Security B) Medicaid C) Temporary Assistance for Needy Families D) the Earned Income Tax Credit

Social Security

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal?

Total expenditures will fall.

Suppose ABC Health is a private health insurance company that offers an identical policy to all customers. Each customer pays a premium equal to the average consumer's annual medical expenses. This is a system that has the potential to fail because of the _____ problem.

adverse selection

For a normal demand curve, the price elasticity of demand will be:

always negative.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.

The price elasticity of demand along a demand curve with a constant slope:

decreases in absolute value as quantity demanded rises.

A high-income household is taxed a certain amount of money. A low-income household receives financial assistance in the same amount from government. The value of the marginal dollar of the financial assistance to the family and the taxes paid by the high-income family are:

different, since the marginal dollar is worth more to the low-income family.

Positive externalities are:

difficult to measure, since marginal social benefits are hard to observe.

For the same amount of pollution emitted, an emissions tax is said to be more efficient than an environmental standard because all polluters:

emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax.

Since 1967 the percentage of the population living below the poverty line has:

fluctuated, but not in any consistent direction

The notch problem occurs when a poor family that has been receiving aid:

has an increase in earnings that reduces means-tested aid from programs, hence reduces their combined incomes.

For a good to be considered normal, the _____ elasticity of demand must be _____.

income; greater than 0

Decreases in input costs and a longer time since a price change will tend to:

increase the price elasticity of supply.

Suppose the U.S. government imposes a binding quota on the number of Japanese-made cars allowed into the United States. Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption, we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____.

increase; increase

An externality is said to exist when:

individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account.

Community rating is a regulation that requires:

insurance companies to offer the same policies for the same premium to everyone, regardless of medical history.

Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States:

lead to agricultural surpluses and lower prices for farmers in developing countries.

Typically the government limits the quantity of a good that can be bought and sold by:

licensing the suppliers.

There is considerable _____ among the quintiles of the distribution of income, with many families moving from _____ quintiles and others moving from _____ quintiles.

mobility; higher to lower; lower to higher

A maximum price set below the equilibrium price is a:

price ceiling.

The most likely reason that the government would implement a _____ is because it feels that the price is too low for _____.

price floor; producers

The quota rent is:

the difference between the demand price and the supply price at the quota limit.

Which factor is important in determining the price elasticity of supply?

the time the producer has to adjust inputs and outputs

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:

the transaction takes place on a black market.

Compared to other countries of comparable wealth, the United States has:

unusually high poverty rates.

John Rawls believed that:

we should do unto others as we would like them to do unto us if we were in the same place.