Final Econ 2302

39. Paddy has lots of cousins. With a family reunion in the near future, Paddy decides to collect income information for himself and all his cousins. He obtains the following data points: $52,000, $22,000, $92,000, $8,000, $118,000, $62,000, $38,000, $14,000, $132,000, $46,000, $26,000, $96,000, $54,000, $110,000, $80,000. The share of income received by the second-to-bottom quintile of this income distribution is A. 11.6% B. 12.6% C. 13.6% D. 14.6%

A

One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then A. to divide all households into quintiles. B. comparing the groups. C. to divide all households by size. D. comparing the share of the population.

A

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will shift the demand curve for low-income workers to the while shifting the demand curve for high- income workers to the _________________________. A. left, left B. left, right C. right, left D. right, right

B

Under which of the following antipoverty programs does the federal government give a fixed amount of money to each state? A. ADFC B. TANF C. AFDC D. TNAF

B

3. If the level of income rise for low-income workers but doesn't change for low-income workers

B. the poverty will not change and inequality will rise

24. A Lorenz curve graphs the _________________________ received by everyone up to a certain quintile. A. unequal distribution over time B. normative shares of income C. cumulative shares of income D. total share of income

C

13. Which of the following is a key requirement imposed under the Welfare Reform Act's new antipoverty program? A. states receiving TANF grants must impose work or school attendance requirements B. no one can receive TNAF benefits for more than 3 years while attending school C. no one can receive AFDC benefits for more than 5 years over their lifetime D. states receiving ADFC benefits must impose work or school attendance requirements

A

19. Medicaid is a federal-state joint program enacted in 1965 that provides medical insurance for A. the near-poor and the low-income elderly. B. all those below the poverty line. C. low-income mothers, but not their spouses. D. the disabled and all of the above.

A

29. The greater inequality of wages can be viewed as a sign that A. demand for skilled labor is increasing faster than supply. B. supply for skilled labor is decreasing faster than demand. C. demand for skilled labor is decreasing faster than supply. D. supply for skilled labor is increasing faster than demand.

A

32. Lesley is a single mother with 2 children. She can earn $10 per hour and can work up to 1,800 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $18,000 per year. For every $1 of income she earns, her level of government support is reduced by $1. Lesley A. has no monetary incentive to work, though she may still choose to work B. has a monetary incentive to work and will maximize her income if she works for 300 hours C. has a monetary incentive to work and will maximize her income if she works for 600 hours D. has a monetary incentive to work and will maximize her income if she works for 900 hours

A

41. Paddy has lots of cousins. With a family reunion in the near future, Paddy decides to collect income information for himself and all his cousins. He obtains the following data points: $52,000, $22,000, $92,000, $8,000, $118,000, $62,000, $38,000, $14,000, $132,000, $46,000, $26,000, $96,000, $54,000, $110,000, $80,000. The share of income received by the highest quintile of this income distribution is , which is than that for the highest quintile of the U.S. income distribution in 2005. A. 37.9%, lower B. 39.7%, lower C. 37.9%, higher D. 39.7%, higher

A

44. Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will _________________________ employment and _________________________ wages for high-income workers. A. increase, decrease B. increase, increase C. decrease, decrease D. decrease, increase

A

48. For a negative externality, the _____________________ than the costs imposed on society as a whole. A. private costs of an action are less B. social costs of an action are less C. private benefits of an action are more

A

49. For a positive externality, _____________________ than the social benefits. A. private benefits of an action are more B. social benefits of an action are more C. private benefits of an action are less D. social costs of an action are less

A

59. If an alternative policy could encourage both _____________________, instead of _____________________, consumers would benefit. A. invention and competition; invention and monopoly B. invention and monopoly; invention and public funding C. invention and monopoly; invention and competition D. invention and competition; invention and public funding

A

65. If the government determines that the private sector does not have sufficient incentive to carry out research and development, which of the following is likely to be a reasonable response? A. government can use public funds to pay for the R&D activities directly. B. setting up government-run laboratories to ensure public benefits arise from public funding. C. direct all public R&D funding to colleges and universities to ensure public benefits arise from public funding. D. ensure that firms are not entering cooperative ventures to lessen competition, as well as b and c above.

A

71. There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is A. rivalrous and nonexcludable B. nonrivalrous and excludable C. rivalrous and excludable D. nonrivalrous and nonexcludable

A

73. Which of the following represents one of the methods that the government uses to promote technology? A. protection of intellectual property B. provision of a greater number of public goods C. maintenance of stable regulated financial markets D. creation of public colleges and universities

A

75. A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company's demand for financial capital for R&D of this cold drug, based on its expected rates of return from selling the cure. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars) 10% $220 9% $228 8% $238 7% $250 6% $264 5% $280 4% $298 If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest in R&D if it receives both the private and the social benefits of this investment. A. $308 B. $264 C. $250 D. $228

A

4. If income rise for low-income worker but doesn't change for high-income workers

A. poverty and inequality will falls

8. A government decided to phase out its antipoverty program support payments more slowly to help the near poor become self-sufficient. One criticism about this policy is likely to be

A. that this antipoverty program costs the government more money.

20. To address a common poverty trap problem for many low-paid Americans whose jobs pay enough that a family could lose its eligibility for _________________________, yet those jobs don't offer _________________________ either, some states guaranteed that children would not lose their coverage if their parents worked. A. food stamps; retirement benefits B. Medicaid; health insurance benefits C. Medicaid; drug insurance benefits

B

25. Every Lorenz curve diagram begins with a line received by everyone up to a certain_________________________. A. sloping down at a 45-degree angle B. sloping up at a 45-degree angle C. upward sloping U-shape

B

33. Bruce is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Bruce works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. With this policy in place, if Bruce works 600 hours, his income will be A. $3,600 B. $16,440 C. $15,000 D. $12,840

B

36. A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the bottom quintile of this income distribution is A. 3.5% B. 5.5% C. 7.5% D. 9.5%

B

46. If a small electric automobile manufacturer is able to gain the social return generated by its electric motor, its demand for financial capital would A. shift to the left. B. shift to the right. C. decrease substantially. D. increase slightly.

B

47. Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms A. derives more private benefits and provides less social benefit. B. provides more social benefits than it derives in private benefits. C. provides a marginal social benefit and derives a complete private benefit. D. provides a complete social benefit and derives a marginal private benefit.

B

56. One reason some economists doubt that patent protection encourages innovation is that economic studies show that inventors receive only _____________________ of the total economic value of their inventions in countries that _____________________. A. one-half to two-thirds; previously had few patents B. one-third to one-half; already had patents C. one-third to one-half; previously had no patents D. one-half to two-thirds; had existing patents

B

62. Which of the following legislation was enacted in 1998 to allow copyright to be extended from 50 to 70 years after an author's death? A. Thomas Edison Patent Restoration Act B. Sonny Bono Copyright Term Extension Act C. Sonny Bono Patent Restoration Act D. Thomas Edison Copyright Term Extension Act

B

67. One difficulty with direct government support of R&D is that it inevitably involves government decisions about_____________________. A. whether it can agree on the amount of social benefit conferred to private firms B. which of the vast number of proposed projects are worthwhile C. the location of the congressional district receiving the research funding. D. quantifying the social benefit conferred on a private firm by an R&D tax reduction.

B

70. Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is A. nonrivalrous and excludable B. rivalrous and nonexcludable C. nonrivalrous and nonexcludable D. rivalrous and excludable

B

Government developed a method called to assist the working poor through the tax system. The amount of the tax break _________________________ with the amount of income earned, _________________________. A. eligible income credit; decreases; and by age of child B. earned income credit; increases; up to a point C. eligible income credit; increases; and by age of child D. earned income credit; decreases; up to a point

B

7. A government program guarantees $18,000 in income, even for those wo\ho do not work at all. If the recipient earns income by working, then the $18,000 benefit is reduces by 50 cents for each $1 earned. Will this program, elliminate the poverty trap.

B. No, enacting a program may still reduce the incentive to work.

In the U.S, government support program that are focused specifically on the poor include which if the following/?

B. Welfare

18. The food stamp benefit A. is a state funded program started in 1984. B. does not contribute to the poverty trap from an economic viewpoint. C. has time limits and is not a complete disincentive to work. D. is reduced by $35 for every $100 earned and a and c above.

C

22. Measuring economic inequality involves comparing those with _________________________. A. high incomes and those below the poverty line B. high incomes and those with low incomes C. high incomes middle incomes, and low incomes D. high incomes and those near the poverty line

C

27. In the framework of a Lorenz curve, the final entry in the cumulative income column needs to be_________________________. A. total income B. cumulative income C. 100% D. 45%

C

37. A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the third quintile of this income distribution is A. 13.1% B. 13.9% C. 14.1% D. 14.9%

C

40. Paddy has lots of cousins. With a family reunion in the near future, Paddy decides to collect income information for himself and all his cousins. He obtains the following data points: $52,000, $22,000, $92,000, $8,000, $118,000, $62,000, $38,000, $14,000, $132,000, $46,000, $26,000, $96,000, $54,000, $110,000, $80,000. The share of income received by the bottom quintile of this income distribution is , which is _________________________ than that for the bottom quintile of the U.S. income distribution in 2005. A. 2.6%, lower B. 4.6%, lower C. 4.6%, higher D. 2.6%, higher

C

50. If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely A. have more incentive to innovate to the extent that the whole of society desires. B. invest significantly more in its research and development activities. C. have less incentive to innovate to the extent that the whole of society desires. D. demand more financial capital investment to expand its R&D activities.

C

51. Which of the following is the most appropriate response of public policy to a negative externality like pollution? A. modernize, update, and restore homes in run down neighborhoods to decrease littering B. find ways to account for the social costs of the negative externality in economic decisions C. encourage high standards of public education to increase innovation capability of youth D. assist the private party creating the negative externality to receive more social benefits

C

54. Once its patent application has been accepted, a firm is able to earn on its product, which _____________________. A. an increased rate of return for investors; raises doubts further R&D activities B. more profit; will allow it to recover the biggest slice of the social value created C. monopoly profits; offers an incentive for research and development to take place D. competitive profits; creates incentive for continuing innovative R&D projects

C

60. If the government altered its invention patent policy from a monopolistic policy to a competitive policy, then consumers A. would face higher prices and less quantity in the long-run. B. would face lower prices and less quantity in the short-run C. would benefit from the lower price and greater quantity sold. D. would benefit from lower prices due to increased public investments

C

64. Because of the legal protection for intellectual property, such as patents, a firm has a better chance of recouping the costs of research if it pursues A. basic technological research B. technologically innovative research C. applied technological research D. technologically positive research

C

66. The federal government funds_____________________ of the nation's basic research, much of which_____________________. A. more than half; carried out by private firms B. less than half; conducted in the labs of private firms C. about half; conducted at colleges and universities D. more than half; conducted a government run facilities

C

68. A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms A. a permanent monopoly over all their inventions that never expires. B. the option to fund all R&D projects through colleges or universities. C. a reduction in corporate taxes based on amount of R&D performed. D. assurance that antitrust authorities challenge cooperative R&D efforts.

C

69. Which of the following would most likely be recognized as a defining characteristic of a public good? A. the good is nonrivalrous item B. the good is nonexcludable item C. the good is both a and b above D. the good is a separate and identifiable item

C

74. A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes. The table below shows the company's demand for financial capital for R&D based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars) 10% $220 9% $228 8% $238 7% $250 6% $264 5% $280 4% $298 3% $308 If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest in R&D if it receives only the private benefits of this investment. A. $308 B. $264 C. $250 D. $228

C

76. Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. If Wisconsin does not clean the lake and Michigan does then the payoffs will be A. Wisconsin gains 200, Illinois gains 100 B. Wisconsin gains 200, Illinois loses 100 C. Wisconsin gains 300, Illinois loses 100 D. Wisconsin gains 300, Illinois gains 100

C

77. Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. In the absence of any agreement, the outcome of this game will be A. neither state cleaning the lake B. Wisconsin cleaning the lake, Illinois not cleaning the lake C. Wisconsin not cleaning the lake, Illinois cleaning the lake D. both states cleaning the lake

C

Lance is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Lance works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. When Lance works 1,200 hours, he receives _________________________ in government support and his total income is _________________________. A. $10,680, $15,000 B. $7,800, $15,000 C. $10,680, $17,880 D. $7,800, $17,880

C

From the Great Depression of the 1930s until 1996, the US's most visible antipoverty program was Aid to Family with Dependent Children, which provided cash payment to

C. All mother and children who below the poverty line

1. If a rise in incomes is the same proportion for both low-income and high-income workers

C. Then poverty will fall and inequality will remain unchanged

5. If the poverty trap were made even more difficult to overcome because a working mother will have extra expenses like transportation and child care that a nonworking will not face, then

C. her economic gains from working will be even smaller

16. Robert is a widower raising 5-year-old twin boys. In 2013, after the plant where he had worked for 10 years shut down, he was able to obtain part-time work that paid him $13,000.00 a year. He receives the earned income tax credit. If Robert receives a raise, so that he will earn $16,350, the earned income credit will be A. reduced by 21 cents per dollar. B. reduced by 25 cents per dollar. C. phased out completely. D. will not be reduced.

D

17. One reason that the welfare reform bill TANF worked as well as it did is that A. the EIC was greatly expanded in the early 1990s. B. the EIC was greatly expanded in the late 1980s. C. it was able to generate an increase in the returns to work for the poor. D. it's worth about $2,500 per family with children and all of the above.

D

21. Which of the following is a safety net that could provide a decent standard of living and/or incentives to work? A. government-subsidized school lunches and breakfasts B. Low Income Home Energy Assistance Program C. the Special Supplemental Food Program for WIC D. Supplemental Security Income and the above

D

26. The trick in graphing a Lorenz curve is that you must transform the shares of income_________________________, which are shown in the first column of numbers in the table, into_________________________, shown in the_________________________ column of numbers. A. for each distribution; total income; third B. for each distribution; total income; second C. for each specific quintile; cumulative income, third D. for each specific quintile; cumulative income; second

D

28. Why did inequality of household income increase in the United States in recent decades? A. growth of single-parent families at the top end of the income distribution B. higher-earner couples near the top end of the income distribution C. increase in earnings received by high-skilled labor relative to low-skilled labor D. demand for high-skilled labor at higher wages increased and b and c

D

30. If a society decides to reduce the level of economic inequality, which of the following sets of tools can it use? A. a tax imposed on the value of inheritances B. redistribution from those with high incomes to those with low incomes C. trying to assure that a ladder of opportunity is widely available D. the three mains sets of tools it can use include all of the above

D

31. Crystal is a single mother with 2 children. She can earn $10 per hour and can work up to 1,800 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $18,000 per year. For every $1 of income she earns, her level of government support is reduced by $1. Crystal's labor-leisure opportunity set A. has doubled B. is smaller with the government support program C. is not affected by the government support program D. is larger with the government support program

D

34. Tim is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Tim works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. This government policy provides a monetary incentive to work, because A. it pays the same amount, regardless of how much Tim works D. benefits are not phased out C. Tim receives a stipend regardless of whether he works or not D. Tim's income level increases the more he works

D

38. A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the lowest quintile of this income distribution is _________________________ than that for the bottom quintile of the U.S. income distribution in 2005. The share of income received by the highest quintile of this income distribution is _________________________ than that for the highest quintile of the U.S. income distribution in 2005. A. lower, lower B. lower, higher C. higher, higher D. higher, lower

D

43. Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will _________________________ wages in for low-income workers and _________________________ income inequality. A. increase, decrease B. increase, increase C. decrease, decrease D. decrease, increase

D

45. Suppose that the government implements a new policy that provides free skills training to all low-skilled workers, which makes them more productive and turns them into high-skilled workers. This will _________________________ the supply of low-skilled workers and _________________________ the supply of high-skilled workers. A. increase, decrease B. increase, increase C. decrease, decrease D. decrease, increase

D

52. Which of the following would some economists be likely to perceive as the most appropriate public policy response to a positive externality created by the development of a highly innovative new technology? A. not taking into account the negative externality associated with social benefit B. not taking into account the positive externality associated with social benefit C. have reasonable rates of return not based on a notion of unearned social benefits D. develop ways to provide a greater share of the social benefits to the innovator

D

53. Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? A. intellectual property rights B. government research and development grants C. cooperative research ventures between companies D. patents, copyrights, and each of the above

D

57. While the majority of economists acknowledge that intellectual property rights do provide a method for increasing the rate of return for inventors, some have suggested there are number of reasons to doubt whether patents provide A. sufficient benefits for society as a whole. B. completely appropriate benefits for the whole of society. C. completely appropriate incentives for innovation. D. sufficient incentives for innovation, as well as c.

D

58. When technology is advancing so quickly, even a patent from, say, two years ago may be _____________________, because _____________________. A. somewhat outdated; few firms are relying on the technology B. completely outdated; no firm is relying on that technology any longer C. irrelevant; inventors are only receiving a slice of the social value. D. irrelevant; not every idea can remain under patent protection forever.

D

61. Ideally, a patent should cover a long enough period of time for the inventor to _____________________, but that period should not be so long that it allows the inventor to _____________________. A. earn a hearty return; charge a high monopoly price permanently B. contribute to the social interest; only receive a slice of the social benefits C. earn a rate of return; prevent broad public access to classic works D. contribute to the social interest; prevent broad public access to inventions

D

63. Under current U.S. copyright legislation, works produced on a for-hire basis and owned by firms enjoy monopoly protection for A. 50 years after date of publication. B. 70 years after date of publication. C. 75 years from the date of publication. D. 95 years from the date of publication.

D

72. If the maintenance fees for a lighthouse are paid in full each year by charging port fees, then the lighthouse is A. rivalrous and excludable B. nonrivalrous and excludable C. rivalrous and nonexcludable D. nonrivalrous and nonexcludable

D

78. Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters A. both will gain 10 B. both will gain 0 C. both will lose 30 D. both will gain 30

D

There seems to be little evidence that poor families experienced _________________________ as a result of _________________________. A. a tax refund; having earned income B. a tax break; having earned income C. an increased standard of living; EIC D. a reduced standard of living; TANF

D

Under which of the following government programs would the federal government's welfare spending rise or fall depending on the number of poor people, and on how each state set its own welfare contribution? A. ADFC B. TANF C. TNAF D. AFDC

D

6. How does being caught in a poverty trap affect an individual's future job prospects?

D. it creates the outcome presented in both a and b

2. If the income level falls for low-income workers, but remain unchanged for high-income workers

D. then poverty willl not change, and inequality will rise