Micro Test 3 Kendall Kennedy
Raising the minimum wage always decreases workers surplus
False
The only possible cause of a gender wage gap is prejudice against hiring female workers
False
The united states is a member of the World trade organization, NAFTA and the EU
False
Which of the following would NOT reduce income inequality in the US
Higher sales taxes
Which is a valid counterargument to the call for higher tariffs to save US jobs?
Imports may eliminate some US jobs but they create others, so they may have little or no effect on employment
NAFTA (North American Free Trade Agreement)
Is an agreement between the US and Canada and Mexico, eliminating most tariffs, trade barriers, and import restrictions
In 2010, the Gini ratio for Colombia was 0.56. By 2012 it was 0.54. Based on the information, how did income inequality in Colombia change during this time?
It decreased
A price ceiling will move a market away from equilibrium only if
It is set below the equilibrium price
If west lafayette believed that underprivileged students could not afford to attend Purdue, would rent controls be an effective way to lower the cost of attendance?
Maybe. there is no clear indication of who would get the new, lower rents in west lafayette and who would be forced to lafayette
Purely competitive labor market
Numerous employers compete with one another in hiring a specific type of labor Each of many works with identical skills supplies that type of labor Individual employers and individual workers are wage takers because neither can control the market wage rate
The OPEC sets production quotas for its member nations production for oil. What does this do to the market for oil
Oil prices rise and quantity sold falls, and consumer surplus falls
Suppose the city of west lafayette believes rent is too high and decides to put a rent ceiling in effect for all apartments in the city. Which of the following would you NOT expect to happen?
People move from lafayette to West Lafayette and as a result the quantity of apartments rented in West Lafayette increases
If the US government raises the federal minimum wage from $7.25 per hour to $15 per hour, which of the following would definitely not happen?
Producer surplus increases
skill-biased technological change (SBTC) is a potential explanation for which of the following trends?
Productivity growing faster than wages in the US Rising inequality in the US and worldwide Increased enrollment in college, coming from higher wages paid to skill workers
if everyone pays a fixed dollar amount of tax, then the tax is a
Regressive tax
Depreciation
currency means that more units of it are needed to buy a single unit of some other currency
In a purely competitive industry, a decrease in a firms marginal revenue product for an economic resource could result from a
decrease in demand for the firms final product
substituion effect
decreases the demand for labor indicates a firm will purchase more of an input whose relative price has declined and conversely, use less of an input whose relative price has increased
Derive demand
demand for labor is derived from the demand for products that labor helps to produce
A more equal distribution of income in the US would result in greater total consumer satisfaction. This statement is based on the concept that
incomes are subject to diminishing marginal utility
Output effect
increases the demand for labor the firm will purchase more of one particular input when the price of the other input falls and less of that particular input when the price of the other input rises
The equality efficiency trade off suggest that
inefficiencies result when income is transferred from rich to poor
Government programs that pay benefits to those who are unable to earn income because of permanent disabilities or to those who have very low incomes are called
public assistance programs
The Temporary Assistance for Needy Families program
put a limit on receiving welfare payments and required able bodied adults to work after receiving assistance for two years
Lorenz Curve
quintile distribution of personal income
Sales and excise taxes are levied on retailers, but retailers add these taxes to the prices of their products. This illustrates the
shifting of taxes to consumers
In effect, tariffs on imports are
subsidies for domestic producers
appreciation
takes fewer units of it to buy a single unit of some other currency
A progressive tax is such that
tax rates are higher the greater one's income
Payroll taxes
taxes based on wages and salaries Finance SS and Medicare
sales and excise taxes
taxes on commodities or on purchases
A tax structure is called progressive when
the average tax rate decreases if income decreases
Which of the following is an example of statistical discrimination
An employer refuses to hire a woman, believing that female employees will work fewer hours than male employees
regressive tax
average rate declines as income increases
progressive tax
average rate increases as income increases
proportional tax
average rate remains the same regardless of the size of income
Selection bias
causes us to overstate the returns to education
MRP
change in the total revenue resulting from the use of each additional unit of labor
If demand for a product is perfectly elastic and supply is upsloping, a $1 excise tax per unit on supplier will
not raise price at all
Gini ratio
numerical measure of the overall dispersion of income
Government programs that replace earnings lost when people retire or are temporarily unemployed would be considered to be
part of social insurance programs
Elasticity of labor demand
percentage change in labor quantity demanded Divided by percentage change in wage rate
The equality efficiency trade off refers to
possible conflicts between the goals of economic efficiency and greater income equality
If indiana increases tax on cigarettes by $2 per pack, which of the following would definitely occur?
producer surplus, consumer surplus, and total surplus all decrease
The EU
Abolished tariffs and import quotas on most goods traded between member nations Relaxed immigration restrictions between member nations Is a free trade zone between many, but not all, countries in Europe
Now assume in the market for cigarettes demand is perfectly inelastic and supply is perfectly elastic. What can we say about the tax incidence for a $2 per pack cigarette pack?
Consumers pay 100% of the tax
In general, a price floor imposed above the equilibrium price results in which of the following?
Deadweight loss
A segregated workforce is the result of which model of discrimination
Taste for discrimination/prejudice
Which of the following accurately describes the Lorenz curve?
The Lorenz curve is a bow shaped curve showing the distribution of income among households in the economy
What is deadweight loss?
The decrease in total surplus as a result of an inefficient level of production
Why is the US Gini ratio increasing over time, while the world's Gini ratio is decreasing over time?
The global Gini ratio is representing the fact that large countries are developing and catching up to the US and western europe
Marginal tax rate
The rate at which the tax is paid on each additional unit on taxable income
If the government imposes a tax in a market where supply is perfectly inelastic, what is the resulting deadweight loss?
There is no deadweight loss
A binding rent ceiling will always reduce producer surplus, but may increase consumer surplus
True
If two countries specialize in their comparative advantage and trade, they can both consume outside their individual production possibilities frontiers
True
Mississippi has a Gini ratio of 0.48. Louisiana has a Gini ratio of 0.50. This means that Louisiana has a greater inequality than Mississippi
True
Using income as the tax base, which of the following best illustrates a regressive tax
a 7 percent general sales tax
Monopsony
a market structure in which there is only a single buyer
The basic economic argument for greater income equality is that
a more equal distribution of a given amount of income will increase the total utility of consumers
MRC
amount that each additional unit of labor adds to the firms total cost
Tariff
excise taxes on imported goods
Government purchases
exhaustive; products purchased directly absorb resources and are part of the domestic output
European Union
free trade zones, 28 nations except US
export subsidies
government payments to domestic producers of export goods
Medicaid
helps finance the medical expenses of individuals participating in the SSI and the TANF programs
Exclusive unionism
higher wage rates
corporate income tax
is levied on a corporations profit the difference between its total revenue and its total expenses
The marginal revenue product of labor in a competitive market decreases as a firm increases the quantity of labor used because of the
law of diminishing returns
Personal income tax
levied on taxable income on households and unincorporated businesses.
Import quotas
limits on the quantities or total value of specific items that may be imported
The greater the degree of inequality in the size distribution of income, the more bowed will be the Lorenz curve toward the
lower right hand corner
Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the
marginal revenue product of the third worker is $14
Human capital
models say that college increases skills, and those skills increase productivity
Signaling
models say that college resolves information problems, and helps sort smart people into better jobs
Transfer payments
nonexhaustive, they do not directly absorb resources or create output
In a pure competition, a profit maximizing firm will equate the marginal revenue product of labor with the
wage rate
A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that
wage rates and labor productivity are directly related
The World Trade Organization
was established to resolve disputes arising under world trade rules
The incidence of a tax pertains to
who actually bears the burden of a tax