Payton Economics

If Costa Rica is able to produce 50,000 pounds of bananas a day, while Nicaragua can produce 30,000 pounds of bananas a day, which statement must be true? A) Costa Rica has an absolute advantage over Nicaragua in banana production. B) Costa Rica has a comparative advantage over Nicaragua in banana production. C) Costa Rica has both an absolute advantage and comparative advantage over Nicaragua in banana production. D) Costa Rica does not necessarily have an absolute advantage nor a comparative advantage over Nicaragua in banana production.

A) Costa Rica has an absolute advantage over Nicaragua in banana production.

Which statement describes a public good? A) It is nonrival in consumption and nonexcludable. B) It is rival in consumption and excludable. C) It is nonrival in consumption and excludable. D) It is rival in consumption and nonexcludable.

A) It is nonrival in consumption and nonexcludable.

When people place a high value on ensuring a cleaner environment for future generations, which statement is true? A) The future is discounted at a relatively low rate B) The present value of future environmental benefits is lower C) The present value of future environmental benefits would equal the discount rate D) Environmental damage suffered in the future would be of less concern today

A) The future is discounted at a relatively low rate

Which policy would a Rawlsian economist not support? A) a reduction in capital gains taxes benefiting high-income earners B) an increase in the top income tax bracket C) an increase in government spending programs aimed at the poor D) a more progressive tax structure

A) a reduction in capital gains taxes benefiting high-income earners

Suppose Canada forms a free-trade agreement with the Netherlands and increases the quantity of tulips it imports. Canadian tulip consumers will be _____ and Canadian tulip producers will be _____. A) better off; worse off B) better off; better off C) worse off; better off D) worse off; worse off

A) better off; worse off

During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good? A) core user B) casual user C) late adapter D) market leader

A) core user

Which of these is a pure public good? A) environmental protection B) a public park C) I-95 D) flu shots

A) environmental protection

Unlike positive externalities from physical goods, network externalities affect: A) existing and potential users. B) only potential users. C) only existing users. D) existing firms.

A) existing and potential users.

Countries can gain from trade as long as the differences in the prices of a trade good between two countries is: A) greater than the cost of transporting it between the countries. B) equal to the cost of transporting it between the countries. C) less than the cost of transporting it between the countries. D) none of these is true.

A) greater than the cost of transporting it between the countries.

The argument that industries should be temporarily protected by tariffs or quotas to allow firms to develop a competitive product is called the: A) infant industry argument. B) competitive relief argument. C) countervailing duty argument. D) antidumping argument.

A) infant industry argument.

Global climate change is described as a public good because: A) it is subjected to the free rider problem. B) it is relatively easy to encourage countries to pay their share of pollution abatement costs. C) tradable emissions permits are sold worldwide. D) large developed countries create most of the world's greenhouse gases.

A) it is subjected to the free rider problem.

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then: A) production of the good is greater than the socially efficient amount. B) production of the good is less than the socially efficient amount. C) production of the good is efficient as long as marginal private costs equal marginal social benefit. D) production of the good is efficient as long as marginal private costs exceed marginal social benefit.

A) production of the good is greater than the socially efficient amount.

Which of these is an example of interconnection? A) sending a package to another country using the U.S. Postal Service B) sharing patent technology between iPhone and Galaxy C) national defense D) a public beach

A) sending a package to another country using the U.S. Postal Service

AT&T offers high-speed Internet service to new subscribers for $29.99 per month for the first six months and then raises the price to $49.99 per month. This offer is an example of a(n): A) teaser strategy. B) switching cost. C) lock-in strategy. D) intertemporal pricing strategy.

A) teaser strategy.

Which of these is not a common cause of income inequality? A) the choice of city where one lives B) differences in human capital C) economic labor discrimination D) number of earners in a household

A) the choice of city where one lives

Facebook experienced a _____ when a large increase in subscribers made the network more appealing, encouraging even more members to join the network. A) virtuous cycle B) social cycle C) growth cycle D) vicious cycle

A) virtuous cycle

If the poverty threshold for a family of four is $24,000 and the Shoenfelds earned $21,000, their income deficit is _____ and their ratio of income to poverty is _____. A) $3,000; 1.14 B) $3,000; 0.875 C) $45,000; 1.14 D) $45,000; 0.875

B) $3,000; 0.875

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands? A) Demand and supply both shift left. B) Demand and supply both shift right. C) Demand shifts right and supply shifts left. D) Demand shifts left and supply shifts right.

B) Demand and supply both shift right.

Which statement is not a common argument against free trade? A) It causes jobs to be lost to foreign competition. B) It causes prices of imported goods to rise. C) It prevents infant industries from becoming competitive in world markets. D) It causes environmental damage due to fewer regulations abroad.

B) It causes prices of imported goods to rise.

Which statement would describe a network effect? A) A Black Friday sale encourages you to buy a new TV. B) Your workout partner cancels her gym membership, so you end up doing so as well. C) You use your holiday bonus to pay off bills. D) A parade comes through town, disrupting traffic all afternoon.

B) Your workout partner cancels her gym membership, so you end up doing so as well.

In order for someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of: A) a teaser strategy B) a switching cost C) bundling D) intertemporal pricing

B) a switching cost

Which of these is not a market-based policy to reduce pollution? A) carbon taxes B) carbon restrictions C) carbon tradable permits D) carbon credits

B) carbon restrictions

Paying $5 on Amazon to stream a movie is an example of a service that is: A) excludable and rival in consumption. B) excludable and nonrival in consumption. C) nonexcludable and rival in consumption. D) nonexcludable and nonrival in consumption.

B) excludable and nonrival in consumption.

When one makes a call to someone using a different cellular provider, what must occur between the two networks in order for the call to be connected? A) a network externality B) interconnection C) free-ridership D) tacit cooperation

B) interconnection

Your grandma finally buys an iPad only after being convinced of the benefits of using it to communicate with the rest of her family who already have iPads. Her demand for an iPad would be represented: A) on the upward-sloping portion of the network demand curve. B) on the downward-sloping portion of the network demand curve. C) at the peak of the network demand curve. D) nowhere on the network demand curve because it doesn't apply to her.

B) on the downward-sloping portion of the network demand curve.

As more people rely on a travel app to book reservations, the quality of the app improves, encouraging more people to use the app. This type of network is best described as a _____ network. A) physical B) virtual C) external D) internal

B) virtual

When an activity has a private marginal benefit of D1, a private marginal cost of S1, and a positive externality, which curve best represents the social marginal benefit? A) D0 B) D2 C) S0 D) S2

B)D2

In international trade, when we say that Brazil is "dumping" in the United States, this is indicating that: A) Brazil is profiting from tariffs placed on U.S. goods. B) Brazil's firms can produce goods at lower cost than U.S. firms can. C) Brazil's firms are selling goods at prices below what they charge in Brazil or below their production costs. D) Brazil's firms are selling goods at prices below the cost by which U.S. firms can produce that same good.

C) Brazil's firms are selling goods at prices below what they charge in Brazil or below their production costs.

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is true? A) Flu shots create an external cost. B) If flu shots were not free, the number of people getting them would be larger than what is socially optimal. C) The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking. D) The externality is created by producers for producers

C) The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking.

Which statement is most likely to be a true one? A) A person with a high income will have high wealth. B) A person will typically maximize their income right before he or she retires at around age 65. C) Wages are the most common form of income in the U.S. economy. D) The richest quintile of Americans control about three times as much wealth as the lowest quintile.

C) Wages are the most common form of income in the U.S. economy.

Poverty is least likely to be eliminated when using which form of measurement? A) an absolute poverty threshold B) the World Bank's $2 per day measure C) a relative poverty threshold D) a fixed annual dollar amount measure

C) a relative poverty threshold

A tariff of 15% on imported artwork is an example of a(n): A) specific tariff. B) compound tariff. C) ad valorem tariff. D) quota.

C) ad valorem tariff.

The speed by which a network good can enter into a virtuous or vicious cycle is generally _____ that of a non-network good. A) about the same as B) slower than C) faster than D) unrelated to

C) faster than

If a government creates a market of tradable permits for greenhouse gases, the price of these permits would _____ if environmentalists buy up permits to reduce the total amount of greenhouse gases. A) decrease B) not change C) increase D) become worthless

C) increase

The free rider problem typically results in a production of output that is: A) equal to the social optimal quantity. B) greater than the social optimal quantity. C) less than the social optimal quantity. D) undetermined without further information.

C) less than the social optimal quantity.

If the poverty threshold for a household of 3 persons is $20,000 and the Shermans earn $22,000, they would be classified as: A) severely poor. B) poor. C) near poor. D) not poor.

C) near poor

The value of cloud storage has risen as more people use it. This effect is best described as a: A) substitution effect. B) revenue effect. C) network effect. D) income effect.

C) network effect.

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but priced at $199 per night the rest of the year. This type of pricing is called: A) teaser pricing. B) bundling. C) peak-load pricing. D) lock-in pricing.

C) peak-load pricing.

Movies are typically only shown in theaters for months before they are released on online streaming sites at a lower price. This is an example of: A) a teaser strategy. B) a switching cost. C) a lock-in strategy. D) intertemporal pricing.

D) intertemporal pricing.

Which Gini coefficient corresponds to a Lorenz curve that is bowed furthest away from the 45-degree line? A) 0.00 B) 0.35 C) 0.50 D) 0.71

D) 0.71

Suppose that the five residents of a small village have the following incomes: $10,000; $20,000; $30,000; $40,000; $50,000. The proportion of total income earned by the lowest two quintiles is _____ and the proportion earned by the highest two quintiles is _____. A) 30%; 90% B) 20%; 100% C) 30%; 40% D) 20%; 60%

D) 20%; 60%

Which of these typically occurs when a new tariff is imposed on the import of foreign- made steel as a result of a national defense argument? A) Consumers will pay lower prices while deadweight loss is reduced. B) Consumers will pay lower prices while deadweight loss is created. C) Consumers will pay higher prices while deadweight loss is reduced. D) Consumers will pay higher prices while deadweight loss is created.

D) Consumers will pay higher prices while deadweight loss is created.

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries? A) Wages offered by foreign companies are generally higher than wages offered by local companies. B) Foreign companies generally pay lower wages in developing countries than they do back home. C) Working conditions, although often less pleasant than in developed nations, are generally improved with foreign investment. D) Foreign companies tend to reduce the overall number of jobs available in developing countries.

D) Foreign companies tend to reduce the overall number of jobs available in developing countries.

Which of these is nonexcludable but rival? A) a pure public good B) a pure private good C) a public good with exclusion D) a common property resource

D) a common property resource

Most new smartphones come pre-installed with a selection of free apps, including a weather app, health app, and news app. Which marketing strategy is the phone provider using? A) a teaser strategy B) versioning C) intertemporal pricing D) bundling

D) bundling

Income redistribution efforts such as progressive taxation and transfer payments will typically _____ income inequality, which means that the Gini coefficient will _____. A) increase; rise B) increase; fall C) decrease; rise D) decrease; fall

D) decrease; fall

The poverty thresholds in the United States are largely based on an adjusted measure of prices of which category or categories of goods? A) housing and transportation B) housing C) food and health care D) food

D) food

In order to ensure that no firm has exclusive access to a set of customers, governments try to promote: A) industry standards. B) essential facility. C) bundling. D) interconnection.

D) interconnection.

If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity. A) greater; less B) less; less C) greater; greater D) less; greater

D) less; greater

A country in autarky would consume at a point _____ its PPF, while a country that engages in trade would consume at a point _____ its PPF. A) to the left of; to the right of B) to the left of; on C) on; to the left of D) on; to the right of

D) on; to the right of

What type of government policy is generally used when a positive externality is present? A) taxes B) restrictions on consumption C) restrictions on production D) subsidies

D) subsidies

When a new gym opens up in town with the capacity of serving 500 new members, the supply curve for this network would be: A) upward-sloping. B) downward-sloping. C) horizontal. D) vertical.

D) vertical

In which situation would regulation be most likely to be effective? A) when industry standards allow different networks to coexist B) when several large network firms share the market C) when entry into the market is relatively free of major barriers D) when a dominant network firm can prevent interconnection with smaller firms

D) when a dominant network firm can prevent interconnection with smaller firms