ap econ unit 4

If the regulated price for a natural monopoly is set where the marginal cost curve intersects the demand curve, the firm will certainly a. shut down in the long run b. shut down in the short run c. produce the quantity at which marginal revenue equals average total cost d. increase its output e. make a profit

a

if a country has a perfectly equal distribution of income, its Gini coefficient equals a. 0 b. 1 c. 10 d. 50 e. 100

a

marginal social benefit equals marginal private benefit plus a. marginal external benefit b. marginal private cost c. total external benefit d. total external cost e. marginal social cost

a

market failure caused by a positive externality will involve a. deadweight loss b. overconsumption c. poollution d. marginal external costs e. taxation

a

one example of a source of external benefits is a. technology spillover b. traffic congestion c. pollution d. subsidies for polluters e. taxes on environmental conservation

a

the inflexibility of which of the following tools makes it inefficient even when correctly applied? a. environmental standards b. emission taxes c. tradable emissions permits d. Coasian barganing e. cap and trade programs

a

the marginal social cost (MSC) and the marginal external cost (MEC) at the socially optimal equilibrium would be a. $200 $200 b. $100 $0 c. $200 $100 d. $100 $200 e. $200 $0

a

when colleges use grade point averages to make admissions decisions, they are employing which strategy? a. signaling b. screening c. profit maximization d. marginal analysis e. adverse selection

b

which of the following welfare state programs provides in-kind benefits? a. temporary assistance for needy families b. medicaid c. the earned income tax credit d. social security e. supplemental security income

b

the poverty rate is a. the total number of people who earn less than $23,850 annually b. the percentage of households that file for bankruptcy in a year c. the percentage of the population that earns less than the poverty threshold d. the percentage of the labor force that is unemployed at some point during a year e. the percentage of the population that is in the lowest income quintile

c

which of the following is true in the case of a positive externality? a. MSC > MSB b. MPB > MSC c. MSB > MPB d. MPB > MSB e. MSC > MPC

c

without government intervention, a monopolist will produce ___ and charge ___ a. Q3 P3 b. Q2 P4 c. Q2 P1 d. Q1 P3 e. Q1 P2

c

a common resource is a. excludable and nonrival in consumption b. excludable and rival in consumption c. nonexcludable and nonrival in consumption d. nonexcludable and rival in consumption e. a public good that is excludable

d

an efficient Pigouvian subsidy for a good is set equal to the good's a. external cost b. marginal social benefit c. marginal external cost d. marginal external benefit e. price at which MSC = MSB

d

which of the following is accurate for goods provided by markets a. artificially scarce goods are likely to be produced in inefficiently large quantities b. common resources are likely to suffer from inefficiently low consumption levels c. private goods that are popular are likely to suffer from overuse problems d. public goods are likely to suffer from inefficiently low production e. artificially scarce goods are likely to suffer from the free-rider problem

d

which of the following welfare state programs is not means-tested? a. temporary assistance for needy families (TANF) b. medicaid c. the earned income tax credit d. social security e. supplemental security income

d

a drawback of tradable emissions permits is that a. there is no incentive to further reduce emissions if the firm has enough permits to cover its current pollution level b. the firm with the highest cost of reducing emissions typically ends up having to reduce emissions the most c. every firm must reduce emissions by the same amount d. permits do not encourage the use of emissions-reducing technology e. governments may provide too many or too few permits

e

which of the following curves is the same as the marginal social cost curve at every level of output in a perfectly competitive market with no external costs a. marginal social benefit b. marginal external cost c. marginal external benefit d. marginal private benefit e. supply

e

based on economic analysis, why do so many people decide not to vote? a. the benefits of voting are nonexcludable b. the costs of voting are nonrival c. the benefits of voting are rival d. the costs of voting are excludable e. the benefits of voting outweigh the costs

a

due to adverse selection, a. mutually beneficial trades go unexploited b. people buy lemons rather than other fruit c. sick people buy less insurance d. private information is available to all e. public information is available to no one

a

moral hazard is the result of a. asymmetric information b. signaling c. toxic waste d. adverse selection e. public information

a

the socially optimal level of pollution is a. less than that created by the market, but not zero b. more than that created by the market c. whatever the market creates d. determined by firms e. zero

a

the used car market has been described as the "market for lemons" because in that market, a. information problems make the owners of flawed cars more likely to sell them than the owners of good cars b. moral hazard causes buyers of used cars to drive recklessly and damage cars c. buyers often get a sour look on their faces when they hear the asking price for a car d. the documents used to transfer the title to a car are traditionally yellow, like a lemon e. used cars are often dented, like the skin of a lemon

a

when there are no external benefits, the demand curve is also which of the following curves? a. MSB b. MEB c. MPC d. MSC e. S

a

which of the following combinations correctly describes the changes since the 1970s in the poverty threshold and in the mean income as compared to the median income in the united states poverty threshold mean income compared to median a. not adjusted for the standard of living rose faster b. adjusted for the cost of living declined c. adjusted for the standard of living declined d. not adjusted for the cost of living rose faster e. not adjusted for the standard of living remained the same

a

which of the following is a source of negative externalities? a. loud conversations in a library b. smokestack scrubbers c. a beautiful view d. national defense e. a decision to purchase dressy but uncomfortable shoes

a

which of the following is true of the US poverty rate? a. it fell in the 1960s b. there has been a clear upward trend since 1973 c. it was lower in 2016 than in 1973 d. it has remained unchanged since the mid 1970s e. it has been steadily decreasing since 1959

a

which of the following types of goods are always nonrival in consumption? a. public goods b. private goods c. common resources d. inferior goods e. goods provided by the government

a

a Gini coefficient of 0.5 would indicate a. that the richest 50% of the population receives all of the income b. more income inequality than a Gini coefficient of 0.4 c. that a country has perfect income equality d. that a country has perfect income inequality e. that the poorest 10% of the population receives half as much income as the richest 10% of the population

b

a natural monopoly exists when, over the relevant range, increasing the output level results in a lower a. total cost b. average total cost c. average variable cost d. average fixed cost e. marginal cost

b

a pigouvian subsidy is appropriate in a market with a significant a. marginal external cost b. marginal external benefit c. difference between the marginal private cost and the marginal social cost d. difference between the equilibrium price and the marginal social cost e. Pigouvian tax

b

in 2016, the poorest 20% of households received approximately what percent of total income? a. 1% b. 3% c. 7% d. 10% e. 17%

b

markets for public goods generally experience problems with a. overconsumption b. free riders c. consumers fighting over the use of products d. market power e. particularly high marginal external costs

b

suppose the industry is currently producing the quantity Q2 and the price is $100. if a Pigouvian tax equal to the marginal external is imposed, what will happen to society's total surplus and the deadweight loss in the industry? a. decrease stay the same b. increase decrease c. increase increase d. decrease decrease e. increase stay the same

b

the Coase theorem asserts that, under the right circumstances, inefficiencies created by externalities can be dealt with through a. lawsuits b. private bargaining c. vigilante actions d. government policies e. mediation

b

the free-rider problem occurs in the case of a. private goods b. common resources c. artificially scarce goods d. motorcycles e. all of the above

b

the marginal social benefit curve for a public good is the a. horizontal sum of the marginal private benefit curves of all consumers b. vertical sum of the marginal private benefit curves of all consumers c. horizontal sum of the marginal external benefit curves of all consumers d. vertical sum of the marginal external benefit curves of all consumers e. demand curve of the consumer who values the public good the most

b

which of the following is the most common policy approach to a natural monopoly a. public ownership b. price regulation c. quantity regulation d. quality regulation e. a breakup of the monopoly into smaller firms

b

which of the following statements regarding the passage of laws intended to promote competition in the marketplace is true? a. the Sherman Antitrust Act was intended to clarify the Clayton Act b. the Clayton Antitrust Act made price discrimination illegal c. the Federal Trade Commission Act made anticompetitive mergers illegal d. the Sherman Antitrust Act outlawed price fixing e. the Clayton Antitrust act made it legal for two boards of directors to share a director in common

b

if external costs cause the socially optimal quantity to fall below the market quantity, the resulting deadweight loss is represented by the area between these two quantities that is a. above the MPC curve and below the MSC curve b. above the MSB curve and below the MPC curve c. above the MSB curve and below the MSC curve d. above the S curve and below the D curve e. above the MPC curve and below the MSB curve

c

programs designed to help only those with low incomes are called a. welfare programs b. in-kind programs c. means-tested programs d. income maintenance programs e. social programs

c

suppose the production of a smartphone imposes $10 worth of pollution costs on people unrelated to the sale or purchase of smartphones. this $10 is part of the smartphones' a. marginal private and marginal external cost b. marginal private cost and marginal social cost c. marginal external cost and marginal social cost d. marginal social cost but not marginal external cost e. marginal external cost but not marginal social cost

c

the lowest regulated price the government could expect this monopolist to maintain in the long run is a. P1 b. P2 c. P3 d. P4 e. P5

c

unlike other monopolies, a natural monopoly is characterized by a high a. marginal cost b. variable cost c. fixed cost d. marginal revenue e. price

c

when the production of a good creates negative externalities, which of the following leads to the socially optimal quantity of output a. a price ceiling set equal to the marginal external cost b. a price floor set equal to the marginal private cost c. a Pigouvian tax set equal to the marginal external cost d. a Pigouvian subsidy set equal to the marginal external cost e. average cost pricing

c

which of the following is an example of market failure a. most people can't buy as many pairs of shoes as they would like b. most stores can't sell as much merchandise as they would like c. fishing in many waterways brings the quantity of fish below its socially optimal level d. people typically pay more for a good than they would like to pay e. stores typically must charge a price that is less than they would like to charge

c

which of the following statements regarding a natural monopoly is accurate? a. the FTC will try to break up the natural monopoly because it is inefficient b. marginal cost pricing would lead to an efficient outcome and monopoly profits c. the cost of producing any given quantity of the good produced by the natural monopoly would increase if multiple firms produced it d. regulators require the natural monopoly to produce the quantity that equates marginal cost and marginal benefit e. the information required for average cost pricing is readily available to regulators

c

if everyone in equalville earns the same income, the lorenz curve for equalville is a. flat b. circular c. upward-sloping and downward-sloping d. straight and upward-sloping e. curved and upward-sloping

d

if everyone in the economy earned exactly the same income, the Lorenz curve would be a. vertical b. horizontal c. downward-sloping d. straight e. upward-sloping and then downward-sloping

d

inefficiencies created by externalities can be dealt with through a. government actions only b. private actions only c. market outcomes only d. either private or government actions e. neither private nor government actions

d

market provision of a public good will lead to a. the efficient quantity of the good and an inefficiently high price b. the efficient quantity of the good and the efficient price c. an inefficiently high quantity of the good and the efficient price d .an inefficiently low quantity of the good and an inefficiently high price e. an inefficiently high quantity of the good and an inefficiently low price

d

when external benefits exist, the marginal external benefit is the difference between the a. marginal external cost and the marginal private benefit b. marginal private benefit and the price c. supply and the demand d. marginal social benefit and the marginal private benefit e. marginal social cost and the marginal private cost

d

when the economy is producing the socially optimal amount of pollution, it is necessarily true that a. the marginal social benefit of pollution exceeds the marginal social cost b. the marginal external cost of pollution equals the marginal external benefit c. no pollution is being emitted d. the marginal social benefit of pollution equals the marginal social cost e. the marginal external cost of pollution is zero

d

when you join snapchat, the value of this social media platform increases for your friends who are already using snapchat. this is an example of a a. negative externality b. marginal external cost c. Pigouvian subsidy d. network externality e. technology spillover

d

which of the following is true about private information? a. everyone has access to it b. it has no value c. adverse selection arises when people take fewer precautions because they are insured d. it can distort economic decisions e. moral hazard arises when sellers have private information about the quality of goods

d

which of the following makes it more likely that private solutions to externality problems will succeed? a. high transaction costs b. high prices for legal services c. delays in the bargaining process d. a small number of affected parties e. loosely defined legal rights

d

if one person received all of the income in an economy, the Lorenz curve would a. rise steadily until the middle of the graph, and then fall b. be upward-sloping c. be downward-sloping d. be vertical on the left side of the graph e. lie along the horizontal axis except at the far right side of the graph

e

implementing which of the following for low-income workers would be an effective way to prevent means-tested antipoverty programs from creating a disincentive to work? a. a high marginal tax rate b. a high average tax rate c. a program that eliminates benefits for those who work d. a notch-based program e. a low marginal tax rate

e

public goods are provided through which of the following means? a. the government only b. voluntary contributions only c. self-interested individuals and firms only d. the government and voluntary contributions only e. the government, voluntary contributions, and self-interested individuals and firms

e

the Pineland community has a public forest where citizens can harvest (cut down) as many trees as they desire. which of the following would most likely worsen the overuse of this common resource? a. a Pigouvian tax on each tree harvested b. a government regulation that bans chainsaws in the forest c. tradable licenses for tree harvesting d. the assignment of property rights to the forest e. a subsidy for tree harvesting

e

the Sherman Antitrust Act of 1890 sought to do which of the following? a. break up existing monopolies b. prevent the creation of new monopolies c. stop monopoly behavior engaged in by trusts d. respond to the increasing power of trusts in the economy e. all of the above

e

which of the following characteristics apply to private goods and common resources a. nonrival in consumption nonexcludable b. rival in consumption excludable c. nonexcludable rival in consumption d. excludable nonrival in consumption e. rival in consumption nonexcludable

e

which of the following conditions contributes to the resolution of externality problems as suggested by the Coase theorem? a. it is awkward for the parties involved to approach each other about the problem b. there is ambiguity about the legal rights of the parties involved c. there are many parties involved d. transaction costs are high e. the legal rights of the parties involved are clearly defined

e

which of the following policy changes would be the most likely to provide a gain in efficiency while achieving the same goal of reducing pollution? a. environmental standards instead of emissions taxes b. Pigouvian taxes instead of tradable emissions permits c. emissions taxes instead of Pigouvian taxes d. environmental standards instead of in-kind benefits e. tradable emissions permits instead of environmental standards

e

which of the following statements about poverty is true? a. the poverty rate has steadily declined over the past two decades b. most governments seek an increase in the Gini coefficient c. married couples are more likely to be poor than single individuals d. bright students from poor families are almost as likely to finish college as bright students from rich families e. high-quality preschool education helps to end the poverty cycle

e