ECO 201 final
At Maggie's bakery she bakes cupcakes (C) and pies (P). The following equation represents her production possibility frontier: C=20-4P For Maggie, the opportunity cost of producing 1 cupcake is 4 pies.
False
Consider the following statement: "The Kentucky Legislature should legalize the recreational use of marijuana in the state." In class we talked about the distinction between positive and negative normative statements. This statement is an example of a positive economic statement.
False
Consider the two labor markets in Minnesota that are both currently in equilibrium at a wage of $10. Suppose that the state of Minnesota decides to increase their minimum wage to $15 per hour. Labor market A is likely to experience more unemployment than labor market B from a $15 minimum wage.
False
Faith lives in a country with the following marginal tax rate schedule: If Faith earns $90,000 this year and you were asked to calculate her total tax liability, you would do this by multiplying $90,000 x 0.30
False
Hurricane Ida caused a significant damage on the Gulf Coast. This is likely caused the production possibility frontier in that part of the country to shift outward (away from the origin on both axis)
False
In class, we said that if a high school soccer team wants to increase revenue from ticket sales to the games, they should charge a low price to students and a higher price to adults who are less flexible. This is because demand curve A represents student demand and demand curve B represents adult demand.
False
Price floors are generally intended to protect consumers and price ceilings are intended to protect producers.
False
The law of supply states that an increase in the price of a product will lead to a decrease in the quantity of the product supplied, ceteris paribus.
False
The primary economic reason that call centers for various US businesses are outsourced to India is because people in India speak in a more soothing way and are better able to deal with angry customers on the phone.
False
With the goal of promoting positive externalities from the vaccine, Greg Mankiw proposes a Pigouvian subsidy of $1,000 for people who get the covid-19 vaccine. We would say that is a command-and-control policy.
False
Cheese must "age" properly to achieve the desired taste and texture before it is taken to market to be sold. Cottage cheese takes one month to age properly and sharp cheddar cheese takes 5 years to age. Supply curve A is the supply of sharp cheddar cheese and supply curve B is the supply of cottage cheese.
True
Consider the following demand and supply schedules. If the price in this market is $150 there will be pressure for the market price to rise.
True
George is currently enrolled in a physics course and he purchased a $50 lab manual for the course. He has written in the manual, and it cannot be returned to the bookstore. George just got his first test back and he scored a 20%. In trying to decide if he should drop the course, an economist would say that the $50 he spent on the lab manual should NOT matter in making his decision.
True
If the price of a good increases by 10% and as a result the quantity of the goof demand falls by 15%, we would say this response is elastic.
True
In thinking about the economic role of government we break activity down into primary functions: protective and productive.
True
Over the past few decades, income inequality in the US has been increasing
True
The demand for regular milk, which many consumers view as a necessity, will be LESS elastic than the demand for chocolate milk, which many consumers view as a luxury.
True
The law of demand implies that demand curves are downward sloping (i.e. negatively sloped)
True
When a state legalizes the use of marijuana, the demand in that state typically becomes MORE ELASTIC.
True
When full information about the harmful health consequences of fast food is NOT available to consumers (i.e. asymmetric information is present) MORE fast food will be produced and consumed than is socially optimal.
True
Justice INC. is a company that produces phones and cars. Assuming, that the graphs below depict their PPF for producing cell phones and cars with PPF 0 being the initial PPF, which graph shows the likely impact if their research team discovers a new and better technology for making cars while at the same time, political unrest in a country where they obtain raw materials for making phones has made it difficult to get these raw materials? a. b. c. d.
a.
The per unit economic burden (actual incidence) of the tax to PRODUCERS is... a. $1 b. $2 c. $3 d. $4 e. $18
a. $1
A sociology professor at UK is conducting a study of how people's behavior has changed because of the pandemic. She needs tests subjects for her study and she posts an advertisement for student participants online. You ask some of your classmates if they plan to participate in the study to pick up some extra money. Madeline says she will participate if they pay at least $30, Shelby says she will participate if they pay at least $50, Austin says he will participate if they pay at least $80, and Dylan says he will participate if they pay at least $65. Suppose that the professor offers to pay $70 to anyone willing to participate in the study. What is the total amount of producer surplus that will result based on this information from your 4 friends? a. $65 b $75 c. $145 d. $210 e. $225
a. $65
The table below shows the demand schedule for student workers and the supply schedule of student workers on a university campus. If the university imposes a minimum wage on campus of $12 per hour for student workers, then... a. 150 student workers will be unemployed on campus b. 150 student jobs will not be filled by student workers c. there will be a surplus of 450 student workers d. 400 student workers will be employed at a wage of $11 per hour
a. 150 student workers will be unemployed on campus
According to the Law of Comparative Advantage, if Brazil and Ukraine were to specialize and trade with each other a. Brazil should produce corn and Ukraine should produce soybeans b. Ukraine should produce corn and Brazil should produce soybeans c. Brazil should produce corn and soybeans and Ukraine should try to produce something else d. Ukraine should produce corn and soybeans and Brazil should try to produce something else
a. Brazil should produce corn and Ukraine should produce soybeans
If we write the linear equation that represents the PPF for UKRAINE and we treat corn as the Y variable and soybeans as the X variable, then the equation would be a. C=8-1/2S b. C=8-2S c. C=16-1/2S d. C=16-2S
a. C=8-1/2S
Which one of the following is NOT true with regard to taxes? a. Kentucky is a tobacco producing state and has the lowest cigarette tax of all the states in the US b. gasoline taxes are assessed at the local, state, and federal levels c. state cigarette taxes and gasoline taxes sometimes lead people to drive across state lines to buy cigarettes and gasoline in a neighboring state
a. Kentucky is a tobacco producing state and has the lowest cigarette tax of all the states in the US
Which of the following graphs most accurately depicts the supply of seats at Rupp Arena? a. Sa b. Sb c. Sc d. Sd
a. Sa
The graph below is a supply and demand framework for the daily market for donuts from Sal's Bakery. Use the graph to answer the next two questions. If the government imposes a price CEILING of $1.50 in this market then there will be... a. a shortage of 20 donuts b. a surplus of 60 donuts c. a surplus of 20 donuts d. a shortage of 80 donuts e. no shortage or surplus
a. a shortage of 20 donuts
At a price of $24, the market for Backyard Honey is experiencing... a. a surplus of 28 jars of honey b. a shortage of 28 jars of honey c. a surplus of 12 jars of honey d. a shortage of 12 jars of honey e. no surplus or shortage
a. a surplus of 28 jars of honey
A liberal arts college in New Hampshire recently determined that the price elasticity of demand for attending their school is |Ed|=1.33 The administration is considering a tuition change to help balance their budget. The best revenue-maximizing strategy is to... a. decrease tuition, which should boost enrollment and increase revenue b. leave tuition as it is, changing tuition would not help the budget c. increase tuition, which would generate more revenue d. do nothing based on this information. Information regarding elasticity is not relevant when making decisions that affect nothing
a. decrease tuition, which should boost enrollment and increase revenue
Consider the market for Craft Hard Cider produced in Lexington. Two things have happened in this market. 1.) Apples are a key input in cider production and a poor apple crop has made apples much more expensive 2.) Income levels in Lexington have increased and hard cider is a normal good As a result of these two changes occurring simultaneously, what is the overall impact on the equilibrium price of hard cider in Lexington? a. equilibrium price will definitely increase b. equilibrium price will definitely decrease c. the overall impact on equilibrium price is uncertain
a. equilibrium price will definitely increase
One thing that economists do to help them understand how the real world works is to a. make assumptions b. ignore the past c. try to capture every aspect of the real world in the models they construct d. conduct normative analysis e. rely upon the invisible foot
a. make assumptions
Based on the graph of the PPF above, we know that... a. some of the resources used in production are better suited for recycling plastic and others are better suited for recycling glass b. all of the inputs are equally suitable for recycling both glass and plastic bottles c. as the recycling center processes more and more plastic bottles, the opportunity cost in terms of foregone glass bottle recycling decreases d. the opportunity cost tradeoff between recycling glass bottles and plastic bottles is constant
a. some of the resources used in production are better suited for recycling plastic and others are better suited for recycling glass
You are deciding which class to take for your final available time slot next semester. You can take economics, statistics, or history. If you choose to take economics instead of history or statistics, what is the opportunity cost of taking economics? a. the benefit would have gotten from whichever class was your next best option b. the benefit you would have gotten from taking history c. the benefit you would have gotten from taking history plus the benefit you would have gotten from taking statistics d. the benefit you would have gotten from taking statistics
a. the benefit you would have gotten from whichever class was your next best option
What name did Adam Smith give to the phenomenon of supply and demand adjusting without government intervention, seemingly on their own? a. the invisible hand b. market power c. capitalism d. the invisible handshake
a. the invisible hand
Which one of the following is TRUE with regard to market failure? a. the presence of a market failure typically implies that the actual market production levels differ from the socially optimal production levels b. Coase's theorem implies that we need government intervention to correct market failure c. Economists generally prefer command-oriented corrective polices to market-oriented corrective policies d. government action can always correct market failure
a. the presence of a market failure typically implies that the actual market production levels differ from the socially optimal production levels
Josie owns a small boutique clothing store near Woodland Park in Lexington. She is considering running an advertisement for her store in a local magazine that comes out monthly. She estimates that it will increase her monthly sales revenue from $30,000 to $31,000. If Jacque engages in sound economic reasoning, she will run the advertisement. In the magazine next month if they cost of running the advertisement is less than... a. $300 b. $1,000 c. $15,000 d. $30,000
b. $1,000
Based on the graph to the right, what is the value of consumer surplus for a consumer who is willing and able to pay $8 for this product? (Hint: you can assume that the current market price is the equilibrium price.) a. $2 b. $3 c. $5 d. $7
b. $3
Marcus is currently working 20 hours a week at the Amazon warehouse. He is considering working an additional 15 hours per week working in the kitchen of a restaurant that has seen an increase in sales by delivering their food. If he works at the restaurant his annual earnings will increase from $15,000 to $25,000 and his tax liability will increase from $1,500 to $2,500. What is his marginal tax rate? a. 5% b. 10% c. 15% d. 20%
b. 10%
If the Lexington Recylcing Center is recycling 350 plastic bottles a day, what is the maximum number of glass bottles they can recycle a day? a. 50 bottles b. 75 bottles c. 125 bottles d. 150 bottles
b. 75 bottles
Kazakhstan and Afghanistan are two counties that both raise sheep and goats and the graph to the right shows their PPF's. If they were to consider specializing and trading, which ONE of the following statements is TRUE? a. Kazakhstan should produce goats because it has the absolute advantage in the production of goats b. Afghanistan should produce goats because it has the comparative advantage in the production of goats c. Afghanistan should produce sheep because a wider variety of products can be produced from sheep including wool, meat, and dairy products d. because of their overall productive advantage, Kazakhstan cannot benefit from trading with Afghanistan
b. Afghanistan should produce goats because it has the comparative advantage in the production of goats
Arial was recently hired by Fifth Third bank for their management training program. The company took the 30 new management program trainees to a new employee retreat at Red River Gorge. The retreat leader gave Arial 30 protein bars and told her to allocate them among the retreat participants using the most equitable "command-based" approach rather than a "market-based" approach. If Arial followed the instructions, then it is most likely that: a. one lucky retreat participant won all thirty protein bars when his or her name was drawn from a hat b. Arial gave each participant one protein bar c. Arial gave 3 protein bars each to the 10 retreat participants who scored highest on the bank's IQ test because they will contribute most to the market value of the bank d. some participants got multiple protein bars and some got none, depending on how much money they brought along or if they had anything of value to trade
b. Arial gave each participant one protein bar
What area on the graph represents the total amount of deadweight loss that results from the imposition of the tax? a. A+F b. C+E c. E d. F
b. C+E
Logan loves hamburgers from Wendy's. The cost of a hamburger is $2.50. The table below shows Logan's marginal benefit from each hamburger he consumes. Assuming that Logan applies the economic decision rule, how many Wendy's hamburgers will he consume? a. Logan will eat 1 hamburger because the first hamburger has the highest marginal benefit b. Logan will eat 3 hamburgers because the first three hamburgers provide a higher marginal benefit relative to the marginal cost c. Logan will consume 4 hamburgers because the first 4 all provide positive marginal benefit d. Logan will eat 5 hamburgers and only avoid the 6th hamburger because of its negative marginal benefit
b. Logan will eat 3 hamburgers because the first three hamburgers provide a higher marginal benefit relative to the marginal cost
When considering the various resources (factors of production), which of the following is most likely to represent CAPITAL? a. a cow on a dairy farm b. a guitar used by a professional musician while on tour c. a recent college graduate who is willing to take a risk and open a new business in Lexington d. the formula for a new pharmaceutical drug
b. a guitar used by a professional musician while on tour
If bologna sandwich meat is an INFERIOR good, then a decline in consumer income will lead to... a. a decrease in the demand for bologna b. an increase in the demand for bologna c. a decrease in the supply of bologna d. an increase in the supply of bologna
b. an increase in the demand for bologna
All of the following are considered protectionist trade policies or barriers to trade EXCEPT: a. tariffs b. budget constraints c. subsidies to domestic producers d. quotas e. embargos
b. budget constraints
Which ONE of the following statements regarding a cap-and-trade program to deal with pollution is NOT TRUE? a. cap-and-trade programs can reduce the total amount of pollution b. cap-and-trade programs are considered "private" solutions rather than "public policy" solutions because firms buy and sell with each other c. cap-and-trade programs can create "pockets" of pollution d. cap-and-trade programs allow firms to buy and sell the right to pollute
b. cap-and-trade programs are considered "private" solutions rather than "public policy" solutions because firms buy and sell with each other
Economics is best defined as the study of... a. how the government can stop the harm from unchecked self-interest b. how society manages its scarce resources c. how to run a business most profitably d. how to protect inflation, unemployment, and stock prices
b. how society manages its scarce resources
Which ONE of the following statements regarding trade is NOT true? a. David Ricardo said that we must examine opportunity cost when determining specialization rather than focusing on absolute advantage b. if country A trades with country B and in the process, country A gains $1 million worth of products from the trade, country B must bear a cost (or loss) of $1 million to balance out country A's gain c. the practice of scalping typically improves market efficiency d. if a country wants to consume a bundle of goods represented by a point beyond (outside of) their PPF, they must specialize and trade with another country
b. if country A trades with country B and in the process, country A gains $1 million worth of products from the trade, country B must bear a cost (or loss) of $1 million to balance out country A's gain
American Airlines will generally show higher ticket prices online to people who are browsing on an Apple computer compared to browsing on a Windows machine. This is a form of... a. externality b. price discrimination c. asymmetric information d. price ceiling
b. price discrimination
According to one of the ten principles of economics that we discussed, the standard living in a country is most closely tied to its a. public education system b. productivity c. population growth rate d. public health care system
b. productivity
The income tax structure in the US is considered to be... a. proportional b. progressive c. diagonal d. regressive
b. progressive
The price elasticity of demand, (Ed), for seafood measures the... a. responsiveness of fishermen to changes in the quality of the seafood they catch b. responsiveness of consumers to changes in the price of seafood c. responsiveness of consumers preferences to changes in the quality of seafood d. responsiveness of fishermen to changes in the price of seafood
b. responsiveness of consumers to changes in the price of seafood
When the US government imposed a $10 tariff on large wheels of Romano cheese imported from Italy, the price of the Romano cheese sold in the US increased from $100 to $108. Based on the share of the economic (actual incidence) burden of the tax borne by producers, we would say that... a. demand is relatively more elastic than supply b. supply is relatively more elastic than demand c. supply and demand are equally elastic d. elasticity and tax incidence are unrelated
b. supply is relatively more elastic than demand
If college education in Kentucky produces positive externalities, we would expect... a. the government to tax education. b. the government to subsidize education. c. people to realize the benefits, which would increase the demand for education. d. colleges to relax admission requirements.
b. the government to subsidize education.
Consider the market for new cars in Lexington. If three of the current major dealerships were to leave Lexington, what would be the likely impact on the market for new cars in Lexington? a. the market equilibrium price will increase and the market equilibrium quantity will increase b. the market equilibrium price will increase and the market equilibrium quantity will decrease c. the market equilibrium price will decrease and the market equilibrium quantity will increase d. the market equilibrium price will decrease and the market equilibrium quantity will decrease
b. the market equilibrium price will increase and the market equilibrium quantity will decrease
A statement that "the market for milk is in equilibrium" means that... a. the price of milk is "fair" (the price is such that the producers just cover the cost of producing milk b. the price of milk is such that the market "clears" which means that the quantity that is supplied by producers is bought by consumers c. there is a large surplus of milk so that the consumers do not have to worry about a possible price increase in the near future d. the suppliers of milk are able to sell everything they supplied to the market and there are still consumers who want to buy more milk
b. the price of milk is such that the market "clears" which means that the quantity that is supplied by producers is bought by consumers
Three basic decisions must be made by all economies. What are they? a. what will be consumed; how will goods be consumed; for whom will goods be consumed b. what goods will be produced; how will goods be produced; for whom will goods be produced c. how can we maximize production; how can we minimize poverty; how can we better prepare for natural disasters d. how much will be produced; when will it be produced; who will produce it
b. what goods will be produced; how will goods be produced; for whom will goods be produced
Select from the graphs depicted below in answering this question. The University of Kentucky has a limited number of parking spots for students, staff, and faculty. Normally, it is very difficult to find a place to park so everyone who wants a parking spot is not able to find one. Which graph below must accurately depicts this current situation in the market for UK parking spots? a. b. c. d. e.
c.
What is the total value of consumer surplus AFTER the imposition of the tax? a. $8 b. $16 c. $24 d. $32 e. $37.50
c. $24
Consider the market above where the government has imposed a $4 excise tax on this product. Use this graph to answer the next five questions. The per unit economic burden (actual incidence) of the tax to CONSUMERS is... a. $1 b. $2 c. $3 d. $4 e. $18
c. $3
If the recycling center is currently recycling at point E and want to move to point D, what is the opportunity cost of ONE plastic bottle as they make this transition? a. 25 glass bottles b. 150 glass bottles c. 1/4 glass bottle d. 4 glass bottles
c. 1/4 glass bottle
Which economist first developed the supply and demand model that we currently use today? a. Adam Smith b. David Ricardo c. Alfred Marshall d. Joe Biden
c. Alfred Marshall
Consider the graph below that depicts the daily market for 8-oz jars of Backyard Honey, a local honey provider in Lexington. You will use the graph to answer the next four questions. The above is a supply and demand framework for the daily market for 8-oz jars of Backyard Honey, a local honey provider in Lexington. What is the current market equilibrium price and equilibrium quantity? a. Pe=$16 and Qe=12 jars of honey b. Pe=$8 and Qe=20 jars of honey c. Pe=$12 and Qe=16 jars of honey d. Pe=$20 abd Qe=8 jars of honey
c. Pe=$12 and Qe=16 jars of honey
Assume that you stop in Kroger and you have $12 that you plan to spend on pizza that costs $4 per slice and soft drinks that costs $2 per bottle. If we treat pizza (P) as our X variable and soft drinks (S) as our Y variable which of the following equations represents your BUDGET CONSTRAINT? a. S=6-1/2P b. S=3-1/2P c. S=6-2P d. S=6+2P
c. S=6-2P
Suppose that we find the price elasticity of demand for iced coffee at Starbuck's is greater than 1, i.e. |Ed|=>1 Considering the determinants of price elasticity of demand, which of the following is NOT a likely explanation for this value of elasticity? a. there are many substitutes for Starbuck's coffee b. Starbucks's coffee is a luxury good c. Starbuck's coffee can be brewed more quickly than other brands d. the market for Starbuck's coffee is a narrowly defined, specific market
c. Starbuck's coffee can be brewed more quickly than other brands
The Laffer Curve shows that... a. as the size of the tax increases, tax revenue always increases b. as the size of the tax increases, tax revenue always decreases c. as the size of the tax increases, tax revenue increases but then eventually starts to decrease d. the size of the tax and tax revenue are unrelated
c. as the size of the tax increases, tax revenue increases but then eventually starts to decrease
Which of the following statements does NOT apply to a market economy? a. households decide which firms to work for and what to buy with their incomes b. private property rights exist and households are the initial owners of resources c. businesses face "soft" budget constraints and are given government financial support if they need help d. the lowest cost inputs are used to produce goods because producers want to maximize profits and they will try to be as efficient as possible
c. businesses face "soft" budget constraints and are given government financial support if they need help
Welfare economics measures the well-being of consumers in terms of... a. annual income b. total savings c. consumer surplus d. home ownership
c. consumer surplus
Dr. Hoyt went to Lowes to buy gardening supplies. She bought $79 worth of merchandise and the total amount she had to pay at the cash register was $83.74. Which of the following is NOT true? a. her tax base was $79 b. her tax liability was $4.74 c. her tax rate was $4.74 d. her tax rate was 6%
c. her tax rate was $4.74
The immediate effect of a binding price ceiling placed on rent in the housing market would be... a. unemployment b. an improvement in the quality of rental housing c. higher search costs for finding apartments d. an increase in the current supply of rental housing. (a shift to the right of the supply curve)
c. higher search costs for finding apartments
The circular-flow diagram of a market economic illustrates that, in markets for the factors of production a. households and firms are both buyers b. households are buyers, and firms are sellers c. households are sellers, and firms are buyers d. households and firms are both sellers
c. households are sellers, and firms are buyers
When a negative externality is present in a market and it is caused by producers while making the product, then from society's point of view... a. marginal private cost (MPC) will be EQUAL TO marginal social cost (MSC) b. marginal private cost (MPC) will be GREATER THAN marginal social cost (MSC) c. marginal private cost (MPC) will be LESS THAN marginal social cost (MSC) d. marginal private cost (MPC) will be equal to zero
c. marginal private cost (MPC) will be LESS THAN marginal social cost (MSC)
Which of the following government agencies is LEAST likely to deal with issues related to market failure from asymmetric information? a. the health department that inspects local restaurants b. the USDA (US Dept. of Agriculture) that inspects meat processing plants c. the EPA (Environmental Protection Agency) that enforces limits on auto emissions d. the FDA (Food and Drug Administration) that approves new drugs
c. the EPA (Environmental Protection Agency) that enforces limits on auto emissions
Suppose that the graph below represents the demand for pizza from Mad Mushroom Pizza in Lexington. Which ONE of the following would cause a shift in the demand for Mad Mushroom Pizza from D1 to D2? a. the population of students at UK decreases by 5,000 students b. the price of pizza from Papa John's pizza (a substitute product) is reduced by 20% c. the prices of beer and soft drinks (complements to pizza) are reduced by 30% at Mad Mushroom Pizza d. the price of mozzarella cheese used in making pizza falls
c. the prices of beer and soft drinks (complements to pizza) are reduced by 30% at Mad Mushroom Pizza
The government frequently intervenes when there is a market failure related to a lack of information about a product that might cause harm. Which one of the following is NOT true with regard to this type of intervention? a. lag time and delays in drug approvals can occur that can prevent sick patients from getting medicine b. regulation for safety and imposition of safety standards can be costly and elevate product prices c. the private market is typically more efficient than the government at protecting consumers from unknown danger d. product restrictions for the sake of safety can reduce product options for consumers
c. the private market is typically more efficient than the government at protecting consumers from unknown danger
Consider investments in infrastructures like new or improved roads, bridges, gas lines, and sewage systems. Which of the following is NOT true regarding such investments? a. they are often politically unpopular because current voters bear the cost of investments for which it might take many years to see the benefits b. investments intended to accumulate capital cause the PPF to shift inward (to the left) during the investment period c. there is no opportunity cost to making such investments because they are paid for with revenue from taxes d. such investments lead to economic growth and improve the productive capacity of a country
c. there is no opportunity cost to making such investments because they are paid for with revenue from taxes
When ticket prices to Elton John concerts increased from $200 to $300 each, the number of tickets sold fell from 500,000 to 300,000. What is the price elasticity of demand for Elton John concert tickets based off this information? a. |Ed|=200,000 b. |Ed|=2,000 c. |Ed|= 5/4 d. |Ed|=4/5
c. |Ed|= 5/4
How much REVENUE does the government generate from this tax? a. $4 b. $8 c. $12 d. $16 e. $24
d. $16
Consider the following equations for supply and demand in a market: supply: Qs=4+4P demand: Qn=40-5P The equilibrium price in this market is... a. $40 b. $10 c. $9 d. $4 e. $2
d. $4
If we were to calculate the cross-price elasticity of demand, Xd, between chicken finger meals at Joella's Hot Chicken and chicken finger meals at Raising Canes, which of the following values are we most likely to find? a. Xd=-0.8 b. Xd=0.0 c. Xd=infinity d. Xd=1.2
d. Xd=1.2
The income elasticity of demand for organic ostrich eggs is 2.1 (i.e. Yd=2.1) This implies that consumers treat organic ostrich eggs as... a. a substitute b. a complement c. a necessity d. a luxury
d. a luxury
Which one of the following statements is TRUE? a. there are many government policies that redistribute income and wealth from rich people to poor people. Those policies are generally intended to promote efficiency rather than equality b. the primary goal of economic policy is to determine ways to eliminate scarcity c. in a command-oriented economy prices and the invisible hand coordinate economic activity d. a policy that makes it illegal to enter a building without wearing a mask would be considered a command-and-control policy rather than a market-based policy
d. a policy that makes it illegal to enter a building without wearing a mask would be considered a command-and-control policy rather than a market-based policy
Which of the following is LEAST likely to produce an externality? a. a nice looking front yard in a neighborhood b. production of a product that releases smoke into the air c. a person driving a vehicle d. a well decorated interior of a house
d. a well decorated interior of a house
Economic efficiency requires that... a. individuals produce at their maximum output level b. only long-lasting, high-quality products be produced without regard to cost c. income be distributed equally among consumers d. all economic activity generating more benefits than costs be undertaken
d. all economic activity generating more benefits than costs be undertaken
Smuggling (the illegal movement of goods) is most likely a response to the imposition of... a. a binding floor price b. a subsidy c. a regressive income tax d. an excise tax
d. an excise tax
Mike likes to shop at Costco because he feels that when he buys things in bigger quantities the prices in discounted. On his most recent trip to Costco he noticed that many large families with three or more children were shopping at Costco. Based on this observation, Mike concluded that shopping at Costco must somehow improve fertility leading to families having more children. His friend Mike and his wife are trying to conceive a child and Mike suggests that a trip to Costco might help. Mike's conclusion is likely in error because... a. he has failed to make the ceteris paribus assumption b. he has confused positive and normative analysis c. he has falsely identified a stochastic relationship as a deterministic relationship d. he has reversed causality in drawing his conclusion
d. he has reversed causality in drawing his conclusion
In describing ten principals of economics, your textbook author, Greg Mankiw, says that markets are generally a good way of allocate resources and coordinate economic activity, but then he goes on to say that the government might improve upon market outcomes in all of the following situations EXCEPT: a. sometimes, cars can have defective parts that can lead to car crashes and injury, but are unaware of the defect b. animal waste from turkey farms in Minnesota runs off into local streams affecting the safety of people using the water downstream c. a state has only one power company providing electricity, giving that one company market power to charge high prices d. market prices in the market for over-the-counter cold medications begins to rise significantly because there is a shortage of over-the-counter cold medication
d. market prices in the market for over-the-counter cold medications begins to rise significantly because there is a shortage of over-the-counter cold medication
Consider the graph below that depicts the production possibility frontier for the Lexington Recycling Center. You will use this graph to answer the next four questions. The inefficient but possible points of production on the graph above include only... a. points a,b,c,d,e,f,i, and h b. points a,b,c,d,e, and f c. points i,h, and g d. points i and h e. point g
d. points i and h
At a local factory, if a worker is late for a shift they are docked $5 of that day's pay. (i.e. the worker loses $5 of earnings) Assume that Y represents the total amount an employee's pay is docked in a month and X is the number of times the employee is late in a month. The relationship between these two variables is most likely to be: a. negative and stochastic b. negative and determination c. positive and stochastic d. positive and deterministic
d. positive and deterministic
Which of the following is NOT a function of prices in a market system? a. prices have a crucial job of balancing supply and demand b. prices send signals to buyers and sellers to help them make rational economic decisions c. prices coordinate economic activity and help allocate resources d. prices ensure an equitable (fair) distribution of goods and services among consumers
d. prices ensure an equitable (fair) distribution of goods and services among consumers
Your roommate continues to play music or watch Netflix long after you want to go to sleep at night. Your roommate doesn't like to wear earbuds, so you can hear the music and movies. If you pay your roommate $20 per month to stop playing music and watching movies at 10:00 each night and your roommate accepts your offer this is an example of... a. a command-and-control policy b. a market failure c. a positive externality d. the Coase Theorem
d. the Coase Theorem
Which of the following is NOT TRUE with regard to the minimum wage? a. an increase in the minimum wage can sometimes lead to an increase in high school dropout rates b. the place in the US with the highest minimum wage is Washington, DC c. individual states are allowed to require a minimum wage higher than the federally mandated $7.25 d. the Kentucky state minimum wage is higher than the federally mandated minimum wage of $7.25
d. the Kentucky state minimum wage is higher than the federally mandated minimum wage of $7.25
In the market for Backyard Honey, allergists in the area begin recommending all their patients consume local honey on a regular basis. Which one of the following should result? a. the quantity supplied (QS) would increase b. supply would increase (a supply curve shift) c. the demand would decrease (a demand curve shift) d. the demand would increase (a demand curve shift) e. the quantity demanded (QD) would increase
d. the demand would increase (a demand curve shift)
In the market for Backyard Honey, if the price decreased from $24 to $8 which ONE of the following would result? a. the quantity supplied would increase by 20 jars b. the supply curve for Backyard Honey would shift to the right, i.e. an increase in supply c. the demand curve for Backyard Honey would shift to the left, i.e. a decrease in demand d. the quantity demanded would increase by 16 jars
d. the quantity demanded would increase by 16 jars
An efficient allocation of resources and no market failure maximizes... a. deadweight loss b. consumer surplus only c. producer surplus only d. total surplus
d. total surplus
Use this information to answer regarding the production possibility frontiers for Brazil and the Ukraine for production corn and soybeans to answer the next three questions: What is the opportunity cost for BRAZIL of producing ONE metric ton of soybeans? a. 12 metric tons of corn b. 3 metric tons of corn c. 2 metric tons of corn d. 2/3 metric tons of corn e. 3/2 metric tons of corn
e. 3/2 metric tons of corn
If the government imposes a price FLOOR of $1.50 in this market then there will be... a. a shortage of 20 donuts b. a surplus of 60 donuts c. a surplus of 20 donuts d. a shortage of 80 donuts e. no shortage or surplus
e. no shortage or surplus
