ECON CH. 7.2+

According to the​ data, which of the following countries are net​ importers? ​(Check all that apply.​)

Aruba.

If you produce at a point on your PPC​, then you are producing at a point that is​ ____________. Part 2 A. attainable but inefficient. B. attainable and efficient. C. attainable if resource prices fall. D. unattainable.

B. attainable and efficient.

According to the principle of comparative​ advantage, both parties will engage in a trade if the trading​ price: A. is below the market price. B. lies between their opportunity costs. C. is higher than the​ seller's cost to produce. D. is lower than the​ buyer's cost to produce.

B. lies between their opportunity costs.

Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that​ good? Countries that do not have an absolute advantage in the production of a good always, can, OR cannot benefit from trade.

CAN

What phenomenon does this example​ illustrate? A. Moral hazard. B. ​Principal-agent relationship. C. Signaling. D. Adverse selection.

D. Adverse selection.

On the Production Possibilities​ Curve, possible production levels are​ represented: A. at any point above the curve. B. at any point below the curve. C. at any point on the curve. D. at any point on or below the curve.

D. at any point on or below the curve.

Suppose there are many sellers with used cars that they value at amounts ranging from​ $0 to ​$13,000. The distribution is even​ (or "uniform"​); ​thus, if you randomly selected all cars worth under​ $6,000, the expected value​ (for the​ seller) would be​ $3,000 (the midpoint from​ $0 to​ $6,000). There are many​ buyers, and they value each car ​$900 higher than sellers. For​ example, a car worth​ $2,000 to a seller would be worth ​$2,900 to a buyer. Find an equilibrium price such that it makes sense for buyers to​ buy, given what they know about sellers. Under these​ conditions, the equilibrium price of a used car will be ​$. ​(Enter your answer as a whole number​.)

$900 higher than sellers. 900+900

Now suppose there is an additional marginal external cost of​ $25 per iPhone. This will result in a marginal social cost​ (MSC) that is above the supply curve. Given this negative​ externality, what is the socially optimal quantity of​ iPhones? (Hint: It is less than​ 4, which was the market outcome discussed​ above)

2

A deadweight loss is the decrease increase in social surplus that results from a market deficit distortion surplus .

A deadweight loss is the decrease in social surplus that results from a market distortion.

The table on the right shows trade statistics for 2012. According to the​ data, which of the following countries are net​ exporters? ​(Check all that apply.​)

Aruba.

Which of the following is an example of private​ information? A. A public​ company's annual revenue. B. The way a person drives a rental car. C. The condition of the exterior and interior of a car for sale. D. A baseball​ player's batting average.

B. The way a person drives a rental car.

In​ economics, signaling is an action taken by an individual​ ____________. A. to discourage someone from attempting to discover his or her private information. B. who has private information to convince others about his information. Your answer is correct. C. who has private information to hide the information from others. D. to convince someone who has private information to reveal his information to others. Which of the following is an example of​ signaling? A. A doctor displays her Harvard Medical School diploma in her office waiting room. B. An individual buying a used car purchases a warranty to protect against it being a​ "lemon." C. A basketball player hits most of his​ 3-point shots to show that​ he's a good basketball player. D. The price of a​ company's stock is high relative to its peers in the industry.

B. who has private information to convince others about his information. A. A doctor displays her Harvard Medical School diploma in her office waiting room.

Which of the following is not an​ externality? Part 2 A. ​Jose, who is allergic to​ pollen, is sick from the flowers that grow in his​ neighbor's garden. B. Rochelle has asthma caused by the pollution of a local factory near her home. C. Jordan has lung cancer from smoking cigarettes. D. Alisha did not sleep well because her neighbor was playing loud music.

C. Jordan has lung cancer from smoking cigarettes.

Adverse selection occurs in the health insurance market because​ ____________. A. people with health insurance are more likely to undertake risky activities since they know that any injuries or illnesses will be paid for by the insurance company. B. only people who are sick will buy health​ insurance, thus signaling the health of those who buy and those who do not. C. buyers have private information about their health that health insurance companies do not. D. unless there are deductibles and​ co-payments, those who buy insurance will not have​ "skin in the​ game."

C. buyers have private information about their health that health insurance companies do not.

Externalities are called market failures because they​ ___________. Part 2 A. raise prices for everyone. B. raise prices in an unfair manner for the poor. C. cause markets to produce suboptimal social outcomes. This is the correct answer. D. cause markets to overproduce when there is inflation.

C. cause markets to produce suboptimal social outcomes. This is the correct answer.

Question content area Part 1 How will the invisible hand move corn prices in response to each of the​ following: Part 2 A weather pattern that produces a bumper corn crop. This will ▼ decreaseincrease corn prices by shifting the supply curve for corn ▼ rightwardleftward.

corn

How will the invisible hand move corn prices in response to each of the​ following:

corn lol

Question content area Part 1 How do public goods differ from common pool​ resources? Explain. Part 2 Public goods are non-rival rival private excludable ​goods, while common pool resource goods are excludable rival private non-rival goods.

non-rival rival

An individual or a firm can internalize an externality by​ ___________. Part 2 A. paying the cost of the externality. B. doubling the size of the externality. C. ignoring the externality. D. disputing that an externality exists.

A. paying the cost of the externality.

A university administrator proposes the​ following: the​ 3,000 students willing to pay​ $8 must in fact pay​ $8 each. This raises​ $24,000. The students willing to pay​ $30 have to pay only​ $16 each​ (for $16,000​ more, for a total of​ $40,000). Part 5 Using the above​ information, which of the following consequences is likely to be true if the administrator uses this method of​ fund-raising? A. The university would not be able to collect​ $24,000, since the students who were willing to pay​ $8 would anticipate an even lesser charge. B. The university would not be able to collect​ $40,000, since the students who were willing to pay​ $30 would not reveal their true preferences. C. The university would be a

B. The university would not be able to collect​ $40,000, since the students who were willing to pay​ $30 would not reveal their true preferences.

What could explain why South​ Korea's gross domestic product​ (GDP) per capita increased so much faster since the 1970s than North​ Korea's GDP per​ capita? Part 2 A. South Korea has a market​ economy, while North Korea is a command economy. B. South Korea has been better able to solve the coordination and incentive problems. C. Resource allocation in South Korea is done much more efficiently than in North Korea. D. All of the above.

D. All of the above.

With the help of the​ graph, it is observed that the marginal private benefit of the good is​ $95 and, due to a positive​ externality, the marginal benefit to society is​ $125. In this​ case, the marginal external benefit created by the positive externality is ​$30. In the​ graph, area B area A represents a

area A

Which of the following statements are true regarding​ externalities? ​(Check all that apply​.) A. Deadweight loss can be either a foregone benefit or the total cost of the externality to society. B. A negative externality occurs when an economic activity has a spillover cost to a bystander. C. In the case of an​ externality, the free market will maximize social surplus. D. For computing efficient​ outcomes, economic agents adjust the demand curve to account for negative externalities. In the case of the negative​ externality, the socially efficient output will be low high relative to the market quantity.

A. Deadweight loss can be either a foregone benefit or the total cost of the externality to society. B. A negative externality occurs when an economic activity has a spillover cost to a bystander. low

Hardware stores charge higher prices for snow shovels after a big snow storm. What role do prices play in the snow shovel​ market? Part 2 A. It would incentivize distributors to ship more snow shovels into the area to meet the increased demand. B. Prices would signal when price gouging was taking place so authorities could step in to prevent it. C. In such a natural​ disaster, prices would not efficiently guide the invisable hand. D. In an​ emergency, prices must remain​ fixed; therefore, prices do not play a role in this case.

A. It would incentivize distributors to ship more snow shovels into the area to meet the increased demand.

How do​ third-party certifications and warranties solve the adverse selection problem in the used car​ market? A. They signal that a good car is not a lemon. B. They pass on the costs of a​ "lemon" to a third party in the transaction. C. They eliminate the moral hazard involved in selling a​ "lemon." D. They make the market more efficient and eliminate the deadweight loss.

A. They signal that a good car is not a lemon.

Why is the market demand curve for public goods calculated as a vertical summation of individual demand​ curves? Part 2 A. because the public good is​ non-rival, so you and others can consume every unit of the good at the same time. Your answer is correct. B. because public goods are the opposite of private​ goods, therefore the summing must be done similar to club goods. C. because public goods are finite in availability of​ consumption, so the vertical summation accounts for the limit. D. because public goods require vertical summation to account for the higher level of fairness compared to private goods.

A. because the public good is​ non-rival, so you and others can consume every unit of the good at the same time. Your answer is correct.

Adverse selection occurs when​ ____________. A. one agent in a transaction knows about a hidden characteristic and trades​ (or not) on the basis of that information. B. the seller in a transaction unknowingly sells a​ "lemon." C. the buyer in a transaction unknowingly purchases a​ "lemon." D. one agent in a market transaction knows about a hidden action and trades​ (or not) on the basis of that information.

A. one agent in a transaction knows about a hidden characteristic and trades​ (or not) on the basis of that information.

Which of the following are not examples of adverse​ selection? ​(Check all that apply.​) A. An employee at a company learns that a big deal is about to be signed and buys the​ company's stock because​ he's sure it is going to go up in value once the deal is announced. Your answer is not correct. B. A student knows whether or not she studied for an exam prior to taking it. This is the correct answer. C. A new car salesman knows how the car was rated by Consumer Reports prior to selling it to a buyer. Your answer is correct. D. An actor knows whether or not he memorized his lines prior to auditioning for a part in a play.

B. A student knows whether or not she studied for an exam prior to taking it. This is the correct answer. C. A new car salesman knows how the car was rated by Consumer Reports prior to selling it to a buyer. Your answer is correct. D. An actor knows whether or not he memorized his lines prior to auditioning for a part in a play.

Why do​ "bad cars drive out the good​ ones" in the market for used​ cars? A. Sellers of used cars are not able to determine which buyers are willing and able to pay for the good​ cars, so only owners of bad cars offer their cars for sale. B. Buyers are not able to tell the difference between good cars and bad​ cars, and so they are not willing to pay a high price for a used car because of the significant chance it will be​ lemon, which makes owners of good cars unwilling to sell them. C. Buyers of used cars​ don't have enough money to buy good​ cars, so only bad cars are sold in the market. D. Sellers of good used cars ask too much for their​ cars, and since buyers are unwilling to pay the high​ prices, sellers of good cars eventually stop trying to sell their​ cars, leaving only bad cars in the market.

B. Buyers are not able to tell the difference between good cars and bad​ cars, and so they are not willing to pay a high price for a used car because of the significant chance it will be​ lemon, which makes owners of good cars unwilling to sell them.

Suppose some workers are capable and others are extraordinary. Firms are willing to pay capable workers a salary of​ $12,000 and extraordinary workers a salary of​ $15,000. Workers know if they are capable or extraordinary but firms do not—that ​is, ability is private information. It would cost capable persons​ $6,000 to earn a college​ degree, but it would cost extraordinary persons just​ $2,000 to earn a college degree since they can finish their education much faster. Workers without college degrees have high school diplomas. Which workers will go to school and earn a college​ degree? A. Both extraordinary workers and capable workers will earn a college degree. B. Extraordinary workers will earn a college degree and capable workers will not. C. Capable workers will earn a college degree and extraordinary workers will not. D. Neither extraordinary nor capable workers will earn a college degree.

B. Extraordinary workers will earn a college degree and capable workers will not.

Negative externalities impose an additional cost​ that: A. is reflected in the producers supply curve. B. is not explicitly recognized by the buyers and sellers in the market. C. needs to be subtracted from the producers marginal cost to determine true market price. D. is reflected in the consumers demand curve.

B. is not explicitly recognized by the buyers and sellers in the market.

Complete specialization occurs when each​ individual, firm, or​ country: A. does not rely on trade for goods and services. B. produces only what it has a comparative advantage in. C. consumes specialty goods instead of generic equivalents. D. produces only what it is known for.

B. produces only what it has a comparative advantage in.

Sofia, a political science​ student, thinks that the government should intervene to revive declining industries like video stores and print newspapers. The​ government, she​ reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with​ her? Explain your answer. Part 2 A. ​Yes, the coordination problems of these industries suggest that the invisible hand is​ failing, so government intervention would revive these industries. B. ​No, these industries are declining not because of coordination problems​ but, rather, because of falling demand. C. ​No, these declining industries are plagued by coordination​ problems, but government intervention is never the answer. D. ​Yes, government intervention is necessary to generate more buyers for these​ industries, thus coordinating buyers with existing sellers.

B. ​No, these industries are declining not because of coordination problems​ but, rather, because of falling demand.

Suppose the university imposed a​ $10 fee to cover the cost. This would raise the​ $40,000 necessary but might make many students upset. Which of the following is likely to happen if the decision to clear snow were put up for a​ university-wide vote? A. A​ majority-rule vote would induce the university to start collecting money for snow​ removal, since all the​ 4,000 students would support the proposed decision. B. A​ majority-rule vote would induce the university to start collecting money for snow​ removal, since​ 3,000 students would support the proposed decision. C. A​ majority-rule vote would induce the university to stop collecting money for snow​ removal, since​ 3,000 students would not support the proposed decision. Your answer is correct. D. A​ majority-rule vote would induce the university to stop collecting money for snow​ removal, since all the​ 4,000 students would not suppor

C. A​ majority-rule vote would induce the university to stop collecting money for snow​ removal, since​ 3,000 students would not support the proposed decision.

Suppose the production of a particular good causes a negative externality. Based on market forces​ only, how will this impact the production levels for a factory if negative externalities are​ present? Part 2 A. It will produce the same level regardless of whether externalities are present. B. It will produce the good below the socially efficient level. C. It will produce the good above the socially efficient level. Your answer is correct. D. Negative externalities do not impact production levels.

C. It will produce the good above the socially efficient level. Your answer is correct.

Which of the following goods have a high​ excludability? ​(Check all that apply.​) A. Common pool resource goods. B. Public goods. C. Ordinary private goods. D. Club goods. Which of the following statements are true regarding a public​ good? ​(Check all that apply.​) A. It is​ non-excludable and​ non-rival in consumption. B. It is​ non-excludable and rival in consumption. C. It is provided when marginal benefits exceed the marginal costs. D. It is solely provided by the government.

C. Ordinary private goods. D. Club goods. C. It is provided when marginal benefits exceed the marginal costs. A. It is​ non-excludable and​ non-rival in consumption.

Question content area Part 1 A college campus must decide whether to spend​ $40,000 to clear sidewalks of snow during the winter. There are​ 4,000 students. One thousand of these students are willing to pay up to​ $30 each to walk on a snowless sidewalk. The other​ 3,000 are willing to pay​ $8 each. C. The university should pay​ $40,000 to keep the snow off the​ sidewalks, since total benefit is greater than total cost. Your answer is correct. Part 3

C. The university should pay​ $40,000 to keep the snow off the​ sidewalks, since total benefit is greater than total cost. Your answer is correct.

The​ free-rider problem arises when an individual​ ____________. Part 2 A. pays for a good only when being monitored by the authorities for noncompliance. B. does not pay for a good because that individual is engaging in illegal activity. C. does not pay for a good because nonpayment does not prevent consumption. Your answer is correct. D. pays for a good only when he or she is in the top quartile of people needing the good.

C. does not pay for a good because nonpayment does not prevent consumption.

In a perfectly competitive​ market, a firm with multiple production plants will minimize total costs of production when A. closing older plants with less advanced production technologies. B. each plant produces at maximum capacity. C. each plant produces where marginal revenue equals marginal cost. D. the cost of production for all plants is equal.

C. each plant produces where marginal revenue equals marginal cost.

A production possibilities curve​ (PPC) ___________. A. shows the combinations of inputs that can create a specific level of output. B. determines the levels of imports and exports within a country. C. shows the relationship between the maximum production of one good for a given level of production of another good. D. shows the​ trade-off between price and quantity of produced goods or services. A linear PPC would show constant opportunity costs increasing opportunity costs decreasing opportunity costs and a PPC that is curved away from the origin would show increasing opportunity costs constant opportunity costs decreasing opportunity costs .

C. shows the relationship between the maximum production of one good for a given level of production of another good. constant opportunity costs , increasing opportunity costs

Is it worth more than​ $16,000 to you given your private information on the​ car? A. ​No, you know that once you drive a car off the lot you will regret not having bought a cheaper car. B. ​No, if the market is only willing to buy the car for​ $16,000 that is how much you will value it at. C. ​Yes, since you just spent​ $20,000 to buy it and know it is still in perfect condition. Your answer is correct. D. ​Yes, since you know that the longer you own the car the more valuable it becomes to you.

C. ​Yes, since you just spent​ $20,000 to buy it and know it is still in perfect condition. Your answer is correct.

How much do firms pay college graduates and high school​ graduates? A. Firms pay high school graduates​ $15,000 and college graduates​ $12,000. B. Firms pay both college graduates and high school graduates​ $12,000, since they cannot tell the difference between extraordinary and capable workers. C. Firms pay both college graduates and high school graduates​ $16,500, the expected value of a worker. D. Firms pay college graduates​ $15,000 and high school graduates​ $12,000.

D. Firms pay college graduates​ $15,000 and high school graduates​ $12,000.

The tables below show the reservation values of buyers and sellers in the market for used iPhones. Suppose the minimum price is given as​ $55 (a​ "price floor"). Which of the following statements is true in the market for used​ iPhones? A. Dave and Ian will each be willing to buy an iPhone. B. Kim and Ty will each be willing to buy an iPhone. C. Sean and Dave will each be willing to buy an iPhone. D. Madeline and Katie will each be willing to buy an iPhone. At a price of​ $55 per​ iPhone, the consumer surplus is 2020. At the price of​ $55, two iPhones will be​ purchased, but there are five willing sellers. the highest possible producer surplus is enter your response here.

D. Madeline and Katie will each be willing to buy an iPhone. Consumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay. In the given​ scenario, if the price floor is given at​ $55, the consumer surplus will be​ $15 +​ $5 =​ $20.

What is the intent of a Pigouvian​ tax? Part 2 A. To encourage producers of a negative externality to increase production to the socially optimal level. Your answer is not correct. B. To eliminate the force of the invisible hand in market transactions. C. To mandate by government fiat the reduction of production to the socially optimal level. D. To induce producers of a negative externality to reduce production to the socially optimal level.

D. To induce producers of a negative externality to reduce production to the socially optimal level.

Terms of trade is the​ ____________. A. legal document that trading partners sign. B. time required to produce a good or service that is traded. C. benefit received from trade. D. exchange rate of goods for goods. Terms of trade are determined​ ____________. A. on the basis of opportunity costs. B. by buyers. C. by sellers. D. on the basis of absolute advantage.

D. exchange rate of goods for goods. A. on the basis of opportunity costs.

Absolute advantage is the ability of an​ individual, firm, or country to​ produce: A. a certain good at a lower opportunity cost than other producers. B. more of a certain good than other competing​ producers, given more resources. C. a certain good at a lower total cost than other producers. D. more of a certain good than other competing​ producers, given the same number of resources.

D. more of a certain good than other competing​ producers, given the same number of resources.

Asymmetric information is when​ ____________. A. there is an​ equity-efficiency trade-off in the outcome of a transaction. Your answer is not correct. B. both parties to a transaction have the same information but fail to conclude the transaction. C. both parties to a transaction are missing the same important piece of information. D. one party to a transaction has different information from the other—information that the other party cares about. The two kinds of asymmetric information are​ ____________. A. ​"lemons" and​ "peaches." B. hidden characteristics and hidden actions. C. moral hazard and adverse selection. D. ​principal-agent relationship and signaling.

D. one party to a transaction has different information from the other—information that the other party cares about. B. hidden characteristics and hidden actions.

When economies open up to free​ trade, trading partners always benefit. Part 2 Why is free trade​ controversial? A. Only countries with an absolute advantage gain. Your answer is not correct. B. Companies always win at the expense of consumers. C. SOME INDIVIDUALS MAY LOSE This is the correct answer. D. Deadweight loss increases.

always C. SOME INDIVIDUALS MAY LOSE

Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national​ defense; an easterner can produce either 2 units of food or 1 unit of national defense. According to the​ data, easterners westerners both neither have a comparative advantage in the production of defense. Suppose this country has decided it wants to produce 60 units of defense. In this​ case, the country will have more food to consume if the easterners ,both equally, westerners produced these 60 units of defense. ou should have anticipated this answer because​ ____________. A. the westerners have an absolute advantage in the production of defense. B. the easterners have a comparative advantage in the production of defense. C. the westerners have a comparative advantage in the production of defense. D. the easterners have an absolute advantage in the production of defense.

easterners, easterners, B. the easterners have a comparative advantage in the production of defense. Now suppose this country institutes a draft and chooses people for the military randomly. Suppose further that it drafts 20 westerners and 20 easterners​ (who together will produce 60 units of​ defense). If the country chooses to have a military​ draft, it will produce units of food. ​(Enter your response as an integer.​) If the country uses 20 westerners and 20 easterners to produce​ defense, then 80 westerners and 80 easterners will be available to produce food. In this​ case, food production will be (80×6)+(80×2)=640 units of food.

Question content area Part 1 If a country had exports of ​$110 billion and imports of ​$290 ​billion, they would be considered a net exporter importer .

importer .

If your professor decided to give all students the highest grade in the​ class, your​ classmates' incentives to study would ▼ increase decrease not change.

decrease

Which of the following is not a source of a​ country's comparative​ advantage? A. Exports. B. Natural resources. C. Technology. D. Climate.

A. Exports.

Recent research by Abigail Wozniak​ ("Discrimination and the Effects of Drug Testing on Black​ Employment, NBER Working Paper No.​ 20095) indicates that when employers test job applicants for​ drugs, employment of black people increases 7​ - 30% and wages increase by 1.4​ - 13.0%. Why might drug testing increase​ employment? Drug testing might increase employment because A. it reduces adverse selection by employers. B. it increases the liklihood that drug users end up in​ jail, thus limiting the​ "lemons" problem in employment. C. it allows employers to pay efficiency wages to the right employees. D. it acts as a signal to employers.

D. it acts as a signal to employers.

The terms of trade are 1.601.60 coconuts per fish. ​(Round your response to two decimal places.​) Part 6 Who benefits from​ trade? A.

Would Nearway and Farway ever trade 120 coconuts for 40 ​fish? A. ​Yes, because they are both better off. B. ​Yes, because even though Farway is​ indifferent, Nearway is better off. Your answer is not correct. C. ​Yes, because even though Nearway is​ indifferent, Farway is better off. D. ​No, because while Farway gains from this​ trade, Nearway does not. This is the correct answer. E. ​No, because while Nearway gains from this​ trade, Farway does not.

How does a​ command-and-control policy differ from a​ market-based policy? Part 2 With a​ command-and-control policy, the market directly regulates the allocation of resources the government directly regulates the allocation of resources the military directs and regulates the economy ​, while with a​market- based​policy, the government directly regulates the allocation of resources the government provides incentives for private organizations to internalize the externality the military directs and regulates the economy .

the government provides incentives for private organizations to internalize the externality

Your new car is stolen just days after you buy it. You purchased it for​ $20,000 but the insurance company believes it is only worth​ $16,000. The insurance company believes that your car is worth less than​ $20,000 because the insurance company knows that the value of the car in the used-car marketplace would be only $16,000 you would be willing to pay more than the market value of $16,000 you would be willing to pay only $16,000 .

the value of the car in the used-car marketplace would be only $16,000