Econ Exam 3 Study
trade barriers
Taxes, quotas, and other restrictions on goods entering or leaving a country.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
What effect is happens when the price level falls, the real value of household wealth rises?
The Wealth Effect
What effect is the How a change in price effects consumption ?
The Wealth Effect
From a neoclassical view, which of the following is a true statement?
The economy cannot sustain production above its potential GDP in the long run.
The Environmental Protection Agency is attempting to rule on whether pollution from greenhouse gas emissions endangers public safety. Among the many greenhouse gas polluters are cows emitting methane. Economists have devised a theory to help address this issue. Identify the statement that is true according to economic theory.
The efficient level of pollution removal occurs where the marginal benefit of pollution removal equals the marginal cost of pollution removal; i.e., some pollution could be allowed.
A money market mutual fund's total assets increase from $100 to $105 when the fund has 100 shares outstanding. Which of the following will happen?
The fund will issue a total of five new shares.
If aggregate supply is vertical, then aggregate demand does not affect:
The quantity of output
Which sentence describe the risk and returns of investing in stocks?
They offer the highest risks and the highest potential returns
Trade balance
Total exports minus total imports
Does International Trade Help the Economy?
Trade model -Simple model assumes two countries and two goods -Demonstrates that trade creates value
Distinguish the true statements from the false statements.
True Market failure occurs when either negative or positive externalities are present. Market failure is when market provision of a good results in an inefficient quantity. Government sometimes intervenes when market failure occurs. False Market failure occurs when negative externalities are present but not when positive externalities are present. Market failure occurs when positive externalities are present but not when negative externalities are present. Externalities are the only example of market failure.
Classify the statements as true or false.
True A pollution charge & a pollution tax are the same thing. Pollution taxes encourage firms to find innovative ways to remove pollution. False With a pollution tax, firms must pay a fine if they pollute more than the legally specified amount. Command-and-control regulation is typically more efficient than emission taxes. Firms generate the same level of pollution regardless of any pollution taxes that are imposed.
Open market operations refer to the purchase or sale of ******** to control the money supply.
U.S. Treasury securities by the federal reserve
Smoot-hawley tariff
US tariff law of 1930; set highest tariff in US history (set off trade war and caused trade depression)
Commodity Money
Valued as a thing (intrinsic value)
How to deal w/ externality ?
Variety of ways to try to deal with externality: Government Command-and-control Market-based tools
Bank Reserves Include what?
Vault Cash and deposits with the federal reserve
The Keynesian view of economics assumes that:
Wages are sticky
Diminishing Marginal Return
When additional units add less and less to total output
Which of these describes a market failure?
When the market outcome fails to allocate resources efficiently
Your creditworthiness, or ability to get a loan, depends on
Your income, debt, assets, and credit history
Dividend
a direct payment from a firm to its shareholders
Risk
a measure of the uncertainty of that project's profitability
While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to
a range of more flexible, market-oriented pollution control policies.
tariff
a tax on imports
The Durban climate conference in December 2011 launched negotiations to develop a new international ____________ agreement that covers all countries. a. climate change b. labor c. monetary d. trade
a. climate change
Typically an increase in economic output results in a decrease in which of these? a. environmental protection b. wages c. economic sovereignty d. productivity
a. environmental protection
Additional external cost
additional costs incurred by 3rd parties outside the production process when a unit of output is produced
Financial Intermiediary
an institution, like a bank, that receives money from savers and provides funds to borrowers
The equilibrium quantity in markets characterized by oligopoly is a. higher than in monopoly markets and higher than in perfectly competitive markets b. higher than in monopoly markets and lower than in perfectly competitive markets c. lower than in monopoly markets and higher than in perfectly competitive markets d. lower than in monopoly markets and lower than in perfectly competitive markets
b. higher than in monopoly markets and lower than in perfectly competitive markets
In an oligopoly, the total output produced in the market is a. higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive b. higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive c. lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive d. lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive
b. higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive
A good that _____ is likely to suffer from a free-rider problem. a. produces a negative externality b. is nonexcludable c. has a sticky price d. is new in an established market
b. is nonexcludable
Which of these is a positive externality of a new technology such as the cell phone? a. the increase in profits for the innovator b. other new technologies invented as a result c. an increase in wages for high-tech workers d. more efficient use of natural resources
b. other new technologies invented as a result
A restaurant owner trying to determine whether to borrow money to open a second restaurant will compare interest rates with _____. a. the size of the money supply b. the expected rate of return c. the prevailing wage d. real estate prices
b. the expected rate of return
Which of these situations produces the largest profits for oligopolists? a. the firm reaches a Nash equilibrium b. the firm reaches the monopoly equilibrium c. the firms reach the competitive outcome d. the firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome
b. the firm reaches the monopoly equilibrium
A firm produces 1,000 widgets. It sells each widget for $1. In order to calculate the firm's average profits, one would need to know _______. a. marginal costs b. total costs c. price d. elasticity
b. total costs
The number of people served by advanced wastewater treatment plants doubled between 1968 and the mid-1990s, but because the treatment plants _______________________, the quantity of waste emitted into the water after treatment ___________________ .
became so much more effective; decreased by about one-third
positive externalitites
beneficial spillovers to a third party or parties
the demand for a public good represents _______ to society and the supply curve represents society's _____.
benefit;costs
The problem of pollution arises in primarily ______________ economies around the world.
both a and b
Hybrid mutual funds normally invest significant amounts in
both common stock and long-term bonds.
In order to shift the vertical supply curve to the left, which of the following would have to occur?
breakdown of key market institutions
environmentalist groups act to directly reduce of emissions by
buying marketable emission permits and not re-selling them.
As the number of firms in an oligopoly market a. decreases, the price charged by firms likely decreases b. decreases, the market approaches the competitive market outcome c. increases, the market approaches the competitive market outcome d. increases, the market approaches the monopoly outcome
c. increases, the market approaches the competitive market outcome
CHECK CHAPTER 12 Graphs
check
check chapter 13 for graphs
check graphs
Economic reasoning suggests that ______________ can protect valuable animal populations better than _____________.
clearly defined private property rights; a ban on hunting
positive externalities & public goods are...
closely related concepts ex. police protection, healthcare, library
laws that specify allowable quantities of pollution and that also may detail which pollution-control technologies must be used
command-and-control regulation
When nations increase production in their area of _________________ and trade with
comparative advantage
do domestic consumers or producers lose more from restrictions?
consumers
non-excludable goods
costly or impossible to exclude someone from using the good
If a glass manufacturer has only a few _____________ of reducing pollutants, it will ________________.
costly ways; end up paying the pollution tax
Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives.
create incentives; allow firms some flexibility
Market-oriented environmental tools _________________ for firms to take the social costs of pollution into account and _______________ in reacting to these incentives.
create incentives; allow firms some flexibility
Which of the following represents a Keynesian point of view of macroeconomics?
creating increases in aggregate demand to reduce unemployment
Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society's point of view. The payoffs facing these companies are given in the table below. From the table, we know that if Company 2 chooses to cut, Company 1 will choose to ______ the forest. If Company 2 chooses to not cut, Company 1 will choose to ______ the forest.
cut, cut
The story of the prisoners' dilemma shows why a. predatory pricing is clearly not in society's best interest b. economists are unanimous in condemning resale price maintenance, since it inevitably reduces competition c. oligopolies can fail to act independently, even when independent decision-making is in their best interest d. oligopolies can fail to cooperate, even when cooperation is in their best interest
d. oligopolies can fail to cooperate, even when cooperation is in their best interest
If the period of patent protection were to be reduced, it would make innovation less lucrative, so the amount of ________ would likely decline. a. total revenue b. product marketing c. sales d. research and development
d. research and development
Which of these allows a private firm to sell a good that is both nonrival and nonexcludable? a. government subsidies b. charging tolls c. intellectual property rights d. the use of advertising
d. the use of advertising
Which of the following would some economists be likely to perceive as the most appropriate public policy response to a positive externality created by the development of a highly innovative new technology? Select one: a. develop ways to provide a greater share of the social benefits to the innovator b. have reasonable rates of return not based on a notion of unearned social benefits c. not taking into account the positive externality associated with social benefit d. not taking into account the negative externality associated with social benefit
develop ways to provide a greater share of the social benefits to the innovator
By type of fund, there are more ______________ funds than any other.
equity
Market failure describes a situation in which the market itself _________ in a way that balances social costs and benefits. Select one: a. fails to allocate resources efficiently b. avoids externalities c. incurs the costs outside the production process d. remains outside the transaction
fails to allocate resources efficiently
Market failure describes a situation in which the market itself ___________ in a way that balances social costs and benefits.
fails to allocate resources efficiently
A monopolistically competitive firm faces a relatively steeper demand curve than the demand curve faced by a monopolist. Select one: True False
false
Bundling - a situation where a customer is allowed to buy one product only if the customer also buys another product. Select one: True False
false
Collusionis when firms act together to increase output and keep prices high. Select one: True False
false
In monopolistic competition goods are produced at the lowest possible average cost. Select one: True False
false
In monopolistic competition, the long-term result of entry and exit is that firms end up with a price that lies on the upward-sloping portion of the AC curve, not at the very bottom of the AC curve. Select one: True False
false
Is the following game a Prisoner's Dilemma type game? 0,-1 -17,-2 -1,-18 -8,-6 Select one: True False
false
Merger - when one firm purchases another. Select one: True False
false
Natural monopoly arises when average costs are declining over the range of production that satisfies market demand. Typically happens when fixed costs are small relative to variable costs. Select one: True False
false
Natural monopoly arises when average costs are rising over the range of production that satisfies market demand. Select one: True False
false
Private rates of return - when the estimated rates of return go primarily to society. Select one: True False
false
Public good- good that is non-excludable and rival. Select one: True False
false
Tying sales - a situation in which multiple products are sold as one. Select one: True False
false
When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being a public good. Select one: True False
false
dumping
firm or industry that sells products on world market at prices below cost of production
Which of the following government policies would be supported by neoclassical macroeconomic assumptions?
focus on long-term growth and on controlling inflation
With respect to the benefits of clean air and water, which of the following would most likely be classified as being relatively easy to value in economic terms?
gains in farming, fishing and tourism
tax breaks for research & development (R&D)
gives firms a reduction in taxes depending on how much research & development (R&D) they do referred to as research & experimentation (R&E) tax credit - gives firms tax credits for investing in INNOVATION
public good
good that is nonexcludable and nonrivalrous, and thus is difficult for market producers to sell to individual consumers
export subsidies
gov. payments made to domestic firms to encourage exports
intellectual property rights
guarantees the innovator an exclusive right to that new product ex. patents & copyright laws
Alternate Outputs from One Day's Labor Input: USA, 12 bushels of wheat or 3 yards of textiles; India, 3 bushels of wheat or 12 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
Alternate Outputs from One Day's Labor Input:USA: 12 bushels of wheat or 3 yards of textiles.India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
The problem of pollution typically arises in ______________ economies around the world.
high or low-income
Expected Rate of Return
how much a project or an investment is expected to return to the investor, either in future interest payments, capital gains, or increased profitability
According to international trade theory, a country should:
import goods in which it has a comparative disadvantage.
ETFs are a direct competitor to ___________.
index funds
Less people buy bonds =
interest rate rises
A typical neoclassical aggregate supply (AS) curve ______________ and a typical neoclassical Phillips curve __________________.
is vertical; is vertical
While the U.S. command-and-control environmental regulations initiated in the 1970s have been effective at reducing pollution, some economists have difficulty with the legislation because ___________________.
it is full of fine print and exceptions, and costly for some firms to comply with.
While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because
it is full of fine print and exceptions, and costly for some firms to comply with.
While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because Select one: a. it usually requires different standards for all current and potential polluters. b. it is full of fine print and exceptions, and costly for some firms to comply with. c. it often requires different pollution-control technology for each polluter. d. it is not subject to compromises in the political process
it is full of fine print and exceptions, and costly for some firms to comply with.
how do countries go about strategic protectionism?
limiting or taxing exports which allows domestic firms to act as cartels when they are selling to international buyers
A ___________________ would lead a large greenhouse gas emitter to reduce emissions by less
lower pollution tax
occurs when a market outcome does not provide the socially optimal level of output
market failure
The main categories of market-oriented approaches to pollution control are
marketable permits; better-defined property rights; pollution charges.
Environmentalist groups tend to prefer ________________ to ___________________.
marketable permits; pollution charges
When you specialize in comparative goods, you ---- output.
maxamize
The idea behind comparative advantage reflects the possibility that one party
may be able to produce something at a lower opportunity cost than another party.
The idea behind comparative advantage reflects the possibility that one party:
may be able to produce something at a lower opportunity cost than another party.
in a negative production externalities graph the market output produces _____ output than is socially optimal
more
The ___________________ argument tends to view inflation as a cost that offers no offsetting gains in terms of lower unemployment?
neoclassical
once a good or service is provided it is not possible to exclude others from enjoying it
nonexcludability
pure public goods
nonrival and nonexclusive
national defense and public broadcasting
nonrival and nonexlsuive
externalities that cross national borders and that cannot be resolved by a single nation acting alone
nternational externalities
rivalrous goods
once the good is used it *can not be used again by anyone else to enjoy*
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.
opportunity cost
absolute advantage
over another country in the production of a porduct when it uses fewer resources to produce product than other country
Shareholders
people who own at least some shares of stock in a firm
a situation where a third party, outside the transaction, benefits from a market transaction by others
positive externality
benefits to others outside the market
positive externality
factor endowments
quantity and quality of labor, land, and natural resources of a country
exchange rate
ratio at which all currencies are traded
North American Free-Trade Agreement (NAFTA)
signed by US, Mex, and Canad to establish NA as a free trade zone
trade deficit
situation when a country imports more than it exports
Negative Externality
situation, 3rd party outside the transaction suffer from markt transaction
Postive Externality
situation, 3rd party outside the transaction, benefits from market transaction by others
A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________.
slopes upward; slopes downward
costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution
social costs
Some nations that seek to produce all of their own needs face the problem that:
some industries are too small to be efficient if restricted to their domestic markets alone.
Bondholder
someone who owns bonds and receives the interest payments
Money market mutual funds (MMMFs) have caused disintermediation at banks at times. This is because MMMFs
sometimes pay higher interest rates than bank deposits.
The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange.
spillover
corn laws
tariffs, subsidies, and restrictions enacted by the british parli. in 19 century to discourage imports and encourage exports
tariff
tax on imports
social benefits
the dollar value of all benefits of a new product or process invented by a company that can be captured by other firms and by society as a whole
private benefits
the dollar value of all benefits of a new product or process invented by a company that can be captured by the investing company
protectionism
the economic policy of restraining trade through quotas, tariffs, or other regulations that burden foreign producers but not domestic production
Why does the private section invests in innovation?
the firm receives only a *portion* of overall social benefits
Initial Public Offering (IPO)
the first sale of shares of stock by a firm to outside investors
The largest proportion of long-term mutual fund assets is held by ___________________.
the household sector
Coupon Rate
the interest rate paid on a bond; can be annual or semi-annual
A pollution charge is a form of tax imposed on
the quantity of pollution that a firm emits.
Bond Yield
the rate of return a bond is expected to pay at the time of purchase
Actual Rate of Return
the total rate of return, including capital gains and interest paid on an investment at the end of a period of time
social benefits
the value of all positive externalities
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:
there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result: there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants. The USA has a comparative advantage over China in the production of pants. there can be mutual gains from trade to the two countries if the USA exports pants to China in exchange for wheat. China has a comparative advantage over the USA in the production of wheat.
there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
A kinked demand curve - a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases. Select one: True False
true
A monopolistically competitive firm decides on its profit-maximizing quantity and price by using MR=MC rule. Select one: True False
true
A monopolistically competitive firm decides on its profit-maximizing quantity and price in much the same way as a monopolist. Select one: True False
true
Clearly defined property rights is one of the market-oriented tools for environmental protection. Select one: True False
true
Concentration ratio is used to measure the degree of monopoly power. Select one: True False
true
Is the following game a Prisoner's Dilemma type game? -2,-3 -17,-2 -1,-18 -8,-6 Select one: True False
true
One of the difficulties with the command-and-control environmental regulation is that it provides no incentive for pollutants to do better. Select one: True False
true
One of the government policies that can increase the incentives to innovate is guaranteeing intellectual property rights. Select one: True False
true
Pollution is an example of a negative externality. Select one: True False
true
Price cap regulation - when the regulator sets a price that a firm cannot exceed over the next few years. Select one: True False
true
Social Benefits = Private Benefits + Positive Externalities (i.e. External Benefits) Select one: True False
true
Social costs- costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process. Select one: True False
true
The Herfindahl-Hirshman Index (HHI) is used to measure the degree of monopoly power. Select one: True False
true
The appropriate public policy response to a positive externality, is to help the party creating the positive externality receive a greater share of the social benefits. Select one: True False
true
are tariffs and quotas interlinked?
yes-- you can always find a tariff that would achieve the same outcome as a quota
You open a 5-year CD for $1,000 that pays 2% interest, compounded annually. What is the value of that CD at the end of the 5 years?
$1,104.08
You have $10,000 to invest and you are considering investing in a fund. The fund charges a front-end load of 5.75 percent and an annual expense fee of 1.25 percent of the average asset value over the year. You believe the fund's gross rate of return will be 11 percent per year. If you make the investment, what should your investment be worth in one year?
$10,337.46
You have $12,500 to invest and you are considering investing in Fund X. The fund charges a front-end load of 3 percent and an annual expense fee of 2.25 percent of the ending asset value over the year. You believe the fund's gross rate of return will be 8 percent per year. If you make the investment, what should your investment be worth in one year?
$12,800.36
If Tyrone's income and expenses remain the same, how much money per month can he afford to save
$200
Growth Rate
% of change in real potential GDP (Y)
Initial Market and Secondary Market
(IPO) Initial Public Offering, firms first sale of stock to the public. (Funds go to firms)
Growth Rate Calculation
(new-old)/old
Inventors where their inventions brought them less profit
* Eli Whitney: invented the cotton gin, Southern planters copied it * Thomas Edison: invented the automatic vote counter - couldn't find a gov't that wanted to buy it (despite social benefits) * Gordon Gould: invented the laser, put off a patent * Turing: presented the notion of a universal machine
How do they make money?
-Dividend -Capital Gains
Households
-Expected rate of return it will pay -Risk of high/low return than expected -Liquidity of investment: How easily money/ financial assets exchange for goods and services.
Bonds
-IOU's -High yield bonds/junk bonds: Bonds offer higher interest rates in compensate for their relatively high chance of default.
NAFTA
-North American Free Trade Agreement -Signed in 1992 -Eliminated nearly all trade restrictions between Canada, the US and Mex.
how does trade increase productivity?
-specialization -division of knowledge -production consistent with comparative advantage
innovation & technology make...
...life better
The graph shows the marginal cost of abatement curve, which shows the extra cost to the firm of cleaning up an additional unit of pollution. When a pollution charge of $5 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up: __________ When a pollution tax of $20 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up: __________
0 40
If you receive $500 in simple interest on a loan that you made for $10,000 for 5 years, what was the interest rate you charged?
1%
3 Keys about Economic Growth
1. Growth is a process 2. It is defined in terms of the economy's ability to produce goods/services 3. It suggests that an economy's ability to produce goods/services is rising
How many board of governors of the federal reserve are there?
7
79. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when social costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
A
A ________ is a direct payment from a firm to its shareholders. A. dividend B. bond C. capital gain D. share
A
Which of the following would legally qualify you to be registered as a shareholder of Microsoft Corporation? A. buying the stock on the New York Stock Exchange B. investing in bonds issued by the Microsoft C. ownership of debt issued by the firm D. a Microsoft employee given options to buy the firm's shares
A
____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A. Negative externality B. Positive externality C. A spillover D. A market failure
A
What is a bank run and what is an example?
A situation in which many depositors simultaneously decide to withdraw money from a bank (e.g. Stock market Crash in the 30's)
Which of the following is a market-oriented solution to the inefficiency?
A tax with a size of P2 - P4.
24) If a bank has $10 million of deposits, a required reserve ratio of 10 percent, and $2 million in reserves, then it does not have enough reserves to support a deposit outflow of A) $1.2 million. B) $1.1 million. C) $1 million. D) either A or B of the above.
A) $1.2 million.
27) Which is the least costly way for a bank to handle deposit outflows? A) Hold excess reserves. B) Borrow from other banks. C) Sell securities. D) Call in loans.
A) Hold excess reserves.
36) Net profit after taxes per dollar of assets is a basic measure of bank profitability called A) return on assets. B) return on capital. C) return on equity. D) return after taxes.
A) return on assets.
94. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is more likely to represent a market-oriented policy? A. E B. C C. all points D. none
A. E
2. Using the term "spillover" is a less formal means of describing A. an externality. B. social costs. C. private costs. D. market failure.
A. an externality.
Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? A. high degree of inflexibility B. clear distinctions drawn between firms C. lack of incentive to reduce pollution D. obvious lack of loopholes
A. high degree of inflexibility
Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ . A. positive regulations B. command and control regulations C. control and command regulations D. negative regulations
A. positive regulations
The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government A. stipulated mandatory use of particular pollution-control technologies. B. allowed pollution credits to be traded between polluters to avoid bearing social costs. C. stipulated exemptions for industries that lobbied politicians hard to avoid regulation. D. allowed industries to determine pollution levels based on profit margins.
A. stipulated mandatory use of particular pollution-control technologies.
15. Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output? A. the European Union B. China C. Ohio D. command economies
A. the European Union
Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.
Absolute advantage
What is A model that explains short-run fluctuations in real GDP and the price level?
Aggregate demand and aggregate supply Model
If aggregate demand increases, what may of caused it?
An increase in government purchases
How does economic growth affect the production possibilities curve?
An increase in potential output is an outward shift on the ppc
Pollution
At market output, social costs of production exceed social benefits to consumers, and the market produced too much of the product
A financial gain earned by purchasing stock in a publically traded company and subsequently selling the investment at higher price is commonly referred to as a _____________ . A. dividend B. capital gain C. interest payment D. rate of return
B
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is: 3 yards of textiles. 4 yards of textiles. 12 yards of textiles. 1 yard of textiles.
B
During the recent U.S. recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their _________________ . A. shareholders B. bondholders C. Chief Executive Officer D. Board of Directors
B
Holly and Josh paid 10% down for their $245,000 home in 2004. If they sell their house for $255,000 in 2010, what will the value of their equity be? A. $5,000 B. $29,500 C. $24,500 D. $30,000
B
In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels. A. marketable permits B. pollution charges C. enhanced property rights D. ecotourism
B
Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the _____________________ and the __________________ . A. marginal benefits are least; marginal costs are greatest B. marginal benefits are greatest; marginal costs are least C. environmental benefits are greatest; social costs are least D. social costs are greatest; environmental benefits are least
B
80. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that shows how much it would cost each company to reduce its pollution by additional increments of 10 pounds. If each mining company is forced to cut its debris in half, the respective cost to Kip and Yale will be A. $5, $2 B. $10, $4 C. $30, $20 D. $30, $12
B. $10, $4
45. Those firms in the oil refining industry that can reduce pollution __________________ will do so _______________________ . A. for a flat charge; at the industrial level B. cheaply and easily; to minimize their pollution taxes C. for a flat charge; with the most expensive technologies D. cheaply and easily; with the most expensive technologies
B. cheaply and easily; to minimize their pollution taxes
60. Marketable permits can be viewed as a form of improved _______________. A. command-and-control regulations B. property rights C. refundable tax credits D. flat fee pollution tax
B. property rights
One major difference between banks and credit unions is that
Banks are profit-making firms while credit unions are non-profit institutions
How do banks create money?
Banks create checking account deposits when making loans from excess reserves
90. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. What level of toxic waste should the country reduce to? A. 30 million tons B. 20 million tons C. 10 million tons D. 0 tons
C
96. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. If both firms install the filters, then Boing will earn ________ and Twang will earn ________ . A. $0 million, $0 million B. -$5 million, -$5 million C. $5 million, $5 million D. $10 million, $10 million
C
A _____________ is a firm that has sold its stock by making it available to be bought and sold by outside investors. A. business entity B. private company C. public company D. public proprietorship
C
A ___________________ would lead a large greenhouse gas emitter to reduce emissions by less. A. flat charge B. higher pollution tax C. lower pollution tax D. pollution tax
C
Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has A. steadily declined. B. remained unchanged. C. steadily improved. D. remained a non-issue.
C
Small companies typically prefer____________ to borrowing from a bank because it is a source of funding where the company is not obligated to _____________________ . A. issuing bonds; to proceed with an IPO B. an IPO; issue bonds C. an IPO; make interest payments D. issuing bonds; make interest payments
C
The _________ of an investment is determined by how easy it is to sell an asset at any given time. A. profitability B. expected profitability C. liquidity D. sustainable outcome
C
_______________ of well-to-do individuals often put their own money into small new companies at an early stage of development, in exchange for owning some portion of the firm. A. A venture fund B. A collateral group C. A network D. Partnerships
C
37) The amount of assets per dollar of equity capital is called the A) asset ratio. B) equity ratio. C) equity multiplier. D) asset multiplier. E) return on equity.
C) equity multiplier.
11) Because of their ________ liquidity, ________ U.S. government securities are called secondary reserves. A) low; short-term B) low; long-term C) high; short-term D) high; long-term
C) high; short-term
12) The most important category of assets on a bank's balance sheet is A) discount loans. B) securities. C) loans. D) cash items in the process of collection.
C) loans.
35) Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called A) return on assets. B) return after taxes. C) return on equity. D) equity multiplier.
C) return on equity.
3) The share of checkable deposits in total bank liabilities has A) expanded moderately over time. B) expanded dramatically over time. C) shrunk over time. D) remained virtually unchanged since 1960.
C) shrunk over time.
39) In the absence of regulation, banks would probably hold A) too much capital, reducing the efficiency of the payments system. B) too much capital, reducing the profitability of banks. C) too little capital, increasing the return on equity. D) none of the above.
C) too little capital, increasing the return on equity.
82. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with waste from their manufacturing processes. In the table below, the first row shows the current level of waste that makes its way into the river from their respective operations. The table also sets out information that indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. If each company is required to reduce debris by exactly 20 pounds, the total cost will be A. $7 B. $14 C. $21 D. $30
C. $21
67. When making decisions about what safety systems should be required in cars or airplanes, the ___________________ will only approve rules where the estimated cost per life saved is __________ or less. A. U.S. Senate; $5 million B. U.S. Congress; $2 million C. Environmental Protection Agency; $3 million D. Environmental Regulation Agency; $7 million
C. Environmental Protection Agency; $3 million
One concern that environmentalists have is that market-oriented environmental tools are A. an inflexible took that won't reduce pollution levels. B. an excuse to implement strict limits on emissions. C. an excuse to allow pollution to be maintained or to grow. D. able to achieve desired reductions in pollution at a lower cost.
C. an excuse to allow pollution to be maintained or to grow.
Environmentalist groups act to directly reduce of emissions by A. allowing a limited amount of pollution to occur. B. allowing a declining amount of pollution to occur. C. buying marketable emission permits and not re-selling them. D. buying, trading, and re-selling marketable emission permits.
C. buying marketable emission permits and not re-selling them.
62. The property rights approach to environmental issues often becomes highly relevant in cases involving __________________. A. greenhouse gas emissions B. harmful affects of acid rain C. endangered species D. fresh water resources
C. endangered species
31. Why do U.S. economists commonly refer to externalities as an example of market failure? A. firms that are required to pay social costs of externalities produce more B. externalities present a case where markets consider all social costs C. externalities present a case where markets only consider some social costs D. firms avoid having to pay social costs of externalities by lowering prices
C. externalities present a case where markets only consider some social costs
Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. A. remains outside the transaction B. incurs the costs outside the production process C. fails to allocate resources efficiently D. avoids externalities
C. fails to allocate resources efficiently
12. The problem of pollution typically arises in ______________ economies around the world. A. high-income B. low-income C. high or low-income D. middle income
C. high or low-income
38. While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because A. it often requires different pollution-control technology for each polluter. B. it usually requires different standards for all current and potential polluters. C. it is full of fine print and exceptions, and costly for some firms to comply with. D. it is not subject to compromises in the political process and all of the above.
C. it is full of fine print and exceptions, and costly for some firms to comply with.
Around the world, the cities with the dirtiest air and water are typically found in ___________________________ . A. high-income countries like France and the U.S. B. in low-income African nations C. low-income countries in Africa and Asia D. in low-income East Asian nations
C. low-income countries in Africa and Asia
44. A ___________________ would lead a large greenhouse gas emitter to reduce emissions by less. A. flat charge B. higher pollution tax C. lower pollution tax D. pollution tax
C. lower pollution tax
When nations increase production in their area of _________________ and trade with each other, both sides can benefit.
Comparative Advantage
Cost of Tariffs
Consumer costs -Higher prices, less purchases Foreign producers -Limited on how much they can sell -Fewer dollars in foreign countries...this means that there are fewer dollars for use in purchasing US exports as well! -Tariffs can isolate you as a nation *think of Cuba
91. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. What number belongs in place of X? A. 700 B. 900 C. 1300 D. 1500
D
Last year Stealth Bank received $100 million in interest payments from borrowers. $25 million in loans were written off as uncollectible. It paid out $30 million in interest to its depositors and collected $25 million for various fees it charged. Administration costs were $22 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits? A. $135 million B. $80 million C. $75 million D. $45 million
D
Property rights are the legal rights of ownership on which others are A. allowed to infringe by paying the property owner's pollution tax. B. able to enforce use of pollution-control technologies. C. able to specify allowable quantities of pollution. D. not allowed to infringe without paying compensation.
D
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? Alland has comparative advantage, but not an absolute advantage, in producing food. Alland has both a comparative and absolute advantage in producing food. Georgeland has both a comparative and absolute disadvantage in producing clothing. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.
D
Some of the leading ecotourism destinations include: A. Costa Rica and Panama in Central America B. Malaysia and the Galapagos Islands C. the Serengeti in Tanzania; the Amazon rain forests D. the Caribbean, New Zealand and all of the above
D
The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like A. an incentive to throw bottles and cans in the trash. B. command-and-control regulation. C. a market permit program. D. a pollution tax incentive to avoid littering.
D
When the quantity of environmental protection is low so that pollution is extensive, then there are usually ______________ to reduce pollution and the ______________ . A. a few inexpensive and easy ways; average benefit are slightly higher B. a lot of expensive and innovative methods; marginal benefits are quite high C. only a few expensive and innovative methods; average benefits are higher D. a lot of cheap and easy ways; marginal benefits of doing so are quite high
D
________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry. Protectionism Import quotas Dumping The infant industry argument
D
1) Which of the following statements is false? A) A bank's assets are its uses of funds. B) A bank issues liabilities to acquire funds. C) A bank's assets provide the bank with income. D) Bank capital is an asset on the bank balance sheet.
D) Bank Capital is an asset on the bank balance sheet
42) The danger of banks engaging in activities such as trading in financial futures and interest-rate swaps is that these activities allow banks to A) increase profits. B) decrease risks. C) avoid bank regulations. D) engage in speculation.
D) engage in speculation
34) On a bank's income statement, the provision for loan losses is an ________ item and represents the amount of ________ in the bank's loan loss reserves. A) income; decrease B) income; increase C) expense; decrease D) expense; increase
D) expense; increase
45) Bank capital A) is raised by selling new equity. B) is a cushion against a drop in the value of its assets. C) comes from retained earnings. D) is all of the above.
D) is all of the above.
95. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is not feasible? A. A B. B C. C D. D
D. D
78. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when only private costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
D. Price = $30, Quantity = 80
Marketable permits work best when there are _____________________ permit holders who are highly interested in trading. A. several dozen or a several hundred B. less than a hundred C. more than a thousand D. a few dozen or a few hundred
D. a few dozen or a few hundred
69. When the quantity of environmental protection is low so that pollution is extensive, then there are usually ______________ to reduce pollution and the ______________ . A. a few inexpensive and easy ways; average benefit are slightly higher B. a lot of expensive and innovative methods; marginal benefits are quite high C. only a few expensive and innovative methods; average benefits are higher D. a lot of cheap and easy ways; marginal benefits of doing so are quite high
D. a lot of cheap and easy ways; marginal benefits of doing so are quite high
72. The challenge of preserving biodiversity, A. any nation itself can reduce emissions to solve global warming. B. any nation acting alone can protect biodiversity around the world. C. includes the full spectrum of animal and plant genetic material. D. a nation can protect biodiversity within its own borders and c.
D. a nation can protect biodiversity within its own borders and c.
The challenge of preserving biodiversity, A. any nation itself can reduce emissions to solve global warming. B. any nation acting alone can protect biodiversity around the world. C. includes the full spectrum of animal and plant genetic material. D. a nation can protect biodiversity within its own borders and c.
D. a nation can protect biodiversity within its own borders and c.
The flexibility of marketable permits program developed for the oil refining industry is credited with achieving the reduction in lead pollution for __________ less cost than command-and-control regulation would have required.
D. at least 20%
What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants? A. shrinkable marketable permits B. free marketable permits C. command-and-control permits D. both a and b above
D. both a and b above
Command-and-control regulation is a body of law that A. fails to consider private costs of firms. B. specifies allowable quantities of pollution. C. details which pollution-control technologies must be used. D. can include both b and c.
D. can include both b and c.
70. As environmental protection increases, A. the biggest marginal benefits are achieved first, smaller marginal benefits follow. B. inexpensive and easy methods of reducing pollution begin to dwindle. C. the more costly and innovative methods can be readily avoided. D. in addition to a and b above, the quality of environmental protection increases.
D. in addition to a and b above, the quality of environmental protection increases.
9. Property rights are the legal rights of ownership on which others are A. allowed to infringe by paying the property owner's pollution tax. B. able to enforce use of pollution-control technologies. C. able to specify allowable quantities of pollution. D. not allowed to infringe without paying compensation.
D. not allowed to infringe without paying compensation.
11. Which of the following is an example of economic output that can injure the environment? A. gold mine discharging arsenic into a natural lake it's using for a tailings pond B. paper mill discharging raw chemical waste into a river C. excessive clear cutting of wood resources by logging companies D. radio-active waste leaking into a river, and all of the above
D. radio-active waste leaking into a river, and all of the above
65. Some of the leading ecotourism destinations include: A. Costa Rica and Panama in Central America B. Malaysia and the Galapagos Islands C. the Serengeti in Tanzania; the Amazon rain forests D. the Caribbean, New Zealand and all of the above
D. the Caribbean, New Zealand and all of the above
Some of the leading ecotourism destinations include: A. Costa Rica and Panama in Central America B. Malaysia and the Galapagos Islands C. the Serengeti in Tanzania; the Amazon rain forests D. the Caribbean, New Zealand and all of the above
D. the Caribbean, New Zealand and all of the above
35. To be effective, U.S. command-and-control environmental regulation required A. social costs of industrial pollution to become unavoidable business costs. B. firms to take the social costs of pollution into account. C. firms to increase their costs by installing specified anti-pollution equipment. D. the EPA to oversee all environmental laws and all of the above.
D. the EPA to oversee all environmental laws and all of the above.
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: A. each would create less pollution B. each would lower production to decrease pollution levels C. their supply curves will represent all of those social costs D. the price of goods will rise and a and b above
D. the price of goods will rise and a and b above
Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking? A. the principle of setting high toxic emission limits to preserve a healthy environment B. the belief that industry must be allowed to prevail over the environment C. the needs of both parties to a voluntary exchange must be completely satisfied D. the principle that a system of voluntary exchange benefits both parties
D. the principle that a system of voluntary exchange benefits both parties
As it pertains to investment, a higher price will increase the interest rate and do what to investment spending?
Decrease investment Spending
What effect does higher personal income taxes have on aggregate demand?
Decreases Aggregate Demand
Rule of 72
Doubling time for an investment
43) When a bank sells all or part of the cash stream from a specific loan, A) it removes the loan from its balance sheet. B) it usually does so at a loss. C) it usually does so at a profit. D) both A and B of the above occur. E) both A and C of the above occur.
E) both A and C of the above occur.
2) A bank's balance sheet A) shows that total assets equal total liabilities plus equity capital. B) lists sources and uses of bank funds. C) indicates whether or not the bank is profitable. D) does all of the above. E) does only A and B of the above.
E) does only A and B of the above.
28) A bank can reduce its total amount of loans outstanding by A) "calling in" loans; that is, by not renewing some loans when they come due. B) selling loans to other banks. C) selling loans to the Federal Reserve. D) doing all of the above. E) doing only A and B of the above.
E) doing only A and B of the above.
Other Advantages of Trade
Economies of scale -Trade gives smaller countries access to goods such as cards -In addition, smaller countries can produce higher quantities of goods they have a comparative advantage in, using their own economies of scale Competition -Foreign competition diminishes domestic monopoly power and offers consumers a wider variety of options
When production of a good or service produces a negative externality, regulators want to ___________
Encourage less production
If the neoclassical argument that the economy always moves back to potential GDP is accepted, then which of the following will be more important?
Encouraging long term growth
A buyer and a seller engage in a market exchange. The market exchange affects a third party who does not participate in the market exchange. This market exchange has conferred a(n) ___________.
Externality
From a neoclassical view, which of the following is less important?
Fighting unemployment
Public Company
Firms sell stock, then bought and sold by financial investors.
Venture capital
Gather money from a variety of individual or institutional investor; banks, college endowments, insurance companies, corporate pension funds.
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?
Georgeland has an absolute but not a comparative advantage in producing clothing.
The BEST way to accumulate personal wealth is to
Get as much education and job training as you can, and start saving early in your life
Growth Rate of Real GDP Per Capita
Growth rate of real GDP-Growth rate of population
A person who invests in mutual funds is choosing an investment that
Has a balance of low risk/ low return and high risk/high return option
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true?
If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade
How will standard of living increase?
If population growth is smaller than output growth.
Quotas
Import Quotas -Limit on the quantity that can be imported into a country -Quotas on milk, tuna, olives, peanuts, cotton, sugar -Japan agreed "voluntary" quota of vehicles it would export to the United States. (Voluntary in the sense that it avoided a tariff.)
Gains from Trade Opportunity Costs
In order to realize gains from trade, countries must produce goods that have the lowest opportunity costs of production
When is unemployment at its natural rate?
In the long run
The purchase of Treasury securities by the Federal Reserve will, in regards to the quantity of reserves held by banks?
Increase the quantity of reserves held by banks
A decrease in the discount rate ******* bank reserves and ******** the money supply if banks respond appropriately to the change in rate.
Increase, Increase
A decrease in the reserve requirement ******* bank reserves and ***** the money supply
Increase, Increase
Stagflation occurs when?
Inflation rises and GDP falls
What effect is how a change in price level effects Investment.
Interest Rate Effect
_________________ are externalities that cross national borders and that a single nation acting alone cannot resolve.
International externalities
Fiat Money
Intrinsic value < value as money
From a neoclassical perspective, which of the following would most likely be viewed as an element that underpins long-run productivity growth in the economy?
Investments in human capital
Municipal Bond
Issued by cities/ a state bond
Treasury bond
Issued by federal government through U.S. department of treasury.
Corporate bonds
Issued by firm
What is economic growth?
It is a process when an economy's potential output increases.
What is a medium of exchange, in regards to the three functions of money?
It is a way of exchanging good and services for money.
How to you determine household wealth?
It is the difference between the value of it assets and the value of its debts
What is the slope of the long run aggregate supply curve?
It is vertical
As it pertains to consumption, if income rises what happens to consumption?
It will also rise
Store of Value
Items hold value over a period of time
What are discount loans?
Loans the federal Reserve makes to banks
The idea behind comparative advantage reflects the possibility that one party:
May be able to produce something at a lower opportunity cost than another party.
What happens to net exports, as the price level rises?
Net exports fall
What is it called when the federal reserve buys or sells short term government bonds?
Open Market Operations
What is the main tool the Federal Reserve uses to conduct monetary policy?
Open Market Operations
What are the three main monetary policy tools used by the federal reserve to manage the money supply?
Open Market Operations, Discount Policy, and reserve requirements
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.
Opportunity Cost
Widget Manufacturing Co. emits pollution into the atmosphere when it produces widgets. The pollution from Widget Manufacturing Co. is a(n) _______.
Opportunity cost
When negative externalities exist producers tend to ______________, leading to ____________ market outcomes.
Overproduce; inefficient
Private Company
Owned by people who run it on a day to day basis
Bondholder
Person who holds bonds
Full-Employment GDP is also known as?
Potential GDP
In the neoclassical model, the AS curve shifts to the right over time as_______________________ and potential GDP expands.
Productivity increases
The theory of _____________________ holds that people will use all information available to them to form the most accurate possible expectations about the future.
Rational expectation
Stocks
Represent ownership in a corporation
How can a country's citizens help achieve a higher rate of economic growth?
Sacrifice some present consumption
In the neoclassical view, the economy has a ___________________________ to move back to potential GDP.
Self correcting tendency
Sam wants to buy a new entertainment system that costs $1,500. He could get a 3-year personal loan from a bank at a fixed annual rate of 8.5% simple interest. He could also get a 3-year loan from a finance company that charges 8.2%, compounded annually. Which answer correctly compares the total costs of the loan with simple interest and the loan with compound interest?
Simple: $382.40; Compound: 417.16
______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social costs
What is a combination of inflation and recession, usually resulting form a supply shock.
Stagflation
Marketable permit programs (cap-and-trade)
→the selling of permits allowing only a predetermined quantity of pollution; firms w/ more permits than pollution can sell remaining permits to other firms, cost increases 1. Firms within industry determine how to achieve reductions 2.Firms that can reduce pollution at low cost sell surplus permits to firms whose compliance costs are high 3. Total reduction achieved at lower cost
Rosa deposited $500 in a savings account with a simple interest rate of 3% per year. IF she made no other deposit or withdrawals,
$30.00
Keisha deposited $400 in a savings account that pays a simple interest rate of 3.5% per year. If she made no other deposits or withdrawals, how much interest had she earned at the end of 3 years?
$42
An open-end mutual fund owns 1,500 shares of Krispy Kreme priced at $12. The fund also owns 1,000 shares of Ben & Jerry's priced at $43, and 2,000 shares of Pepsi priced at $50. The fund itself has 3,500 of its own shares outstanding. What is the NAV of a fund's share?
$46
Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. If both firms install the filters, then Boing will earn ________ and Twang will earn ________ .
$5 million, $5 million
What is the total amount of interest collected from a $5,000 loan after three years with a simple interest rate of 6%?
$5,900
Melissa wants to buy a living room set that costs $1,800. She could get a A 4-year personal loan from a bank at a fixed annual interest rate of 8.7%. She could also get a 4-year loan from a finance company that charges 8.5%, compounded annually. Which answer correctly compares the total costs of the loan with simple interest and the loan with compound interest?
$636.40 simple; 694.52 compound
The Matrixlandia Government wants to reduce the total amount of sulfur dioxide (SO2)(SO2) emitted by the electric industry by requiring both Modern Electric and Ancient Electric to reduce their emissions by 3 tons each, for a total SO2SO2 reduction of 6 tons. The table provides marginal cost (MC) of emissions reduction data. What will be the industry's total cost of reducing emissions by 6 tons (in hundreds of dollars)? Round your answer to two decimals. total cost: When the government enacts a cap and trade policy, Modern Electric decides to reduce its SO2SO2 emissions by 4 tons and trade (sell) one SO2SO2 emissions permit to Ancient Electric for $18.50$18.50 . With the permit from Modern, Ancient Electric needs to reduce its emissions by only 2 tons. What will be the industry's total cost for reducing emissions by 6 tons under the cap‑and‑trade policy (in hundreds of dollars)? Round your answer to two decimals. total cost under cap‑and‑trade policy: Using the information above, can a cap and trade policy help lower the total cost of pollution control?
$89 $82.75 yes
Tariffs
-A tariff is a tax on an imported good. It effectively raised the worlds price of the good by the amount of the per-unit tariff -The higher price of imports makes imports less desirable -There will be higher prices, but more domestic producers will be able to compete
How do firms raise capital?
-Borrow from banks/ Retained earnings and profits -Bonds: A financial contract, borrowing money then repay amount borrowed at interest rate. -Venture capital
Major Trading Partners of the US
-China -Canada -Mexico -Japan -Germany -South Korea -United Kingdom
Bond components
-Face value (amount buyers agree to pay the investment) -Coupon rate/interest rate (paid at different times throughout year) -Maturity rate (Borrowers will pay back face value/ interest rate -Bond yield (Measures rate of return a bond is expected to pay) -Combining on bonds face value, interest rate, maturity date, and market interest rate, allows a buyer to compute a bonds present value.
Implications of this free trade
-Increase in supply would occur -Total supply=domestic + imports -This supply increse would lower the price that we pay for the good here in the US -Some local producers would sell less products, possibly go out of business; people lose jobs
market-oriented tools
-Pollution Charges: - tax imposed on the quantity of pollution that a firm emits
Najor trading partners of the US; Canada and Mex.
-Popular trade partners due to location -Vehicles, oil, and natural gas from Canada -Coffee, computers, appliances and gold from Mex. -US exports cars, car parts, computers, agricultural products, and financial travel services
Modern trade increase caused by:
-Reduction in shipping costs -Increased specialization
Globalization and trade
-Total world exports are one-fourth the size of world GDP -Many of the goods we purchase in the United States are imported from other countries *ex. The iPhone- Designed by Apple in CA and assembled in China, the item is shipped thousands of miles before purchased
WTO
-World Trade Organization -Facilitates trade agreements among nations -Resolves disputes
Trade deficit
-a negative trade balance, when imports >exports -the US has has a trade deficit since 1975
Stocks#2
-based on supply/demand factors -stocks: fixed supply at given time -performance of markets is gauged
child labor (arguments against trade)
-common in 19th century great britian and the us -child labor declined in developed world as people got richer -forces that reduced child labor in the developed countries are not in developing countries
key industries (arguments against trade)
-key industries are those that create spillovers
we need to keep certain jobs at home for national security (arguments against trade)
-protection may be justified -- (ex: domestic vaccine industry) problem: creates incentive for every domestic producer to claim their product is vital for national secutity
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:
0.5 apples; 0.25 apples.
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange?
1 apple for 3 oranges
3 Functions of Money
1. Medium of Exchange 2. Store of Value 3. Unit of Account
Mutual funds and Housing
1. Principals of diversification -Buy stocks/bonds at a wide range of companies to spread risk of individual stocks. 2. Housing: Single largest investment by most households; overtime value increases.
Three difficulties with command-and-control regulation
1. offer no incentive to improve the quality of environment beyond the set standard 2. inflexible, and requires same standard for all polluters 3. written by legislators and the EPA, so are subject to compromises in the political process
why is the free market efficient?
1. supply of goods is bought by the buyers with the highest willingness to pay 2.the supply of goods is sold by sellers with the lowest cost 3.between buyers and sellers, there are no unexploited gains from trade or any wasteful trades
A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. What level of toxic waste should the country reduce to?
10 million tons
Economists have found though several studies that the rate of return of a college education to that person, in the United States, is approximately _____ %. Select one: a. 10-15 b. 25-35 c. >50 d. 0-5
10-15
Hedge funds charge expense fees and performance fees. The average performance fee on hedge funds is ____________.
20 percent
You have $16,000 to invest in a mutual fund with a NAV = $45. You choose a fund with a 4 percent front load, a 1 percent management fee, and a 0.25 percent 12b-1 fee. Assume that the management and 12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 9 percent. What was your net annual rate of return to the nearest basis point?
3.33 percent
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles.India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:
4 years of textiles
A small city has an open space in the middle of downtown it can rent for concerts. Concerts are fun, but noise from the music and the concertgoers annoys some of the quieter citizens. The marginal private benefit (𝑀𝐵𝑃MBP), marginal private cost (𝑀𝐶𝑃MCP), and marginal external cost (𝑀𝐶𝐸MCE) for each number of concerts are given in the accompanying table: a. Absent government intervention, how many concerts are held downtown? b. After receiving several complaints from downtown residents, the city council decides to limit the number of concerts for which it will rent the downtown space. What is the socially optimal number of downtown concerts c. The city council's staff economist suggests that instead of imposing a strict limit on the number of concerts, the city council should implement a "noise fee." What should this fee be to result in the same number of concerts as in part b? d. Which statement most accurately describes the city council's action in part b? Which statement most accurately describes the staff economist's proposition in part c? The economist suggested
6 concerts 4 concerts $2000 per concert imposed an evironmental regulation. imposing a Pigouvian tax.
You have $15,000 to invest in a mutual fund. You choose a fund with a 3.5 percent front load, a 1.75 percent management fee, and a 0.5 percent 12b-1 fee. Assume, for simplicity, that the management and 12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 12.50 percent. What was your net annual rate of return to the nearest basis point?
6.12 percent
You wish to invest $17,445 in a mutual fund with a NAV of $26.03. The fund charges a front-end load of 4.50 percent. How many fund shares will you receive?
640
Rule of 72 Calculation
72/growth rate
Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be:
8 wine; 16 cloths
About ___________ of retirement plan investments are in so-called institutional funds, which are funds that manage retirement plans for an institution's employees.
80 percent
Capital funds
= firms
84. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. In the table below, the first row of shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. The total cost of requiring each firm to reduce its garbage by one third is A. $167 B. $137 C. $187 D. $127
A
87. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner's dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. From the table, we know that the outcome of this game will be A. neither state choosing to protect the lake B. Wisconsin choosing to not protect the lake, Michigan choosing to protect the lake C. Wisconsin choosing to protect the lake, Michigan choosing to not protect the lake D. both states choosing to protect the lake
A
94. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is more likely to represent a market-oriented policy? A. E B. C C. all points D. none
A
A bond is a form of ___________ through which a corporation agrees to repay the amount that was borrowed together with ___________ over a period of time in the future. A. financial contract; a rate of interest B. financial instrument; a rate of return C. initial public offering; a rate of interest D. financial investment; guarantees the investment
A
A pollution charge is a form of tax imposed on A. the quantity of pollution that a firm emits. B. pollution control technologies. C. every economy in the world. D. low-income market-orientated industries.
A
An economist is more likely to identify __________________ as a more efficient and flexible way for society to __________________________ . A. marketable permits; allow a limited, declining amount of pollution to occur B. better defined property rights; to address issues of allowable levels of pollution C. market-oriented environmental tools; enforce strict limits on emissions D. better defined property rights; to shrink pollution levels over time
A
Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ . A. positive regulations B. command and control regulations C. control and command regulations D. negative regulations
A
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: an absolute advantage in coffee production a comparative advantage in coffee production. both a comparative and absolute advantage in coffee production. an absolute advantage and comparative disadvantage in coffee production.
A
If a $1,000 five-year bond that was issued at an interest rate of 7% is offered for sale one year before it matures, and the current interest is 5%, how much should an investor be willing to pay for it? A. $1,019 B. $1,124 C. $1,050 D. $952
A
If a glass manufacturer has only a few ________________ of reducing pollutants, it will ____________________ . A. costly ways; end up paying the pollution tax. B. inexpensive ways; incur the pollution tax instead. C. costly ways; do so to minimize its pollution taxes. D. inexpensive ways; buy the most expensive technology.
A
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will A. take place in the firms where it is least expensive to do so. B. take place in every firm within the time set by the permit. C. be initiated at the household level. D. be rewarded with refundable charges.
A
If an externality of pollution exists for all manufacturers in a given industry, then all related social costs A. are no longer represented in their supply curves. B. continue to be represented in their supply curves. C. are no longer represented in their demand curves. D. continue to be represented in their demand curves.
A
In 2004, Ted and Diane paid 20% down and took out a five-year mortgage for the balance of the $265,000 price of a home. After deducting interest, their monthly payments toward the principle balance owed on the mortgage was reduced by $2,000.00 each year. If they were to sell their home in 2009, it would sell for $215,000. What is the equity in their home? A. $13,000 B. $50,000 C. $163,000 D. $202,000
A
Investors who believe that the stock is _____________ , relative to the fundamental value of its future expected profits, will sell their shares to those who believe that the stock is __________. A. overvalued; undervalued B. undervalued; overvalued C. momentum trading; less risky D. high risk; disadvantaged
A
Last year Stealth Bank received $60 million in interest payments from borrowers. $20 million in loans were written off as uncollectible. It paid out $22 million in interest to its depositors and collected $35 million for various fees it charged. Administration costs were $15 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits? A. $35 million B. $15 million C. $50 million D. $57 million
A
Market-oriented environmental policies are ________, and __________ will work better in some situations than in others. A. a tool-kit; specific tools B. productive policies; some policies C. inflexible; incentives to protect endangered species D. flexible; the command-and-control approach
A
Since stock prices will shift in response to unpredictable future news, these prices will tend to follow what mathematicians call _________________. A. a random walk with a trend B. momentum trading C. long-term fundamental value D. unpredictable changes in expectations
A
Stock markets often experience a frenzy of buying or selling when investors are ___________________ by following the current trend in a very actively traded company. A. momentum trading B. trading on fundamentals C. diversifying their portfolios D. decreasing investment yields
A
Tariffs result in a decrease in consumer surplus because: the price of the protected good increases and quantity consumed decreases. the price of the protected good decreases and quantity consumed increases. the price and the quantity consumed of the protected good decreases. the price and the quantity consumed of the protected good increases.
A
The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife spend over A. $450 billion per year. B. $550 billion per year. C. $250 billion annually. D. $200 billion annually.
A
The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government A. stipulated mandatory use of particular pollution-control technologies. B. allowed pollution credits to be traded between polluters to avoid bearing social costs. C. stipulated exemptions for industries that lobbied politicians hard to avoid regulation. D. allowed industries to determine pollution levels based on profit margins.
A
The number of people served by advanced wastewater treatment plants doubled between 1968 and the mid-1990s, but because the treatment plants _______________________, the quantity of waste emitted into the water after treatment ___________________ . A. became so much more effective; decreased by about one-third B. became so much less effective; increased by about one-third C. remained ineffective; remained the same D. moderately improved; increased by 10%
A
The race to the bottom scenario of global environmental degradation is explained roughly like this: Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits. Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution. Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits. Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution.
A
The stock of a business firm is divided into _________________ . A. individual shares B. voting shares C. non-voting shares D. individual stocks
A
Trevor and Lynda bought a home in 20013 for $185,000 with a 20% down payment. Their mortgage payments were only applied to interest on the mortgage balance. If they have to sell their home in 2016 for $148,000, what would be the value of their equity? A. 0 B. $37,000 C. $11,100 D. $29,600
A
Using the term "spillover" is a less formal means of describing A. an externality. B. social costs. C. private costs. D. market failure.
A
Which of the following belongs in the range of financial investment options available to U.S. households? A. tangible assets B. venture capital funds C. direct loans to established businesses D. direct loans to start-up business firms
A
Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output? A. the European Union B. China C. Ohio D. command economies
A
Which of the following is a feature that typically distinguishes a savings account from a checking account? A. pays interest B. less liquidity C. automatic teller machine access is available for checking accounts D. withdrawals require a trip to the bank by the account holder
A
Which of the following is considered to be a method that firms can use to raise the financial capital that they need to pay for modernizing their production plants? A. reinvesting profits B. investments by late stage investors C. borrowing large sums directly from households D. increasing dividends to attract new investors
A
Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? A. high degree of inflexibility B. clear distinctions drawn between firms C. lack of incentive to reduce pollution D. obvious lack of loopholes
A
Which of the following would be classified as a situation where a third party benefits from a market transaction by others? A. City buying 10,000 trees for green space renewal projects. B. Increased levels of air pollution in neighborhoods near a football stadium. C. Allowing a mining company to use a natural lake to discharge waste. D. Two firms trading pollution credits to avoid cutting their toxic emissions.
A
While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to A. a range of more flexible, market-oriented pollution control policies. B. a range of polices stipulating set limits governing pollutant emissions. C. stringent polices balance industry profit goals and environmental quality. D. stringent polices that will return the environment to its former pristine quality.
A
Why was the Clean Air Act amended in 1990? A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels B. so flat fees for excessive pollution could be determined by the federal government C. to reduce sulfur dioxide emission through command-and-control regulations D. to reduce sulfur dioxide emissions from electric power plants to half of 1970 levels
A
With respect to the benefits of clean air and water, which of the following would most likely be classified as being relatively easy to value in economic terms? A. gains in farming, fishing and tourism B. gains from lower levels of corrosion C. gains in environmental enjoyment D. all of the above are correct answers
A
XYZ Corporation plans to open a manufacturing plant in China, but the company has not retained any of its yearly profits for this purpose. How will XYZ Corporation likely raise the money to finance its offshore expansion? A. sale of bonds to institutional investors B. sale of bonds to municipal households C. by issuing Treasury bills D. by encouraging momentum selling of its stock
A
_______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A. Social costs B. Private costs C. Market costs D. External costs
A
Gresham's law
A lower quality commodity can drive higher quality commodities
Which of the following is true?
A nation cannot have a comparative advantage in the production of every good.
Which of the following is true? A nation cannot have a comparative advantage in the production of every good. A nation cannot have an absolute advantage in the production of every good. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. A nation can have a comparative advantage in the production of every good, but not an absolute advantage.
A nation cannot have a comparative advantage in the production of every good.
Trade surplus
A positive trade balance, when exports >imports
32) The largest source of bank income is A) interest on loans. B) interest on securities. C) service charges on deposit accounts. D) noninterest income.
A) interest on loans.
5) Because passbook savings are ________ liquid for the depositor than checking accounts, they earn ________ interest rates. A) less; higher B) less; lower C) more; higher D) more; lower
A) less; higher
15) A bank's largest source of funds is its A) nontransaction deposits. B) checking deposits. C) borrowing from the Fed. D) federal funds.
A) nontransaction deposits.
33) Of the following, the largest operating expense for a bank is A) salaries and employee benefits. B) interest paid on discount loans. C) interest paid on federal funds borrowed from other banks. D) interest paid on checkable deposits
A) salaries and employee benefits.
84. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. In the table below, the first row of shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. The total cost of requiring each firm to reduce its garbage by one third is A. $167 B. $137 C. $187 D. $127
A. $167
64. The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife spend over A. $450 billion per year. B. $550 billion per year. C. $250 billion annually. D. $200 billion annually.
A. $450 billion per year.
The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife spend over A. $450 billion per year. B. $550 billion per year. C. $250 billion annually. D. $200 billion annually.
A. $450 billion per year.
26. Which of the following would be classified as a situation where a third party benefits from a market transaction by others? A. City buying 10,000 trees for green space renewal projects. B. Increased levels of air pollution in neighborhoods near a football stadium. C. Allowing a mining company to use a natural lake to discharge waste. D. Two firms trading pollution credits to avoid cutting their toxic emissions.
A. City buying 10,000 trees for green space renewal projects.
Which of the following would be classified as a situation where a third party benefits from a market transaction by others? A. City buying 10,000 trees for green space renewal projects. B. Increased levels of air pollution in neighborhoods near a football stadium. C. Allowing a mining company to use a natural lake to discharge waste. D. Two firms trading pollution credits to avoid cutting their toxic emissions.
A. City buying 10,000 trees for green space renewal projects.
3. ____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A. Negative externality B. Positive externality C. A spillover D. A market failure
A. Negative externality
____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A. Negative externality B. Positive externality C. A spillover D. A market failure
A. Negative externality
79. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when social costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
A. Price = $55, Quantity = 30
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when social costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
A. Price = $55, Quantity = 30
5. _______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A. Social costs B. Private costs C. Market costs D. External costs
A. Social costs
_______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A. Social costs B. Private costs C. Market costs D. External costs
A. Social costs
23. While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to A. a range of more flexible, market-oriented pollution control policies. B. a range of polices stipulating set limits governing pollutant emissions. C. stringent polices balance industry profit goals and environmental quality. D. stringent polices that will return the environment to its former pristine quality.
A. a range of more flexible, market-oriented pollution control policies.
While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to A. a range of more flexible, market-oriented pollution control policies. B. a range of polices stipulating set limits governing pollutant emissions. C. stringent polices balance industry profit goals and environmental quality. D. stringent polices that will return the environment to its former pristine quality.
A. a range of more flexible, market-oriented pollution control policies.
58. Market-oriented environmental policies are ________, and __________ will work better in some situations than in others. A. a tool-kit; specific tools B. productive policies; some policies C. inflexible; incentives to protect endangered species D. flexible; the command-and-control approach
A. a tool-kit; specific tools
Market-oriented environmental policies are ________, and __________ will work better in some situations than in others. A. a tool-kit; specific tools B. productive policies; some policies C. inflexible; incentives to protect endangered species D. flexible; the command-and-control approach
A. a tool-kit; specific tools
Using the term "spillover" is a less formal means of describing A. an externality. B. social costs. C. private costs. D. market failure.
A. an externality.
30. If an externality of pollution exists for all manufacturers in a given industry, then all related social costs A. are no longer represented in their supply curves. B. continue to be represented in their supply curves. C. are no longer represented in their demand curves. D. continue to be represented in their demand curves.
A. are no longer represented in their supply curves.
If an externality of pollution exists for all manufacturers in a given industry, then all related social costs A. are no longer represented in their supply curves. B. continue to be represented in their supply curves. C. are no longer represented in their demand curves. D. continue to be represented in their demand curves.
A. are no longer represented in their supply curves.
17. The number of people served by advanced wastewater treatment plants doubled between 1968 and the mid-1990s, but because the treatment plants _______________________, the quantity of waste emitted into the water after treatment ___________________ . A. became so much more effective; decreased by about one-third B. became so much less effective; increased by about one-third C. remained ineffective; remained the same D. moderately improved; increased by 10%
A. became so much more effective; decreased by about one-third
The number of people served by advanced wastewater treatment plants doubled between 1968 and the mid-1990s, but because the treatment plants _______________________, the quantity of waste emitted into the water after treatment ___________________ . A. became so much more effective; decreased by about one-third B. became so much less effective; increased by about one-third C. remained ineffective; remained the same D. moderately improved; increased by 10%
A. became so much more effective; decreased by about one-third
46. If a glass manufacturer has only a few ________________ of reducing pollutants, it will ____________________ . A. costly ways; end up paying the pollution tax. B. inexpensive ways; incur the pollution tax instead. C. costly ways; do so to minimize its pollution taxes. D. inexpensive ways; buy the most expensive technology.
A. costly ways; end up paying the pollution tax.
If a glass manufacturer has only a few ________________ of reducing pollutants, it will ____________________ . A. costly ways; end up paying the pollution tax. B. inexpensive ways; incur the pollution tax instead. C. costly ways; do so to minimize its pollution taxes. D. inexpensive ways; buy the most expensive technology.
A. costly ways; end up paying the pollution tax.
66. With respect to the benefits of clean air and water, which of the following would most likely be classified as being relatively easy to value in economic terms? A. gains in farming, fishing and tourism B. gains from lower levels of corrosion C. gains in environmental enjoyment D. all of the above are correct answers
A. gains in farming, fishing and tourism
With respect to the benefits of clean air and water, which of the following would most likely be classified as being relatively easy to value in economic terms? A. gains in farming, fishing and tourism B. gains from lower levels of corrosion C. gains in environmental enjoyment D. all of the above are correct answers
A. gains in farming, fishing and tourism
37. Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? A. high degree of inflexibility B. clear distinctions drawn between firms C. lack of incentive to reduce pollution D. obvious lack of loopholes
A. high degree of inflexibility
56. An economist is more likely to identify __________________ as a more efficient and flexible way for society to __________________________ . A. marketable permits; allow a limited, declining amount of pollution to occur B. better defined property rights; to address issues of allowable levels of pollution C. market-oriented environmental tools; enforce strict limits on emissions D. better defined property rights; to shrink pollution levels over time
A. marketable permits; allow a limited, declining amount of pollution to occur
An economist is more likely to identify __________________ as a more efficient and flexible way for society to __________________________ . A. marketable permits; allow a limited, declining amount of pollution to occur B. better defined property rights; to address issues of allowable levels of pollution C. market-oriented environmental tools; enforce strict limits on emissions D. better defined property rights; to shrink pollution levels over time
A. marketable permits; allow a limited, declining amount of pollution to occur
87. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner's dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. From the table, we know that the outcome of this game will be A. neither state choosing to protect the lake B. Wisconsin choosing to not protect the lake, Michigan choosing to protect the lake C. Wisconsin choosing to protect the lake, Michigan choosing to not protect the lake D. both states choosing to protect the lake
A. neither state choosing to protect the lake
33. Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ . A. positive regulations B. command and control regulations C. control and command regulations D. negative regulations
A. positive regulations
34. The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government A. stipulated mandatory use of particular pollution-control technologies. B. allowed pollution credits to be traded between polluters to avoid bearing social costs. C. stipulated exemptions for industries that lobbied politicians hard to avoid regulation. D. allowed industries to determine pollution levels based on profit margins.
A. stipulated mandatory use of particular pollution-control technologies.
50. If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will A. take place in the firms where it is least expensive to do so. B. take place in every firm within the time set by the permit. C. be initiated at the household level. D. be rewarded with refundable charges.
A. take place in the firms where it is least expensive to do so.
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will A. take place in the firms where it is least expensive to do so. B. take place in every firm within the time set by the permit. C. be initiated at the household level. D. be rewarded with refundable charges.
A. take place in the firms where it is least expensive to do so.
Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output? A. the European Union B. China C. Ohio D. command economies
A. the European Union
8. A pollution charge is a form of tax imposed on A. the quantity of pollution that a firm emits. B. pollution control technologies. C. every economy in the world. D. low-income market-orientated industries.
A. the quantity of pollution that a firm emits.
A pollution charge is a form of tax imposed on A. the quantity of pollution that a firm emits. B. pollution control technologies. C. every economy in the world. D. low-income market-orientated industries.
A. the quantity of pollution that a firm emits.
52. Why was the Clean Air Act amended in 1990? A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels B. so flat fees for excessive pollution could be determined by the federal government C. to reduce sulfur dioxide emission through command-and-control regulations D. to reduce sulfur dioxide emissions from electric power plants to half of 1970 levels
A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels
Why was the Clean Air Act amended in 1990? A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels B. so flat fees for excessive pollution could be determined by the federal government C. to reduce sulfur dioxide emission through command-and-control regulations D. to reduce sulfur dioxide emissions from electric power plants to half of 1970 levels
A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.
Absolute advantage
What is A curve that shows the relationships between the price level and the quantity of real GDP demanded by households, firms, and the government?
Aggregate Demand Curve
What shows the relationship between the price level and quantity of real GDO demanded?
Aggregate demand curve
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment.
Aggregated Demand
A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
Aggregated demand
Classify the scenarios according to whether or not they describe a negative externality.
An example of a negative externality A factory emits pollution into the atmosphere as a by-product of production. A neighbor plays loud music that annoys the surrounding community. Not an example of a negative externality A person gets a flu shot and is therefore less likely to spread illness to others. A person with no allergies gets a mosquito bite from a disease-free mosquito. A donut shop emits a delicious smell into the air as a by-product of production.
In economics, money is defined as?
Any asset people generally accept in exchange for goods and services
Secondary Market
Any subsequent sale of that stock. (funds go to stockholder)
Medium of Exchange
Anything that is accepted as a means of payment
80. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that shows how much it would cost each company to reduce its pollution by additional increments of 10 pounds. If each mining company is forced to cut its debris in half, the respective cost to Kip and Yale will be A. $5, $2 B. $10, $4 C. $30, $20 D. $30, $12
B
83. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with debris and waste from their manufacturing processes. In the table below, the first row shows the current level of debris and waste each produces that makes its way into the river. The information in the table also indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. If the government imposes a pollution tax of $7 for each 10 pounds of debris, total pollution will fall by ____ pounds, at a total cost of ____. A. 40; $28 B. 40; $17 C. 40; $22 D. 60; $30
B
85. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. The first row of the table below shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. The government wants to reduce emissions by one third, and does so by issuing marketable permits based on the current level of emissions where the permits will shrink the allowable amount of pollution by one third. Alpha will reduce emissions by ____ tons, Beta will reduce emissions by ____ tons, Gamma will reduce emissions by ____ tons, Delta will reduce emissions by ____ tons, for a total cost of ____. A. 50, 150, 50, 250, $130 B. 50, 200, 0, 250, $150 C. 0, 200, 50, 250, $120 D. 50, 200, 50, 200, $100
B
88. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society's point of view. The payoffs facing these companies are given in the table below.From the table, we know that if Company 2 chooses to cut, Company 1 will choose to ______ the forest. If Company 2 chooses to not cut, Company 1 will choose to ______ the forest. A. cut, do not cut B. cut, cut C. do not cut, do not cut D. do not cut, cut
B
93. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Suppose Bulgaria prefers grapes. Which of the following points is better? A. A B. B C. C D. E
B
A ________________ operates directly between a saver with financial assets to invest and an entity who will receive those assets in exchange for paying a ________________ . A. public company; higher rate of interest B. financial intermediary; rate of return C. private company; higher rate of interest D. stock market; rate of return
B
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
B
A mutual fund that seeks to imitate the overall behaviour of the stock market is called ____________________ . A. a long-run collectibles fund B. an index fund C. a mortgage-backed securities fund D. an indexed retirement age fund
B
A new American import quota on imported steel would be likely to: reduce the cost of production to steel-using American firms. increase American production of steel. generate tax revenue to the government. increase the production of steel-using American firms.
B
A study by the Environmental Protection Agency looked at the costs and benefits of the Clean Air Act from 1970 to 1990. This study found that a middle-range estimate of the health and other benefits from cleaner air was $22 trillion. This amount was about __________________ than the costs of reducing the pollution. A. 10 time lower B. 44 times higher C. 10 times higher D. 44 times lower
B
Alysa and Todd purchased a home in 1999 for $80,000 with no down payment. In 2004, they were able to refinance their mortgage on the home for $140,000. They reinvested $75,000 into the home, adding a new addition and making upgrades. In 2006, the couple sold the home for $320,000. What was the value of Alysa and Todd's equity in 2006? A. $250,000 B. $180,000 C. $240,000 D. $60,000
B
An import quota or tariff on French wine that raises the prices for wine will probably: hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. hurt domestic wineries, which will lose business as a result of the higher prices. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities.
B
Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ . A. a different approach to negotiations; similar income levels and sets of priorities B. a difficult set of negotiations; different income levels and sets of priorities C. a different approach to negotiations; low and middle-income levels. D. deliberate negotiations; high-income levels and similar sets of priorities.
B
Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation. A. marketable permit; less cost-effective way B. pollution tax; flexible, more cost-effective way C. marketable permit; less flexible manner D. pollution tax; less cost effective, but flexible way
B
Each year banks typically offer a wide range of ____________ comprised of ______________________from a variety of different companies. A. index funds; guaranteed equity investments B. mutual funds; a range of stocks or bonds C. index funds; capital gains from trading stocks D. mutual funds; a range of stocks
B
Environmentalist groups tend to prefer ________________ to ___________________. A. command-and-control regulations; marketable permits B. marketable permits; pollution charges C. pollution taxes; marketable permits D. marketable permits; monetary refunds
B
I'MAStart-UP Corp. issued and sold 2,500,000 common voting shares during its first public stock sale. What is the minimum number of shares needed to be able to elect a new director to the Board? A. 1.275 million B. 1.25 million C. 1.225 million D. 2.5 million
B
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes, A. its supply curve will be based on perceived benefits of maximizing utility. B. it is factoring in the social costs of the pollution it generates. C. its demand curve will be based on production choices relating to marginal costs. D. its costs will be the same as society's costs and all of the above.
B
In choosing between the range of alternative investments typically available to U.S. households, which of the following will play a role in influencing their selection of a particular investment type? A. the expected rate of return, risk, and liquidity of each kind of investment B. the interest rate and the expected rate of return C. whether or not the majority of households are early stage investors D. the form of dividends, angel investors, future expectations
B
In the investment industry, the principle of _______________ supports investing in a wide range of companies to reduce the level of risk. A. subprime loans B. diversification C. fundamentals trading D. buying low and selling high
B
International trade is fundamentally a ________________________. war which is won by the strongest win-win situation lose-lose situation win-lose situation
B
Marketable permits can be viewed as a form of improved _______________. A. command-and-control regulations B. property rights C. refundable tax credits D. flat fee pollution tax
B
Michael purchased 5,000 shares of IMAGoldMiner Inc. in May for $0.55 each. He purchased 5,000 more at $0.75 cents in June and another 5,000 for $1.02 in July. In October, IMAGoldMiner began production at its new gold mine and Michael was able to sell 5,000 shares at $2.05, another 5,000 at $3.25 and the remaining 5000 at $4.50. In this instance, Michael A. is trading on fundamentals. B. profited by momentum trading. C. is diversifying his investments. D. traded based on future expected profits.
B
Suppose the government of Taiwan subsidized its watch-making industry, enabling Taiwanese producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Taiwanese subsidization policy by: setting a tariff such that the prices of Taiwanese and domestic watches to the consumer are equal. accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry. setting a tariff high enough to just offset the subsidy granted to the Taiwanese watch-making industry. setting a declining quota on the import of Taiwanese watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy.
B
The City of Washington needs to upgrade its levies and its water drainage systems. The cost will exceed the amount of tax revenue the City expects to receive over the next 10 years. How will the City be able to raise the funds needed to finance this upgrade? A. issue Treasury Bonds B. issue municipal bonds C. borrow from Banks D. borrow from large corporations
B
The main categories of market-oriented approaches to pollution control are A. redefined property rights; pollution permits; marketable charges. B. marketable permits; better-defined property rights; pollution charges. C. pollution charges; extended property rights; marketable permits. D. pollution permits; defined property rights; marketable charges.
B
The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. relative cost opportunity cost absolute advantage comparative advantage
B
The term __________ refers to the __________ that a bond is expected to pay at the time of purchase. A. rate of interest; yield rate B. bond yield; rate of return C. rate of interest; rate of return D. yield rate; bond rate
B
The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. A. social costs B. spillover C. market failure D. private costs
B
Those firms in the oil refining industry that can reduce pollution __________________ will do so _______________________ . A. for a flat charge; at the industrial level B. cheaply and easily; to minimize their pollution taxes C. for a flat charge; with the most expensive technologies D. cheaply and easily; with the most expensive technologies
B
Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. A. eliminating the risk that any B. setting limits for how much of each C. avoiding the risk that any air D. eliminating the risk that a toxic
B
Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? A. high-income, market-oriented economies B. low incomes and command economies C. the United States D. European Union
B
Which of the following is not an ironclad rule in the financial markets? A. borrowing from a bank works better for large, well-known corporations B. banks fund small business loans and large firms issue bonds to raise money C. a bank can monitor a large established firm's better than a new small business D. relatively large and well-known firms typically never borrow from banks
B
Which of the following is used to describe the full spectrum of animal and plant genetic material? A. ecodiversity B. biodiversity C. envirodiversity D. duodiversity
B
Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? A. countries with high-incomes B. every country C. market-oriented countries D. command-oriented countries
B
Why do business firms need financial capital? A. to lend to other businesses B. to make real physical capital investments C. to provide an alternate source of revenue for households D. to make diversified capital investments
B
Why would a large publically traded corporation likely prefer issuing bonds as a way to raise new money as opposed to issuing more shares? A. the rate of return the corporation promised will be more difficult to deliver B. more shares will dilute the existing value of the stock, causing its market price to fall C. the market will view the new share issue as a sign the company is in financial difficulty D. issuing bonds is a more secure method for corporations to raise needed money
B
_____________ are numerical limitations on the quantity of products that can be imported. Nontariff barriers Import quotas Taxes Tariffs
B
23) If a bank has $100,000 of deposits, a required reserve ratio of 20 percent, and $40,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is A) $30,000. B) $25,000. C) $20,000. D) $10,000.
B) $25,000.
4) Which of the following statements is false? A) Checkable deposits are usually the lowest-cost source of bank funds. B) Checkable deposits are the primary source of bank funds. C) Checkable deposits are payable on demand. D) Checkable deposits include NOW accounts.
B) Checkable deposits are the primary source of bank funds.
44) Discount loans are also known as ________. A) interest-free loans B) advances C) credits D) market loans
B) advances
8) Bank loans from the Federal Reserve are called ________ and represent a ________ of funds. A) discount loans; use B) discount loans; source C) fed funds; use D) fed funds; source
B) discount loans; source
40) An argument that supports a regulated minimum capital requirement is that banks that hold too little capital A) are unprofitable. B) impose costs on other banks because they are more likely to fail. C) have an unfair competitive advantage over savings and loans. D) includes all of the above.
B) impose costs on other banks because they are more likely to fail.
20) Bankers' concern regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks to deal with deposit outflows is an example of A) liability management. B) liquidity management. C) managing interest-rate risk. D) none of the above.
B) liquidity management.
9) Which of the following are reported as assets on a bank's balance sheet? A) discount loans from the Fed B) loans C) borrowings D) only A and B of the above
B) loans
13) Which of the following bank assets are the least liquid? A) reserves B) mortgage loans C) cash items in process of collection D) deposits with other banks
B) mortgage loans
14) Which of the following bank assets are the most liquid? A) consumer loans B) reserves C) cash items in process of collection D) U.S. government securities
B) reserves
16) In general, banks make profits by selling ________ liabilities and buying ________ assets. A) long-term; shorter-term B) short-term; longer-term C) illiquid; liquid D) risky; risk-free
B) short-term; longer-term
38) For a given return on assets, the lower the bank capital is, A) the lower the return for the owners of the bank will be. B) the higher the return for the owners of the bank will be. C) the lower the credit risk for the owners of the bank will be. D) both A and C of the above will happen.
B) the higher the return for the owners of the bank will be.
83. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with debris and waste from their manufacturing processes. In the table below, the first row shows the current level of debris and waste each produces that makes its way into the river. The information in the table also indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. If the government imposes a pollution tax of $7 for each 10 pounds of debris, total pollution will fall by ____ pounds, at a total cost of ____. A. 40; $28 B. 40; $17 C. 40; $22 D. 60; $30
B. 40; $17
68. A study by the Environmental Protection Agency looked at the costs and benefits of the Clean Air Act from 1970 to 1990. This study found that a middle-range estimate of the health and other benefits from cleaner air was $22 trillion. This amount was about __________________ than the costs of reducing the pollution. A. 10 time lower B. 44 times higher C. 10 times higher D. 44 times lower
B. 44 times higher
A study by the Environmental Protection Agency looked at the costs and benefits of the Clean Air Act from 1970 to 1990. This study found that a middle-range estimate of the health and other benefits from cleaner air was $22 trillion. This amount was about __________________ than the costs of reducing the pollution. A. 10 time lower B. 44 times higher C. 10 times higher D. 44 times lower
B. 44 times higher
85. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. The first row of the table below shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. The government wants to reduce emissions by one third, and does so by issuing marketable permits based on the current level of emissions where the permits will shrink the allowable amount of pollution by one third. Alpha will reduce emissions by ____ tons, Beta will reduce emissions by ____ tons, Gamma will reduce emissions by ____ tons, Delta will reduce emissions by ____ tons, for a total cost of ____. A. 50, 150, 50, 250, $130 B. 50, 200, 0, 250, $150 C. 0, 200, 50, 250, $120 D. 50, 200, 50, 200, $100
B. 50, 200, 0, 250, $150
93. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Suppose Bulgaria prefers grapes. Which of the following points is better? A. A B. B C. C D. E
B. B
73. Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ . A. a different approach to negotiations; similar income levels and sets of priorities B. a difficult set of negotiations; different income levels and sets of priorities C. a different approach to negotiations; low and middle-income levels. D. deliberate negotiations; high-income levels and similar sets of priorities.
B. a difficult set of negotiations; different income levels and sets of priorities
Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ . A. a different approach to negotiations; similar income levels and sets of priorities B. a difficult set of negotiations; different income levels and sets of priorities C. a different approach to negotiations; low and middle-income levels. D. deliberate negotiations; high-income levels and similar sets of priorities.
B. a difficult set of negotiations; different income levels and sets of priorities
10. Which of the following is used to describe the full spectrum of animal and plant genetic material? A. ecodiversity B. biodiversity C. envirodiversity D. duodiversity
B. biodiversity
Which of the following is used to describe the full spectrum of animal and plant genetic material? A. ecodiversity B. biodiversity C. envirodiversity D. duodiversity
B. biodiversity
Those firms in the oil refining industry that can reduce pollution __________________ will do so _______________________ . A. for a flat charge; at the industrial level B. cheaply and easily; to minimize their pollution taxes C. for a flat charge; with the most expensive technologies D. cheaply and easily; with the most expensive technologies
B. cheaply and easily; to minimize their pollution taxes
88. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society's point of view. The payoffs facing these companies are given in the table below. From the table, we know that if Company 2 chooses to cut, Company 1 will choose to ______ the forest. If Company 2 chooses to not cut, Company 1 will choose to ______ the forest. A. cut, do not cut B. cut, cut C. do not cut, do not cut D. do not cut, cut
B. cut, cut
20. Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? A. countries with high-incomes B. every country C. market-oriented countries D. command-oriented countries
B. every country
Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? A. countries with high-incomes B. every country C. market-oriented countries D. command-oriented countries
B. every country
28. If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes, A. its supply curve will be based on perceived benefits of maximizing utility. B. it is factoring in the social costs of the pollution it generates. C. its demand curve will be based on production choices relating to marginal costs. D. its costs will be the same as society's costs and all of the above.
B. it is factoring in the social costs of the pollution it generates.
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes, A. its supply curve will be based on perceived benefits of maximizing utility. B. it is factoring in the social costs of the pollution it generates. C. its demand curve will be based on production choices relating to marginal costs. D. its costs will be the same as society's costs and all of the above.
B. it is factoring in the social costs of the pollution it generates.
14. Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? A. high-income, market-oriented economies B. low incomes and command economies C. the United States D. European Union
B. low incomes and command economies
Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? A. high-income, market-oriented economies B. low incomes and command economies C. the United States D. European Union
B. low incomes and command economies
71. Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the _____________________ and the __________________ . A. marginal benefits are least; marginal costs are greatest B. marginal benefits are greatest; marginal costs are least C. environmental benefits are greatest; social costs are least D. social costs are greatest; environmental benefits are least
B. marginal benefits are greatest; marginal costs are least
Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the _____________________ and the __________________ . A. marginal benefits are least; marginal costs are greatest B. marginal benefits are greatest; marginal costs are least C. environmental benefits are greatest; social costs are least D. social costs are greatest; environmental benefits are least
B. marginal benefits are greatest; marginal costs are least
41. The main categories of market-oriented approaches to pollution control are A. redefined property rights; pollution permits; marketable charges. B. marketable permits; better-defined property rights; pollution charges. C. pollution charges; extended property rights; marketable permits. D. pollution permits; defined property rights; marketable charges.
B. marketable permits; better-defined property rights; pollution charges.
The main categories of market-oriented approaches to pollution control are A. redefined property rights; pollution permits; marketable charges. B. marketable permits; better-defined property rights; pollution charges. C. pollution charges; extended property rights; marketable permits. D. pollution permits; defined property rights; marketable charges.
B. marketable permits; better-defined property rights; pollution charges.
54. Environmentalist groups tend to prefer ________________ to ___________________. A. command-and-control regulations; marketable permits B. marketable permits; pollution charges C. pollution taxes; marketable permits D. marketable permits; monetary refunds
B. marketable permits; pollution charges
Environmentalist groups tend to prefer ________________ to ___________________. A. command-and-control regulations; marketable permits B. marketable permits; pollution charges C. pollution taxes; marketable permits D. marketable permits; monetary refunds
B. marketable permits; pollution charges
63. In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels. A. marketable permits B. pollution charges C. enhanced property rights D. ecotourism
B. pollution charges
In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels. A. marketable permits B. pollution charges C. enhanced property rights D. ecotourism
B. pollution charges
48. Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation. A. marketable permit; less cost-effective way B. pollution tax; flexible, more cost-effective way C. marketable permit; less flexible manner D. pollution tax; less cost effective, but flexible way
B. pollution tax; flexible, more cost-effective way
Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation. A. marketable permit; less cost-effective way B. pollution tax; flexible, more cost-effective way C. marketable permit; less flexible manner D. pollution tax; less cost effective, but flexible way
B. pollution tax; flexible, more cost-effective way
Marketable permits can be viewed as a form of improved _______________. A. command-and-control regulations B. property rights C. refundable tax credits D. flat fee pollution tax
B. property rights
22. Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. A. eliminating the risk that any B. setting limits for how much of each C. avoiding the risk that any air D. eliminating the risk that a toxic
B. setting limits for how much of each
Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. A. eliminating the risk that any B. setting limits for how much of each C. avoiding the risk that any air D. eliminating the risk that a toxic
B. setting limits for how much of each
Command-and-control regulation is a body of law that _______________.
B. specifies allowable quantities of pollution C. details which pollution-control technologies must be used D. can include both b and c *****
1. The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. A. social costs B. spillover C. market failure D. private costs
B. spillover
The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. A. social costs B. spillover C. market failure D. private costs
B. spillover
76. A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
B. the possibility of the bees stinging the students at the school.
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
B. the possibility of the bees stinging the students at the school.
Benefits and Costs of Environmental Protection
Benefits: (1) people healthier and live longer (2) certain industries benefit from clean air and water (farming, fishing, and tourism) (3) property values higher (4) enjoy cleaner environment Costs 1.Resources needed to clean up environment 2. Opportunity costs: fewer goods and services
81. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that show how much it would cost each company to reduce its pollution by additional increments of 10 pounds.If a system of tradable permits is introduced, the total cost of cutting current debris in half is A. $40 B. $45 C. $50 D. $55
C
82. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with waste from their manufacturing processes. In the table below, the first row shows the current level of waste that makes its way into the river from their respective operations. The table also sets out information that indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. If each company is required to reduce debris by exactly 20 pounds, the total cost will be A. $7 B. $14 C. $21 D. $30
C
92. Ireland and England both fish in the Irish Sea. If this sea is over-fished, the fish stocks will fall and fish will eventually become extinct. Both countries have to decide whether to fish a lot or a little. The payoffs are given in the table below. The outcome of this game is ________ , which illustrates the _________ . A. both countries choosing to fish a little, prisoners dilemma B. both countries choosing to fish a lot, externalities C. both countries choosing to fish a lot, prisoner's dilemma D. both countries choosing to fish a little, externalities
C
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
C
A checking account typically pays __________________, but gives easy access to your money, either by writing a check or by using ______________. A. no interest; a credit card B. between 3% and 5% interest; a credit card C. little or no interest; a debit card D. between 2% and 4% interest; a debit card
C
A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the _____________ of reducing the emissions is _______________ . A. total cost; less than the tax B. total cost; equal to the social cost C. marginal cost; less than the tax D. marginal cost; equal to the social cost
C
A positive externality arises in a situation where a third party, outside the transaction, A. fails to allocate resources efficiently. B. suffers from a market transaction by others. C. benefits from a market transaction by others. D. pays a pollution tax to balance social costs.
C
Around the world, the cities with the dirtiest air and water are typically found in ___________________________ . A. high-income countries like France and the U.S. B. in low-income African nations C. low-income countries in Africa and Asia D. in low-income East Asian nations
C
Environmentalist groups act to directly reduce of emissions by A. allowing a limited amount of pollution to occur. B. allowing a declining amount of pollution to occur. C. buying marketable emission permits and not re-selling them. D. buying, trading, and re-selling marketable emission permits.
C
If a government wants to establish a marketable permit program, it must begin by determining A. how many permits will be issued in the overall market. B. the overall price to be charged for each permit. C. the overall quantity of a certain pollutant that will be allowed. D. whether or not permits will be issued free of charge.
C
If market-oriented environmental tools offer a mechanism or providing either the same environmental protection at lower cost, or providing a greater degree of environmental protection for the same cost, then this ___________ will arise for ________________ . A. spillover; market-oriented countries B. trade-off; command-oriented countries C. trade-off; all countries around the globe D. spillover; only the high-income countries
C
If no externalities of pollution exist in a particular industry, the interaction of demand and supply _________________________ . A. is based on benefits individuals perceive while maximizing utility B. is based on choices about production relative to total average costs C. will coordinate social costs and benefits D. shifts so supply has no relation to social costs
C
If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day A. is a voluntary exchange. B. is positively a voluntary exchange. C. would be a negative externality. D. would be an external voluntary exchange.
C
In order to be classified as a _______________, a firm must be owned by the people who run it on a day-to-day basis. A. business firm B. public company C. private company D. corporation
C
In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time, A. were necessary as US industries had zero incentive to control pollution. B. were an inexpensive incentive for industrial polluters to improve performance. C. are given considerable credit for cleaner air and water in recent decades. D. draws distinctions between the needs of firms and costly equipment upgrades.
C
Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. A. remains outside the transaction B. incurs the costs outside the production process C. fails to allocate resources efficiently D. avoids externalities
C
Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives. A. draw distinctions; lower the social costs incurred B. lack incentives; prohibit firms from having flexibility C. create incentives; allow firms some flexibility D. specify particular technology; lower the social costs incurred
C
One concern that environmentalists have is that market-oriented environmental tools are A. an inflexible took that won't reduce pollution levels. B. an excuse to implement strict limits on emissions. C. an excuse to allow pollution to be maintained or to grow. D. able to achieve desired reductions in pollution at a lower cost.
C
Politicians often argue for tariff increases in order to reduce the nation's dependence on imports. If tariffs are increased, the long-run effect is most likely to be: an increase in American imports, and a decrease in American exports. an decrease in American imports, and an increase in American exports. a decrease in both American imports and exports. an increase in both American imports and exports.
C
Riley and Sue paid 30% down for a house valued at $135,000 in 2013. If they sell the house in 2017 for $140,000, what will the value of their equity be? A. $40,500 B. $35,500 C. $45,500 D. $5,000
C
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true? Alland has both an absolute and a comparative advantage in producing food. Georgeland has both an absolute and a comparative advantage in producing clothing. Georgeland has an absolute but not a comparative advantage in producing clothing. Alland has an absolute but not a comparative advantage in producing food.
C
The objective of imposing a higher pollution tax is to A. ensure firms have pollution charge credits for all reduced emissions. B. provide incentive for firms to maintain regulation emission levels. C. provide adequate incentive for firms to reduce their emissions by more. D. ensure firms must pay the pollution charge for all reduced emissions.
C
The old proverb: "Don't put all your eggs in one basket" is synonymous with which of the following? A. an average rate of return B. predicting value of tangible assets C. diversified investments D. a flexible rate of return
C
The problem of pollution typically arises in ______________ economies around the world. A. high-income B. low-income C. high or low-income D. middle income
C
The property rights approach to environmental issues often becomes highly relevant in cases involving __________________. A. greenhouse gas emissions B. harmful affects of acid rain C. endangered species D. fresh water resources
C
Treasury bonds are issued by the federal government through the _____________________ . A. Federal Reserve B. Central Bank C. U.S. Department of the Treasury D. U.S. Office of the Comptroller of Currency
C
Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, and then subsequently selling that stock for a higher price during the firm's _____________________ , A. initial bond issue B. initial liquidity offering C. initial public offering D. initial private offering
C
What do stocks, bonds, securitized mortgage assets and other financial investments all have in common? A. they are all forms of investments bought by demanders of capital B. they all guarantee rates of return C. they can only be purchased in financial markets D. their values are tracked by the Dow Jones Industrial Average
C
When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of A. command-and-control regulation. B. pollution tax. C. permit to pollute. D. inflexible, costly regulation.
C
When making decisions about what safety systems should be required in cars or airplanes, the ___________________ will only approve rules where the estimated cost per life saved is __________ or less. A. U.S. Senate; $5 million B. U.S. Congress; $2 million C. Environmental Protection Agency; $3 million D. Environmental Regulation Agency; $7 million
C
Which of the following is not a typical question that must be answered with regard to a private company that is owned by a large number of shareholders? A. How and when does the company get money from the sale of its stock? B. What rate of return does the company promise to pay when it sells stock? C. What is the dividend yield on preferred shares of companies that hold this stock? D. Who makes decisions in a company owned by a large number of shareholders?
C
Which of the following would be the least likely method for firms to raise the financial capital they need to pay for new equipment? A. issuing bonds B. reinvesting profits C. borrowing from households D. selling stock
C
While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because A. it often requires different pollution-control technology for each polluter. B. it usually requires different standards for all current and potential polluters. C. it is full of fine print and exceptions, and costly for some firms to comply with. D. it is not subject to compromises in the political process and all of the above.
C
Why do U.S. economists commonly refer to externalities as an example of market failure? A. firms that are required to pay social costs of externalities produce more B. externalities present a case where markets consider all social costs C. externalities present a case where markets only consider some social costs D. firms avoid having to pay social costs of externalities by lowering prices
C
Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies? A. the range of flexible, market-oriented pollution control policies are flawed B. government regulated the limits for how much pollutant can be emitted C. it isn't required to pay any of the cost of cleaning up its pollution D. it is following the principle of voluntary exchange of benefits
C
________________ are a form of _______ bonds that offer relatively high interest rates to compensate for their relatively high chance of default. A. Bonds; government B. High-yield bonds; municipal C. Junk bonds; corporate D. Certificates of deposit; bank
C
_______________________ find ways to take the inflow of funds from many separate _________ of financial capital and transform it into the funds desired by _______________ of financial capital. A. Financial intermediaries; high risks; suppliers B. Governments; suppliers; demanders C. Financial capital markets; suppliers; demanders D. Venture capital funds; the risks; demanders
C
47) In recent years, the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses, while the costs involved in running the bank have been approximately ________ of total operating expenses.
C) 30%; 50%
30) Banks fail when the value of bank ________ falls below the value of ________, causing the bank to become insolvent. A) reserves; required reserves B) loans; secondary reserves C) assets; liabilities D) income; expenses
C) assets; liabilities
26) In general, banks would prefer to meet deposit outflows by ________ rather than ________ A) selling loans; selling securities. B) selling loans; borrowing from the Fed. C) borrowing from the Fed; selling loans. D) "calling in" loans; selling securities
C) borrowing from the Fed; selling loans
7) Large-denomination CDs are ________, so that like a bond they can be resold in a ________ market before they mature. A) nonnegotiable; secondary B) nonnegotiable; primary C) negotiable; secondary D) negotiable; primary
C) negotiable; secondary
21) When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but instead makes loans, then in the bank's final balance sheet, A) the assets at the bank increase by $200,000. B) the liabilities of the bank increase by $200,000. C) reserves increase by $200,000. D) all of the above occur.
C) reserves increase by $200,000.
96. 35. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. If both firms install the filters, then Boing will earn ________ and Twang will earn ________ . A. $0 million, $0 million B. -$5 million, -$5 million C. $5 million, $5 million D. $10 million, $10 million
C. $5 million, $5 million
81. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that show how much it would cost each company to reduce its pollution by additional increments of 10 pounds. If a system of tradable permits is introduced, the total cost of cutting current debris in half is A. $40 B. $45 C. $50 D. $55
C. $50
90. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. What level of toxic waste should the country reduce to? A. 30 million tons B. 20 million tons C. 10 million tons D. 0 tons
C. 10 million tons
When making decisions about what safety systems should be required in cars or airplanes, the ___________________ will only approve rules where the estimated cost per life saved is __________ or less. A. U.S. Senate; $5 million B. U.S. Congress; $2 million C. Environmental Protection Agency; $3 million D. Environmental Regulation Agency; $7 million
C. Environmental Protection Agency; $3 million
57. One concern that environmentalists have is that market-oriented environmental tools are A. an inflexible took that won't reduce pollution levels. B. an excuse to implement strict limits on emissions. C. an excuse to allow pollution to be maintained or to grow. D. able to achieve desired reductions in pollution at a lower cost.
C. an excuse to allow pollution to be maintained or to grow.
36. In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time, A. were necessary as US industries had zero incentive to control pollution. B. were an inexpensive incentive for industrial polluters to improve performance. C. are given considerable credit for cleaner air and water in recent decades. D. draws distinctions between the needs of firms and costly equipment upgrades.
C. are given considerable credit for cleaner air and water in recent decades.
In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time, A. were necessary as US industries had zero incentive to control pollution. B. were an inexpensive incentive for industrial polluters to improve performance. C. are given considerable credit for cleaner air and water in recent decades. D. draws distinctions between the needs of firms and costly equipment upgrades.
C. are given considerable credit for cleaner air and water in recent decades.
4. A positive externality arises in a situation where a third party, outside the transaction, A. fails to allocate resources efficiently. B. suffers from a market transaction by others. C. benefits from a market transaction by others. D. pays a pollution tax to balance social costs.
C. benefits from a market transaction by others.
A positive externality arises in a situation where a third party, outside the transaction, A. fails to allocate resources efficiently. B. suffers from a market transaction by others. C. benefits from a market transaction by others. D. pays a pollution tax to balance social costs.
C. benefits from a market transaction by others.
92. Ireland and England both fish in the Irish Sea. If this sea is over-fished, the fish stocks will fall and fish will eventually become extinct. Both countries have to decide whether to fish a lot or a little. The payoffs are given in the table below. The outcome of this game is ________ , which illustrates the _________ . A. both countries choosing to fish a little, prisoners dilemma B. both countries choosing to fish a lot, externalities C. both countries choosing to fish a lot, prisoner's dilemma D. both countries choosing to fish a little, externalities
C. both countries choosing to fish a lot, prisoner's dilemma
55. Environmentalist groups act to directly reduce of emissions by A. allowing a limited amount of pollution to occur. B. allowing a declining amount of pollution to occur. C. buying marketable emission permits and not re-selling them. D. buying, trading, and re-selling marketable emission permits.
C. buying marketable emission permits and not re-selling them.
40. Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives. A. draw distinctions; lower the social costs incurred B. lack incentives; prohibit firms from having flexibility C. create incentives; allow firms some flexibility D. specify particular technology; lower the social costs incurred
C. create incentives; allow firms some flexibility
Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives. A. draw distinctions; lower the social costs incurred B. lack incentives; prohibit firms from having flexibility C. create incentives; allow firms some flexibility D. specify particular technology; lower the social costs incurred
C. create incentives; allow firms some flexibility
The property rights approach to environmental issues often becomes highly relevant in cases involving __________________. A. greenhouse gas emissions B. harmful affects of acid rain C. endangered species D. fresh water resources
C. endangered species
Why do U.S. economists commonly refer to externalities as an example of market failure? A. firms that are required to pay social costs of externalities produce more B. externalities present a case where markets consider all social costs C. externalities present a case where markets only consider some social costs D. firms avoid having to pay social costs of externalities by lowering prices
C. externalities present a case where markets only consider some social costs
6. Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. A. remains outside the transaction B. incurs the costs outside the production process C. fails to allocate resources efficiently D. avoids externalities
C. fails to allocate resources efficiently
The problem of pollution typically arises in ______________ economies around the world. A. high-income B. low-income C. high or low-income D. middle income
C. high or low-income
While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because A. it often requires different pollution-control technology for each polluter. B. it usually requires different standards for all current and potential polluters. C. it is full of fine print and exceptions, and costly for some firms to comply with. D. it is not subject to compromises in the political process and all of the above.
C. it is full of fine print and exceptions, and costly for some firms to comply with.
21. Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies? A. the range of flexible, market-oriented pollution control policies are flawed B. government regulated the limits for how much pollutant can be emitted C. it isn't required to pay any of the cost of cleaning up its pollution D. it is following the principle of voluntary exchange of benefits
C. it isn't required to pay any of the cost of cleaning up its pollution
Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies? A. the range of flexible, market-oriented pollution control policies are flawed B. government regulated the limits for how much pollutant can be emitted C. it isn't required to pay any of the cost of cleaning up its pollution D. it is following the principle of voluntary exchange of benefits
C. it isn't required to pay any of the cost of cleaning up its pollution
19. Around the world, the cities with the dirtiest air and water are typically found in ___________________________ . A. high-income countries like France and the U.S. B. in low-income African nations C. low-income countries in Africa and Asia D. in low-income East Asian nations
C. low-income countries in Africa and Asia
A ___________________ would lead a large greenhouse gas emitter to reduce emissions by less. A. flat charge B. higher pollution tax C. lower pollution tax D. pollution tax
C. lower pollution tax
42. A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the _____________ of reducing the emissions is _______________ . A. total cost; less than the tax B. total cost; equal to the social cost C. marginal cost; less than the tax D. marginal cost; equal to the social cost
C. marginal cost; less than the tax
A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the _____________ of reducing the emissions is _______________ . A. total cost; less than the tax B. total cost; equal to the social cost C. marginal cost; less than the tax D. marginal cost; equal to the social cost
C. marginal cost; less than the tax
61. When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of A. command-and-control regulation. B. pollution tax. C. permit to pollute. D. inflexible, costly regulation.
C. permit to pollute.
When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of A. command-and-control regulation. B. pollution tax. C. permit to pollute. D. inflexible, costly regulation.
C. permit to pollute.
43. The objective of imposing a higher pollution tax is to A. ensure firms have pollution charge credits for all reduced emissions. B. provide incentive for firms to maintain regulation emission levels. C. provide adequate incentive for firms to reduce their emissions by more. D. ensure firms must pay the pollution charge for all reduced emissions.
C. provide adequate incentive for firms to reduce their emissions by more.
The objective of imposing a higher pollution tax is to A. ensure firms have pollution charge credits for all reduced emissions. B. provide incentive for firms to maintain regulation emission levels. C. provide adequate incentive for firms to reduce their emissions by more. D. ensure firms must pay the pollution charge for all reduced emissions.
C. provide adequate incentive for firms to reduce their emissions by more.
16. Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has A. steadily declined. B. remained unchanged. C. steadily improved. D. remained a non-issue.
C. steadily improved.
Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has A. steadily declined. B. remained unchanged. C. steadily improved. D. remained a non-issue.
C. steadily improved.
77. A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
C. the bees helping to pollinate the orchard, leading to more fruit.
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is A. the cost of the bee hives to the beekeeper. B. the possibility of the bees stinging the students at the school. C. the bees helping to pollinate the orchard, leading to more fruit. D. the honey the bees produce.
C. the bees helping to pollinate the orchard, leading to more fruit.
49. If a government wants to establish a marketable permit program, it must begin by determining A. how many permits will be issued in the overall market. B. the overall price to be charged for each permit. C. the overall quantity of a certain pollutant that will be allowed. D. whether or not permits will be issued free of charge.
C. the overall quantity of a certain pollutant that will be allowed.
If a government wants to establish a marketable permit program, it must begin by determining A. how many permits will be issued in the overall market. B. the overall price to be charged for each permit. C. the overall quantity of a certain pollutant that will be allowed. D. whether or not permits will be issued free of charge.
C. the overall quantity of a certain pollutant that will be allowed.
75. If market-oriented environmental tools offer a mechanism or providing either the same environmental protection at lower cost, or providing a greater degree of environmental protection for the same cost, then this ___________ will arise for ________________ . A. spillover; market-oriented countries B. trade-off; command-oriented countries C. trade-off; all countries around the globe D. spillover; only the high-income countries
C. trade-off; all countries around the globe
If market-oriented environmental tools offer a mechanism or providing either the same environmental protection at lower cost, or providing a greater degree of environmental protection for the same cost, then this ___________ will arise for ________________ . A. spillover; market-oriented countries B. trade-off; command-oriented countries C. trade-off; all countries around the globe D. spillover; only the high-income countries
C. trade-off; all countries around the globe
29. If no externalities of pollution exist in a particular industry, the interaction of demand and supply _________________________ . A. is based on benefits individuals perceive while maximizing utility B. is based on choices about production relative to total average costs C. will coordinate social costs and benefits D. shifts so supply has no relation to social costs
C. will coordinate social costs and benefits
If no externalities of pollution exist in a particular industry, the interaction of demand and supply _________________________ . A. is based on benefits individuals perceive while maximizing utility B. is based on choices about production relative to total average costs C. will coordinate social costs and benefits D. shifts so supply has no relation to social costs
C. will coordinate social costs and benefits
25. If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day A. is a voluntary exchange. B. is positively a voluntary exchange. C. would be a negative externality. D. would be an external voluntary exchange.
C. would be a negative externality.
If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day A. is a voluntary exchange. B. is positively a voluntary exchange. C. would be a negative externality. D. would be an external voluntary exchange.
C. would be a negative externality.
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
Canada has a comparative advantage in the production of hockey sticks.
Which of these is not a difficulty with command-and-control environmental regulation?
Command-and-control regulation is too flexible because it treats each producer differently
The four categories present potential responses to environmental problems. Place each response in the category that best matches it. It is possible that a category may end up with more than one scenario or none at all.
Command‑and‑control regulation (e.g., environmental standards) Government requires that auto manufacturers use a new, cleaner technology in producing cars. Government requires that auto manufacturers limit pollution to a specified threshold. Marketable or tradable pollution permits (e.g., cap‑and‑trade) Auto manufacturers are allowed to pollute as much as they wish, provided that they have purchased a sufficient number of pollution vouchers. Pollution or emissions tax An auto manufacturer is charged a fee per unit of pollution emitted into a river. Well‑defined property rights A steel mill pays nearby homeowners to compensate them for the noise they must put up with as a result of the steel manufacturing process.
What matters most in determining the efficient distribution of production over the world is:
Comparative advantage
To decrease the money supply, the federal reserve could...
Conduct an open market sale of Treasury securities
Unit of Account
Consistent way of measuring the value of things
Some of the leading ecotourism destinations include:
Costa Rica and Panama in Central America Malaysia and the Galapagos Islands the Serengeti in Tanzania; the Amazon rain forests the Caribbean, New Zealand and all of the above
How is a credit union different from a bank
Credit unions are non-profit institutions, while banks are profit-making firms
The M1 Measure of the money supply equals?
Currency plus checking account balances plus travelers checks
What is the most important variable determining the consumption of households
Current Income
From a neoclassical viewpoint, government should focus less on
Cyclical unemployment
78. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when only private costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
D
86. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner's dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. From the table, we know that if Wisconsin chooses to protect the lake, Michigan will choose to ______ the lake. If Wisconsin chooses to not protect the lake, Michigan will choose to ______ the lake A. protect, protect B. not protect, protect C. protect, not protect D. not protect, not protect
D
89. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society's point of view. The payoffs facing these companies are given in the table below. From the table, we know that the outcome of this game will be A. neither Company choosing to cut the forest B. Company 1 choosing to cut, Company 2 choosing not to cut C. Company 2 choosing to cut, Company 1 choosing not to cut D. both companies choosing to cut the forest
D
95. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is not feasible? A. A B. B C. C D. D
D
97. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. In the absence of any government intervention or agreement between the firms, A. both firms will install filters B. Boing will install a filter, Twang will not C. Twang will install a filter, Boing will not D. neither firm will install a filter
D
As environmental protection increases, A. the biggest marginal benefits are achieved first, smaller marginal benefits follow. B. inexpensive and easy methods of reducing pollution begin to dwindle. C. the more costly and innovative methods can be readily avoided. D. in addition to a and b above, the quality of environmental protection increases.
D
Bill and Cathy built a new home in 1985 at a cost of $90,000.00. They paid 20% of the cost to build the home themselves and financed the remainder by way of a mortgage. They paid the mortgage off in 15 years. They used $35,000 from Bill's inheritance to upgrade the home in 2004. When they sold the home for $335,000.00 in 2006, what was the value of their equity? A. $35,000 B. $245,000 C. $210,000 D. $335,000
D
Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is not feasible?
D
Command-and-control regulation is a body of law that A. fails to consider private costs of firms. B. specifies allowable quantities of pollution. C. details which pollution-control technologies must be used. D. can include both b and c.
D
During the U.S. stock market collapse of 2007, Paula's financial advisor recommended that she invest in a number of pharmaceutical companies while their stock values were down considerably. He expected these companies to maintain high dividend yields, making them attractive to investors. If Paula follows her financial advisor's recommendations, she is A. likely investing in an index fund. B. diversifying her investment portfolio. C. following momentum trading advice. D. following fundamental trading advice.
D
How has the widespread adoption of debit cards as the preferred method of payment for consumer purchases likely affected bank administration costs? A. the cost of bank administration is unaffected by widespread use of debit cards B. costs increased due to high cost of developing and maintaining debit card technology C. administration costs increased because the cost of electricity means high-cost for electronic transactions D. costs are reduced because the cost of purchase is immediately debited from purchaser's checking account
D
How would a sustained increase in the market price of its shares directly benefit a publically traded company? A. It will be able to lower the dividend yield on its preferred shares. B. It will be able to borrow larger sums from other companies. C. It would be able to borrow larger sums from banks. D. It could sell any shares it owns in itself at the higher valuation.
D
If pollutants are emitted into the air and water, what costs might be incurred as a result? A. compromised recreation possibilities B. decreased property values C. loss from destruction of wildlife habitat D. health injuries and all of the above
D
In January 2001, Bianca invested $5,000 for three years at 4.20%; in January 2010, she invested $5,000 for two years at 3.81%; and, in January 2011, she invested $5,000 for one year at 3.55%. Bianca's savings account in each year paid 2.8%, 1.59%, and 1.13% respectively. In January, 2014, if Bianca reinvests her initial capital of $15,000., plus the interest it has earned for another two-year term, her bank will likely offer to pay a higher rate of return A. to compensate for junk bonds relatively high chance of default. B. as compensation for the relatively high chance of bank failures. C. to match the rate of return that its bonds are expected to pay at the time of purchase. D. on the CD in exchange for her promise to leave the funds invested for the set-term.
D
In addition to the current levels of air and water pollution, a list of important environmental issues would most likely include: A. emissions of greenhouse gases B. safe disposal of hazardous waste materials C. destruction of wetlands and other habitats D. extinction of species and all of the above
D
In the United States, venture capital firms invested __________ in 2009. A. two-thirds less B. in certificates of deposit C. $3 billion in NINJA loans D. $21 billion
D
Jackie has invested $25,000 for a 10 period at a guaranteed interest rate of 9%. If Jackie decides to sell her investment before the 10 year period has ended, she may receive less if the interest rates at that time are lower. Jackie is a A. shareholder B. owner of a certificate of deposit C. angel investor D. bondholder
D
Levi and Beverly paid 20% down on a house valued at $165,000 in 1994. They upgraded the house entirely in 2003, when they refinanced their mortgage for $165,000. If they sell the house in 2018 for $190,000, what would be the value of their equity in the home? A. $68,000 B. $58,000 C. $33,000 D. $25,000
D
Low and middle-income societies correctly point out that high-income countries have historically A. been the primary contributors to greenhouse warming. B. been the primary contributors to reduced biodiversity. C. failed to put environmental protection ahead of corporate profits. D. legitimately lacked moral standing in addition to all the above.
D
Marketable permits work best when there are _____________________ permit holders who are highly interested in trading. A. several dozen or a several hundred B. less than a hundred C. more than a thousand D. a few dozen or a few hundred
D
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: A. each would create less pollution B. each would lower production to decrease pollution levels C. their supply curves will represent all of those social costs D. the price of goods will rise and a and b above
D
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude: Germany has a comparative advantage in the production of hockey sticks. Canada has an absolute advantage in the production of maple syrup. Germany has an absolute advantage in the production of maple syrup. Canada has a comparative advantage in the production of hockey sticks.
D
The arguments presented by economists regarding U.S. environmental command-and-control regulations generally A. accept the goal of reducing pollution. B. question the regulations as being the best policy tools for meeting reduction goals. C. assert that these laws are clear of the usual fine print, loopholes and exceptions. D. lack flexibility and a and b above.
D
The bottom line on investing in individual stocks is: _______________ on average over lengthy periods of time; ________________, especially in the short run; _______________, since stock does need to be sold to turn gains into spendable money. A. low rate of return; high risk; low liquidity B. moderate rate of return; low risk; high liquidity C. high rate of return; moderate risk; low liquidity D. high rate of return; high risk; moderate liquidity
D
The challenge of preserving biodiversity, A. any nation itself can reduce emissions to solve global warming. B. any nation acting alone can protect biodiversity around the world. C. includes the full spectrum of animal and plant genetic material. D. a nation can protect biodiversity within its own borders and c.
D
The flexibility of marketable permits program developed for the oil refining industry is credited with achieving the reduction in lead pollution for __________ less cost than command-and-control regulation would have required. A. at least 50% B. 50% C. 20% D. at least 20%
D
The ownership in a company is represented by ________________ and those who are legally recognized as having ownership in a company are called _____________. A. ownership of the shares with voting rights; shareholders B. shares with voting rights; stockholders C. ownership of stock; stockholders D. ownership of shares in the company's stock; shareholders
D
The problem of pollution arises in primarily ______________ economies around the world. A. command-oriented B. market-oriented C. middle income D. both a and b
D
The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. relative advantage specialization absolute advantage opportunity cost
D
To be effective, U.S. command-and-control environmental regulation required A. social costs of industrial pollution to become unavoidable business costs. B. firms to take the social costs of pollution into account. C. firms to increase their costs by installing specified anti-pollution equipment. D. the EPA to oversee all environmental laws and all of the above.
D
What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants? A. shrinkable marketable permits B. free marketable permits C. command-and-control permits D. both a and b above
D
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product. economy of scale production efficiency relative advantage absolute advantage
D
Which of the following is an example of economic output that can injure the environment? A. gold mine discharging arsenic into a natural lake it's using for a tailings pond B. paper mill discharging raw chemical waste into a river C. excessive clear cutting of wood resources by logging companies D. radio-active waste leaking into a river, and all of the above
D
Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking? A. the principle of setting high toxic emission limits to preserve a healthy environment B. the belief that industry must be allowed to prevail over the environment C. the needs of both parties to a voluntary exchange must be completely satisfied D. the principle that a system of voluntary exchange benefits both parties
D
Which of the following will provide an investor with a legally valid claim of partial ownership of a firm? A. entitlement to bond interest B. ownership of a treasury bond C. entitlement to dividends D. ownership of stock
D
__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products. Import ceilings Quotas Tariffs Nontariff barriers
D
The graph illustrates a nation's production possibility frontier (PPF) for timber production and spotted owl habitat. According to the graph, there are four possible combinations of timber production and spotted owl habitat, points A, B, C, and D. Which point best fits the situation where the country prioritizes increasing Gross Domestic Product (GDP) directly in relation to timber production? Which point best fits the situation where the country prioritizes environmental quality? Which point is currently not attainable? Which point is attainable but not efficient?
D A C B
19) Which of the following are primary concerns of a bank manager? A) maintaining sufficient reserves to minimize the cost to the bank of deposit outflows B) extending loans to borrowers who will pay high interest rates, but who are also good credit risks C) acquiring funds at a relatively low cost, so that profitable lending opportunities can be realized D) all of the above
D) all of the above
31) A bank failure is more likely to occur when A) a bank holds less in U.S. government securities. B) a bank suffers large deposit outflows. C) a bank holds less equity capital. D) all of the above occur. E) only A and B of the above occur
D) all of the above occur.
46) With large banks beginning to explore ways in which the liabilities on their balance sheets could provide them with reserves and liquidity, this led to A) the expansion of overnight loan markets. B) the development of negotiable CDs. C) the ability of money center banks to acquire funds quickly. D) all of the above occurring.
D) all of the above occurring.
41) Examples of off-balance-sheet activities include A) loan sales. B) foreign exchange market transactions. C) trading in financial futures. D) all of the above. E) only A and B of the above.
D) all of the above.
10) Which of the following are not reported as assets on a bank's balance sheet? A) cash items in the process of collection B) deposits with other banks C) U.S. Treasury securities D) checkable deposits
D) checkable deposits
25) Banks can protect themselves from the disruption caused by deposit outflows by A) holding excess reserves. B) selling securities. C) "calling in" loans. D) doing all of the above. E) doing only A and B of the above
D) doing all of the above.
22) If a bank has $1 million of deposits, a required reserve ratio of 20 percent, and $300,000 in reserves, it need not rearrange its balance sheet if there is a deposit outflow of A) $50,000. B) $75,000. C) $150,000. D) either A or B of the above.
D) either A or B of the above.
91. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. What number belongs in place of X? A. 700 B. 900 C. 1300 D. 1500
D. 1500
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when only private costs are taken into account are A. Price = $55, Quantity = 30 B. Price = $40, Quantity = 55 C. Price = $30, Quantity = 20 D. Price = $30, Quantity = 80
D. Price = $30, Quantity = 80
59. Marketable permits work best when there are _____________________ permit holders who are highly interested in trading. A. several dozen or a several hundred B. less than a hundred C. more than a thousand D. a few dozen or a few hundred
D. a few dozen or a few hundred
When the quantity of environmental protection is low so that pollution is extensive, then there are usually ______________ to reduce pollution and the ______________ . A. a few inexpensive and easy ways; average benefit are slightly higher B. a lot of expensive and innovative methods; marginal benefits are quite high C. only a few expensive and innovative methods; average benefits are higher D. a lot of cheap and easy ways; marginal benefits of doing so are quite high
D. a lot of cheap and easy ways; marginal benefits of doing so are quite high
47. The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like A. an incentive to throw bottles and cans in the trash. B. command-and-control regulation. C. a market permit program. D. a pollution tax incentive to avoid littering.
D. a pollution tax incentive to avoid littering.
The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like A. an incentive to throw bottles and cans in the trash. B. command-and-control regulation. C. a market permit program. D. a pollution tax incentive to avoid littering.
D. a pollution tax incentive to avoid littering.
51. The flexibility of marketable permits program developed for the oil refining industry is credited with achieving the reduction in lead pollution for __________ less cost than command-and-control regulation would have required.
D. at least 20%
13. The problem of pollution arises in primarily ______________ economies around the world. A. command-oriented B. market-oriented C. middle income D. both a and b
D. both a and b
The problem of pollution arises in primarily ______________ economies around the world. A. command-oriented B. market-oriented C. middle income D. both a and b
D. both a and b
53. What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants? A. shrinkable marketable permits B. free marketable permits C. command-and-control permits D. both a and b above
D. both a and b above
89. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society's point of view. The payoffs facing these companies are given in the table below. A. neither Company choosing to cut the forest B. Company 1 choosing to cut, Company 2 choosing not to cut C. Company 2 choosing to cut, Company 1 choosing not to cut D. both companies choosing to cut the forest
D. both companies choosing to cut the forest
7. Command-and-control regulation is a body of law that A. fails to consider private costs of firms. B. specifies allowable quantities of pollution. C. details which pollution-control technologies must be used. D. can include both b and c.
D. can include both b and c.
18. In addition to the current levels of air and water pollution, a list of important environmental issues would most likely include: A. emissions of greenhouse gases B. safe disposal of hazardous waste materials C. destruction of wetlands and other habitats D. extinction of species and all of the above
D. extinction of species and all of the above
In addition to the current levels of air and water pollution, a list of important environmental issues would most likely include: A. emissions of greenhouse gases B. safe disposal of hazardous waste materials C. destruction of wetlands and other habitats D. extinction of species and all of the above
D. extinction of species and all of the above
27. If pollutants are emitted into the air and water, what costs might be incurred as a result? A. compromised recreation possibilities B. decreased property values C. loss from destruction of wildlife habitat D. health injuries and all of the above
D. health injuries and all of the above
If pollutants are emitted into the air and water, what costs might be incurred as a result? A. compromised recreation possibilities B. decreased property values C. loss from destruction of wildlife habitat D. health injuries and all of the above
D. health injuries and all of the above
As environmental protection increases, A. the biggest marginal benefits are achieved first, smaller marginal benefits follow. B. inexpensive and easy methods of reducing pollution begin to dwindle. C. the more costly and innovative methods can be readily avoided. D. in addition to a and b above, the quality of environmental protection increases.
D. in addition to a and b above, the quality of environmental protection increases.
39. The arguments presented by economists regarding U.S. environmental command-and-control regulations generally A. accept the goal of reducing pollution. B. question the regulations as being the best policy tools for meeting reduction goals. C. assert that these laws are clear of the usual fine print, loopholes and exceptions. D. lack flexibility and a and b above.
D. lack flexibility and a and b above.
The arguments presented by economists regarding U.S. environmental command-and-control regulations generally A. accept the goal of reducing pollution. B. question the regulations as being the best policy tools for meeting reduction goals. C. assert that these laws are clear of the usual fine print, loopholes and exceptions. D. lack flexibility and a and b above.
D. lack flexibility and a and b above.
74. Low and middle-income societies correctly point out that high-income countries have historically A. been the primary contributors to greenhouse warming. B. been the primary contributors to reduced biodiversity. C. failed to put environmental protection ahead of corporate profits. D. legitimately lacked moral standing in addition to all the above.
D. legitimately lacked moral standing in addition to all the above.
Low and middle-income societies correctly point out that high-income countries have historically A. been the primary contributors to greenhouse warming. B. been the primary contributors to reduced biodiversity. C. failed to put environmental protection ahead of corporate profits. D. legitimately lacked moral standing in addition to all the above.
D. legitimately lacked moral standing in addition to all the above.
97. 36. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. In the absence of any government intervention or agreement between the firms, A. both firms will install filters B. Boing will install a filter, Twang will not C. Twang will install a filter, Boing will not D. neither firm will install a filter
D. neither firm will install a filter
Property rights are the legal rights of ownership on which others are A. allowed to infringe by paying the property owner's pollution tax. B. able to enforce use of pollution-control technologies. C. able to specify allowable quantities of pollution. D. not allowed to infringe without paying compensation.
D. not allowed to infringe without paying compensation.
86. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner's dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. From the table, we know that if Wisconsin chooses to protect the lake, Michigan will choose to ______ the lake. If Wisconsin chooses to not protect the lake, Michigan will choose to ______ the lake A. protect, protect B. not protect, protect C. protect, not protect D. not protect, not protect
D. not protect, not protect
Which of the following is an example of economic output that can injure the environment? A. gold mine discharging arsenic into a natural lake it's using for a tailings pond B. paper mill discharging raw chemical waste into a river C. excessive clear cutting of wood resources by logging companies D. radio-active waste leaking into a river, and all of the above
D. radio-active waste leaking into a river, and all of the above
To be effective, U.S. command-and-control environmental regulation required A. social costs of industrial pollution to become unavoidable business costs. B. firms to take the social costs of pollution into account. C. firms to increase their costs by installing specified anti-pollution equipment. D. the EPA to oversee all environmental laws and all of the above.
D. the EPA to oversee all environmental laws and all of the above.
32. Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: A. each would create less pollution B. each would lower production to decrease pollution levels C. their supply curves will represent all of those social costs D. the price of goods will rise and a and b above
D. the price of goods will rise and a and b above
24. Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking? A. the principle of setting high toxic emission limits to preserve a healthy environment B. the belief that industry must be allowed to prevail over the environment C. the needs of both parties to a voluntary exchange must be completely satisfied D. the principle that a system of voluntary exchange benefits both parties
D. the principle that a system of voluntary exchange benefits both parties
29) Which of the following statements is an accurate description of modern liability management? A) Greater flexibility in liability management has allowed banks to increase the proportion of their assets held in loans. B) New financial instruments enable banks to acquire funds quickly. C) The introduction of negotiable CDs have significantly reduced the percentage of funds that banks borrow from one another to finance loans. D) All of the above have occurred since 1960. E) Only A and B of the above have occurred since 1960.
E) Only A and B of the above have occurred since 1960.
6) Which of the following are not checkable deposits? A) savings accounts B) small-denomination time deposits C) negotiable order of withdrawal accounts D) all of the above E) only A and B of the above
E) only A and B of the above
17) When a $10 check written on the First National Bank is deposited in an account at the Second National Bank, then A) the liabilities of the First National Bank decrease by $10. B) the liabilities of the Second National Bank increase by $10. C) the reserves of the First National Bank increase by $10. D) all of the above occur. E) only A and B of the above occur.
E) only A and B of the above occur.
18) Holding all else constant, when a bank receives the funds for a deposited check, A) cash items in process of collection fall by the amount of the check. B) bank assets remain unchanged. C) bank liabilities decrease by the amount of the check. D) all of the above occur. E) only A and B of the above occur.
E) only A and B of the above occur.
Social cost is _____________.
Equal to private costs plus external costs
What are changes in Federal taxes and purchases that are intended to achieve macroeconomic policy objectives?
Fiscal Policy
GDP Per Capita Calculation
GDP/population
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?
Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing
From the examples below, determine which best describes an international externality.
Global warming fears rise as a result of increased pollution in Singapore.
Rank the following in asset size from largest to smallest in 2013. I. Mutual funds II. Insurance companies III. Depository institutions
III, I, II
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?
India has a comparative advantage in the production of rice.
What effect does changes in the price level have on aggregate supply in the long run?
It does not affect it
What does an increase in savings do?
It increases the amount of resources that can be devoted to capital goods.
What is a unit of account, in regards to the three functions of money?
It is an amount something is worth
What effect will deflation have on the quantity of real GDP demanded?
It will Increase it
If a bank charges 4% interest on loans, how much interest will it pay on savings
Less than 4%
What are the actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy objectives?
Monetary Policy
If a bank pays 3% interest on savings, how much interest will it change for loans?
More than 3%
The market value of a mutual fund's assets divided by the number of fund shares outstanding is equal to the
NAV.
Reasons Given for Trade Barriers
National security -Better to produce some goods on your own -Weapons, for example (bad to rely on others!) Infant industry argument -Firm that is just "starting out" may need protection. Once it is large enough, remove the protection. -Problem: the protections are usually never removed due to extreme political difficulty! Economic diversification -If a country is too dependent on a single industry, a recession may be inevitable if that industry declines; may not want entire economy tied to one industry Anti-dumping argument -"Dumping" is the sale of a good by a foreign supplier at a price below what it is sold for in their home country *Goal of dumping: entry to a new market -Dumping is often the result of foreign subsidies. Thus, production is cheaper not because of comparative advantage, but due to (unfair) government funding
______________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative externality
____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative externality
What happens to net exports as the price level drops
Net exports rise
The BEST way to improve your credit rating is to
Never forget to pay your bills on time
The Federal Deposit Insurance Company is a government agency
Protects the savings of people who deposit their money in banks
Which of the following illustrates the concept of an external cost?
Raymond cannot open his windows because he lives downwind from a chemical factory.
_______________ developed a famous theory that said the externality problem could potentially be solved if property rights were better defined.
Ronald Coase
What does M2 include that M1 does not?
Savings Accounts, CD's, Money Market Accounts
What is A curve that shows the relationship in the short run between the price level and the quantity of real GDP supplied from firms?
Short Run Aggregate Supply
Why are trade barriers so common given that they result in inefficiency?
Special interests, lobbying, irrational ignorance
Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession?
Standard of living is ultimately determined by long term growth
Steve has $10,000 in his savings account when his bank
Steve got all of his money back
If Whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?
Store of Value
What function of money would be violated if inflation were high?
Store of Value
Which of these is not a potential solution for pollution?
Subsidies
What is an unexpected event that causes the short-run aggregate supply curve to fall.
Supply Shock
Specialized electronic batteries, such as those for laptops, are hard to dispose of safely, yielding excess pollution when one gets thrown away. Suppose that producing these batteries creates an external cost of $150 per unit. The accompanying diagram depicts the market for these batteries in which these external costs are not internalized. Please adjust the appropriate curves to represent the market if the external costs are internalized.
Supply curve shifts left.
Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:
The USA has an absolute advantage in the production of cars.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
Ronald Coase's ideas on property rights have helped economists and policymakers better understand environmental problems. Identify the true statement regarding Coase and property rights.
The assignment of property rights to someone is essential.
What happens in the long run if the capital stock in this economy increases over time?
The capacity to produce will increase which is represented by a rightward shift in the long run aggregate supply curve
What are discount rates?
The interest rate the Federal Reserve charges on discount loans
What effect is how a change in the price level effects Net Exports?
The international trade effect
Refer to Figure 12.1. Which of the following statements describes the inefficiency in this market?
The market produces Q2, which is too high from society's perspective.
Use the graph above to answer the following question. Point E0 represents _____________.
The quantity of refrigerators that will be produced if producers bear only the private costs of production
Tyler's family wants to buy a new computer system that costs $2,000. They could get a 3-year personal loan from the bank at a fixed rate of 10% simple interest. They could get a 3-year loan from a finance company that charges 8%, compounded annually. Calculate the total cost of each loan after 3 years, and then decide which credit offer family should accept.
The second one
Which aggregate supply curve has a positive slope?
The short run only
How can economic growth be achieved?
Through an increase in the production of capital goods
Gains from Trade Opportunity Costs
Thus, in terms comparative advantage (and with the intent to specialize and trade) -Mex. should specialize in clothing prduction -United States should specialize in food production
Command and control, sometimes called direct control, is when the government passes legislation specifically regulating an activity, typically because the activity leads to market failure. Classify each statement about this type of regulation as either true or false. Classify each statement.
True One option with command and control is for the government to decide on a specific amount of pollution that firms can legally emit. A limitation of a command and control is that firms have no incentive to remove additional pollution once they are within the legal pollution limits. Command and control is subject to political considerations. Under command and control, the government has the option to specify the technology that firms must use in production. False Command and control is more flexible than market‑based regulation. Command and control is always the best option when it comes to reducing the amount of pollution.
Classify each statement as true or false.
True Social cost is the sum of private and external costs. When the production of a good results in pollution, private and social costs are different. Pollution is an example of an external cost. False The terms "social cost" and "external cost" are synonyms. When the production of a good results in pollution, private and social costs are the same. Wages are an example of an external cost. Private costs are costs that the firm is not obligated to disclose to the public.
Indicate whether the statements are true or false.
True Marketable permits typically achieve pollution reduction at a lower cost than command-and-control regulation. The term "cap and trade" describes regulation by marketable permits. Marketable permits provide their owners with the right to pollute a specified amount. False Pollution taxes are more effective at reducing pollution than marketable permits. Compared with no regulation, regulation with marketable permits decrease firms' cost.
US- Canadian free trade agreement
US and canada agree to eliminate all barriers to trade between two countries by 1988
Can small differences in rates of economic growth lead to large differences in levels of potential output over time?
Yes
Savings Account
a bank account that pays an interest rate, but withdrawing money typically requires a trip to the bank or an automatic teller machine
Checking Account
a bank account that typically pays little or no interest, but that gives easy access to money, either by writing a check or by using a "debit card"
Municipal Bond
a bond issued by cities that wish to borrow
Corporate Bond
a bond issued by firms that wish to borrow
Treasury Bond
a bond issued by the federal government through the U.S. Department of the Treasury
Present Value
a bond's current price at a given time
Corporation
a business owned by shareholders who have limited liability for the company's debt yet a share of the company's profits; may be private or public and may or may not have publicly-traded stock
Debit Card
a card that lets the person make purchases, and the cost is immediately deducted from that person's checking account
Stock
a claim on partial ownership of a specific firm
A fund has a NAV of $30 per share but the shares are currently selling for $32. This fund must be
a closed-end fund.
Partnership
a company run by a group as opposed to an individual
Sole Proprietorship
a company run by an individual as opposed to a group
Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ .
a difficult set of negotiations; different income levels and sets of priorities
Bond
a financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future
Capital Gain
a financial gain from buying an asset, like a share of stock or a house, and later selling it at a higher price
Private Company
a firm owned by the people who run it on a day-to-day basis
Public Company
a firm that has sold stock to the public, which in turn can be bought and sold by investors
When the quantity of environmental protection is low so that pollution is extensive, then there are usually ______________ to reduce pollution and the ______________ .
a lot of cheap and easy ways; marginal benefits of doing so are quite high
When the quantity of environmental protection is low so that pollution is extensive, then there are usually _______________ to reduce pollution and the ___________________.
a lot of cheap and easy ways; marginal benefits of doing so are quite high
Certificate of Deposit (CD)
a mechanism for a saver to deposit funds at a bank and promise to leave them at the bank for a time, in exchange for a higher rate of interest
Index Fund
a mutual fund that seeks only to mimic the overall performance of the market
The challenge of preserving biodiversity,
a nation can protect biodiversity within its own borders and includes the full spectrum of animal and plant genetic material.(c)
The Junkbuyers Company travels from home to home, purchasing items that would otherwise be put out with the garbage. Presumably both the buyer and the seller benefit from the transaction. The company also reduces the amount of garbage produced. SInce this situation, the social benefits are _____ the private benefits. a. larger than b. the same as c. more important than d. smaller than
a. larger than
Like monopolists, oligopolists are aware that an increase in the quantity of output always a. reduces the price of their product b. reduces their profit c. reduces their revenue d. reduces productivity
a. reduces the price of their product
In markets characterized by oligopoly a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist b. collusive agreements will always prevail c. collective profits are always lower with cartel arrangements than they are without cartel arrangements d. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market
a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist
Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together, a. they are unable to maintain the same degree of monopoly power enjoyed by a monopolist b. each firm's profit always ends up being zero c. society is worse off as a result d. both a and c are correct
a. they are unable to maintain the same degree of monopoly power enjoyed by a monopolist
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.
absolute advantage
additional costs incurred by third parties outside the production process when a unit of output is produced
additional external cost
When a shift in ________________ occurs, rational expectations hold that its impact on output and employment will only be temporary.
aggregated demand
Command-and-control regulation is a body of law that
ails to consider private costs of firms. details which pollution-control technologies must be used can include both b and c.
With common ownership ______________.
all of the above
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:
an absolute advantage in coffee production
The Aggregate demand curve will shift if what happens?
any of the factors effecting GDP increase or decrease (C+I+G+NX)
In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time,
are given considerable credit for cleaner air and water in recent decades.
If an externality of pollution exists for all manufacturers in a given industry, then all related social costs __________ Select one: a. continue to be represented in their supply curves. b. are no longer represented in their supply curves. c. continue to be represented in their demand curves. d. are no longer represented in their demand curves.
are no longer represented in their supply curves.
economies of scale
available when producing for a world market that would not be available when producing for a limited domestic market
Supply curve
based on choices about production that firms make while looking at their marginal cost
Demand curve
based on the benefits that individuals perceive while maximizing utility
the full spectrum of animal and plant genetic material
biodiversity
High Yield Bonds / Junk Bonds
bonds that offer relatively high interest rates to compensate for their relatively high chance of default
Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect a. an increase in market output and an increase in the price of the product b. an increase in market output and a decrease in the price of the product c. a decrease in market output and an increase in the price of the product d. a decrease in market output and a decrease in the price of the product
c. a decrease in market output and an increase in the price of the product
When firms are faced with making strategic choices in order to maximize profit, economists typically use a. the theory of monopoly to model their behavior b. the theory of aggressive competition to model their behavior c. game theory to model their behavior d. cartel theory to model their behavior
c. game theory to model their behavior (*prisoner's dilemma)
Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it a. is always in their best interest to supply more to the market b. is always in their best interest to supply less to the market c. is always in their best interest to leave their quantities supplied unchanged d. may be in their best interest to do any of the above, depending on market conditions
c. is always in their best interest to leave their quantities supplied unchanged
Which of these encourages innovation by securing a private return? a. welfare programs b. entitlements c. patents and copyrights d. tariffs
c. patents and copyrights
If economic activity in a society is mostly organized and directed among the family, then this society is an example of a(n) ________ economy. a. command b. capitalist c. traditional d. market
c. traditional
Gov't spending on research & development
can provide direct financial support for research & development (R&D) done at colleges & universities, nonprofit research entities, and sometimes by private firms, as well as at gov't-run laboratories
Which of these is both nonexcludable and nonrival? a. an open-air playground b. a beach c. distilled water d. clean air
d. clean air
________ may be enforced with patents or copyright protection, for example, for software programs or other electronics. a. ownership rights b. trade agreements c. private property rights d. intellectual property rights
d. intellectual property rights
All are examples of the benefits of clean air and water EXCEPT
decreased prices for all goods and services.
Why are market-oriented environmental tools advantageous
due to their incentives and flexibility, they can achieve any desired reduction in pollution at a lower cost to society
The neoclassical view holds that long-term expansion of potential GDP due to _______________________ will determine ____________________.
economic growth; the size of the economy
According to the Environmental Kuznets Curve, there is not necessarily a trade-off between _____________ and _____________.
economic output; environmental protection
The concept of _________________ means that as the measure of output goes up, average costs of production decline-at least up to a point.
economies of scale
(the coase theorem) in the presence of an externality, if the transaction costs are small the resulting allocations of resources will be ______ regardless of the initial allocation of property rights
efficent
In addition to the current levels of air and water pollution, a list of important environmental issues would most likely include:
emissions of greenhouse gases safe disposal of hazardous waste materials destruction of wetlands and other habitats extinction of species and all of the above
The property rights approach to environmental issues often becomes highly relevant in cases involving __________________.
endangered species
solutions to common property resource problems
establishing private property rights, using government policy to restrict access to the common resource and informal organizations that restrict each users benefits from the resource
European Union (EU)
european trading bloc composed of austria, belgium, den, fin, franc, germ, gree, ire, ital, luxembourg, nether, portu, spain, sweed, UK
nonrivalrous
even when one person uses the good, others can use it too
Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority?
every country
Sonny Bono Copyright Term Extension Act (1998)
extends copyright terms in the U.S. by 20 years *owned by companies & other entities to 95 years (prev. 75) * owned by individuals to 70 years (prev. 50)
Why do U.S. economists commonly refer to externalities as an example of market failure?
externalities present a case where markets only consider some social costs
International externalities
externalities that cross national border& that a single nation acting alone cannot resolve →global warming →biodiversity
the 3 cuases of market failure:
externalities, existence of public goods and common property resources
a market exchange that affects a third party who is outside or "external" to the exchange; sometimes called a "spillover"
externality
an action or transaction that affects a third party who is not a party to it
externality
Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits.
fails to allocate resources efficiently
A monopolistically competitive firm faces a relatively flatter demand curve than the demand curve faced by a perfectly competitive firm. Select one: True False
false
A public good is a good that is excludable and rival, and thus is difficult for market producers to sell to individual consumers. Select one: True False
false
Acquisition - when two formerly separate firms combine to become a single firm. Select one: True False
false
Collusion is when firms act together to increase output and keep prices low. Select one: True False
false
Cost-plus regulation- when the regulator sets a price that a firm cannot exceed over the next few years. Select one: True False
false
If a small electric automobile manufacturer is able to gain the social return generated by its electric motor, its demand for financial capital would shift to the right. Select one: True False
false
In monopolistic competition goods are produced at the lowest possible average cost. Select one: True False
false
Some studies done by economists have found that the original inventor receives one-quarter to one-third of the total economic benefits from innovations, while other businesses and new product users receive the rest of the benefit. Select one: True False
false
The effect of a market exchange on a third party who is outside or "external" to the exchange is called a social cost. Select one: True False
false
Thomas Edison Copyright Term Extension Act was enacted in 1998 to allow copyright to be extended from 50 to 70 years after an author's death? Select one: True False
false
Venture Capital
financial investments in new companies that are still relatively small in size, but that have potential to grow substantially
Biodiversity
full spectrum of animal/ plant genetic material
Mutual Funds
funds that buy a range of stocks or bonds from different companies, thus allowing an investor an easy way to diversify
what happens when a tariff is lowered? (trade and jobs- arguments against trade)
imports increase but we pay for our imports with exports- so trade moves jobs from import-competing industries to exporting industries -wages increase due to comparative advantage trade restrictions only save a few domestic jobs and all consumers pay higher prices
An increase in net exports will do what to the ADC?
increase the ADC
As it pertains to investment, a lower price will decrease the interest rate and do what to investment spending?
increases investment spending
the demand for public goods is the vertical summation of
individual demand curves
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?
inflationary increase in price level
More people buy bonds =
interest rate falls
general agreement on tariff and trade (GATT)
international agreement signed by US and 22 countries to promote foreign trade
Diversification
investing in a wide range of companies to reduce the level of risk
Pollution tax
is < effective At reducing pollutions than marketable permits.
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes,
it is factoring in the social costs of the pollution it generates.
The arguments presented by economists regarding U.S. environmental command-and-control regulations generally
lack flexibility and a and b above. accept the goal of reducing pollution. question the regulations as being the best policy tools for meeting reduction goals.
Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product.
learning and innovation
in a positive consumption externalities graph the market produces ___ output than is socially optimal
less
quota
limit on quantity of imports
Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output?
low incomes and command economies
Around the world, the cities with the dirtiest air and water are typically found in ____________.
low-income countries in Africa and Asia
Around the world, the cities with the dirtiest air and water are typically found in ___________________________ .
low-income countries in Africa and Asia
bc the demand for a public good represents benefits to society and the supply curve represents society's costs equating ______ and _______ yields the optimal
marginal benefits and marginal costs
Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the ____________ and the ______________.
marginal benefits are greatest; marginal costs are least
When the market on its own does not allocate resources efficiently in a way that balances social costs and benefits; externalities are one example of a market failure
market failure
a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms
marketable permit program
As the economy weakens, one would expect investment in ____________ funds to increase and investment in _____________ funds to decrease, ceteris paribus.
money market mutual; equity
Once it's patent application has been accepted, a firm is able to earn __________ on its product, which __________. Select one: a. monopoly profits; offers an incentive for research and development to take place b. more profit; will allow it to recover the biggest slice of the social value created c. an increased rate of return for investors; raises further R&D activities
monopoly profits; offers an incentive for research and development to take place
product differentiation
natural response to diverse preferences within an economy and across economies
__________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. Select one: a. Negative externality b. Positive externality c. A market failure d. A spillover
negative externality
a situation where a third party, outside the transaction, suffers from a market transaction by others
negative externality
costs to others outside the market
negative externality
Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner's dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. From the table, we know that the outcome of this game will be
neither state choosing to protect the lake
cable tv and satellite radio
nonrival and exlcusive
public good with exclusion
nonrival and exlusive
consumption by on edoes not reduce that good's or services's utlity to others.
nonrivalry
Property rights are the legal rights of ownership on which others are ___________________.
not allowed to infringe without paying compensation
Property rights are the legal rights of ownership on which others are
not allowed to infringe without paying compensation.
economic integration
occurs when two or more nations join to form a free trade-zone (aka. EU and NAFTA)
The slope of the production possibility frontier is determined by the ____ of expanding production of one good, measured by how much of the other good would be lost.
opportunity cost
The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost.
opportunity cost
The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.
opportunity cost
a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax
pollution charge
In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels.
pollution charges
Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation.
pollution tax; flexible, more cost-effective way
Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ .
positive regulations
stragetic protectionism
possible for a country to use tariffs and quotas to get a larger share of the gains from trade
protection
practice of shielding a sector of the economy from foreign competition
excluable goods
prevented by a firm or a person only *those who pay for it will receive it*
The aggregate demand curve will experience a movement along the curve if ?
price changes.
For a negative externality, the __________ than the costs imposed on society as a whole. Select one: a. private costs of an action are less b. social benefits of an action are more c. social costs of an action are less d. private benefits of an action are more
private costs of an action are less
The production of paper creates dioxin emissions, which are released into the air. If the paper manufacturer does NOT bear the entire cost of dioxin emissions, then the market will ____________.
produce more paper than is efficient
externalities can be caused by:
production and consumption
the legal rights of ownership on which others are not allowed to infringe without paying compensation
property rights
The objective of imposing a higher pollution tax is to
provide adequate incentive for firms to reduce their emissions by more.
terms of trade
ratio at which a country can trade domestic products for imported products
Liquidity
refers to how easily money or financial assets can be exchanged for a good or service
world trade organization (WHO)
replaced GATT as forum to discuss and attempt to resolve trade related issues b/w countries in 1995
(the coase theorem) the socially optimal level of production will be _______ no matter what
resolved
quota
restriction on the quantity of goods that can be imported
airline seat and ice cream bar
rival and exclusive
pure private good
rival and exclusive
common property resources
rival and nonexclusive
ocean fishery and highway
rival and nonexlsuive
Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted.
setting limits for how much of each
What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants?
shrinkable marketable permits free marketable permits both a and b above
The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government
stipulated mandatory use of particular pollution-control technologies.
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will
take place in the firms where it is least expensive to do so
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will ___________________.
take place in the firms where it is least expensive to do so
Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output?
the European Union
Face Value
the amount that the bond issuer or borrower agrees to pay the investor
Which of the following is a valid criticism of the rational expectations theory?
the assumption seems too strong
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is
the bees helping to pollinate the orchard, leading to more fruit. the honey the bees produce.
intellectual property
the body of law including patents, trademarks, copyrights, and trade secret law that protects the right of inventors to produce and sell their inventions
Maturity Date
the date that a bond must be repaid
The graph shows the marginal social benefit curve (MB) and marginal social cost curve (MC) for pollution removal. For the 20th unit of pollution removal, For the 50th unit of pollution removal, Determine the socially optimal level of pollution removal. socially optimal pollution removal: __________ units
the marginal benefit exceeds the marginal cost. the marginal cost exceeds the marginal benefit. 46.23
Equity
the monetary value a homeowner would have after selling the house and repaying any outstanding bank loans used to buy the house
If a government wants to establish a marketable permit program, it must begin by determining
the overall quantity of a certain pollutant that will be allowed.
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be:
the price of goods will rise and a and b above
Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking?
the principle that a system of voluntary exchange benefits both parties
A pollution charge is a form of tax imposed on _________________.
the quantity of pollution that a firm emits
Shares
the stock of a firm, divided into individual portions
Heckscher-Ohlin theorem
theory that explains existence of countrys comparative advantage by its factor endowments
According to the Coase theorem, private parties can solve an externality problem if ______________.
there are clear property rights and no transaction costs
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:
there are no incentives for Alpha to specialize and trade with Beta.
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:
there are no incentives for Beta to engage in international specialization and trade with Alpha.
free rider
those who want other to pay for the public goods and then plan to use the good themselves
Open-end mutual funds guarantee
to redeem investor's shares upon demand at current NAV.
Why was the Clean Air Act amended in 1990?
to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels
A monopolistically competitive firm faces a relatively flatter demand curve than the demand curve faced by a monopolist. Select one: True False
true
A monopolistically competitive firm faces a relatively steeper demand curve than the demand curve faced by a perfectly competitive firm. Select one: True False
true
If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely have less incentive to innovate to the extent that the whole of society desires. Select one: True False
true
In monopolistic competition, the long-term result of entry and exit is that firms end up with a price that lies on the downward-sloping portion of the AC curve, not at the very bottom of the AC curve. Select one: True False
true
The marginal costs of reducing pollution are generally increasing and the marginal benefits of reducing pollution are generally declining. Select one: True False
true
The new approach to antitrust regulation includes estimating the demand and supply curves for a monopolist that is being regulated. Select one: True False
true
in a negative production externalities graph, an external cost shifts supply curve
up and to the left
in a positive consumption externalities graph an external benefit shifts the demand curve
up and to the left
theory of comparative advantage
used to argue against corn laws (states that specialization and free trade will benefit all trading parteners and real wages will rise)
trade surplus
when a country exports more than it imports
comparative advantage
when good can be produced at lower cost in terms of other goods
nonexcludable
when it is costly or impossible to exclude someone from using the good and thus hard to charge for it
non-rivalrous goods
when one person uses the public good, another can also use it
social rate of return
when the estimated rates of return go primarily to society
If no externalities of pollution exist in a particular industry, the interaction of demand and supply _______________.
will coordinate social costs and benefits
Tragedy of the Commons
within a shared-resource system where *individual users acting independently & rationally* according to *their own self-interest* behave *contrary to the common good of all users by depleting that resource*
If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day
would be a negative externality.
infant industry
young industry that may need temporary protection from competition from the established industries of other countries to develop an acquired comparative advantage
Market failure
→ a case where markets no longer consider all social costs, but only some of them --> market on its own does not allocate resources efficiently, in away that balances social cost & benefits → ex. externalities(can be +or-), monopolies →private market fails to achieve efficient output, because either 1. firms do not account for all costs incurred in production 2. consumers do not account for all benefits obtained (a positive externality) 3. Government determines who and how 4. No mechanism to find most efficient means to reduce negative externality
Spillovers
→externalities that occur in market transactions that affect other parties beyond those involved
Social costs
→include the private costs incurred by firms and the additional costs incurred by outside the production process, like cost of pollution →illustrated on demand and supply diagram
Command-and-control regulation
→laws which specify allowable quantities of pollution and which also may detail which pollution-control technologies must be used →highly successful in protecting and cleaning U.S. environment
Pollution charge
→tax imposed on the quantity of pollution that a firm emits →gives firms an incentive to reduce emissions, as long as the marginal cost of reducing is less than the tax
Externality
→the effect of a market exchange on a third party who is outside to the exchange
Property rights
→the legal rights of ownership on which others are not allowed to infringe without paying compensation →when well-defined, can stop spillovers