Micro Final

Union membership in the United States probably ______ an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively ______.

is not; low

The primary advantage to selling pollution permits rather than using a fixed percent reduction for all firms is that:

pollution reduction is accomplished in the least costly way possible.

The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is

$32.

Suppose Chris is offered the following gamble: with probability 0.1 he will win $90, with probability 0.4 he will win $50, and with probability 0.5 he will lose $60. The expected value of this gamble is found by solving:

0.1 × $90 + 0.4 × $50 - 0.5 × $60

According to the textbook, the union wage premium for workers with the same amount of human capital is about ______.

10%

Which of the following factors is not part of an individual's stock of human capital?

Employment status

Which argument against enacting workplace safety regulations can be justified using economic tools or observation?

If the value workers place on a safety device is greater than the cost of providing it, then firms in a perfectly competitive labor market will want to install the device.

According to the textbook, the best possible solution to the problem of poverty is:

a combination of a negative income tax and public employment.

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to

a decrease in the VMP of each worker.

Workers' compensation is:

a government insurance plan that provides benefits to workers who are injured on the job.

First-dollar insurance coverage means that:

all of the insured's expenses are covered.

The union wage premium refers to the:

amount by which union wages exceed nonunion wages.

Pure public goods:

are frequently provided by the government, and are sometimes provided by private firms.

The negative effect of a tax on the economic surplus of participants in a market should:

be weighed against the potential benefits of the public goods financed by the tax.

Adam Smith's invisible hand only leads to an efficient outcome when:

buyers are fully informed about all relevant aspects of a product and the market in which it is traded.

If the government taxes a good that generates a negative externality, then the government:

can increase total economic surplus and generate tax revenue.

When attorneys, accountants and other professionals wear expensive clothing, it:

can serve as a credible signal of ability.

Unlike the minimum wage, the Earned Income Tax Credit does not:

cause low-wage workers to be laid off.

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run:

competing firms will hire the worker away.

According to the text, the allocation of scarce health care resources should be:

determined by weighing marginal costs and marginal benefits.

One justification for the creation of a federal level of government is:

economies of scale in the provision of military defense.

When the federal government borrows money, the resulting ______ in interest rates will lead private investment to ______.

increase; fall

The taxing agency in your state would like to impose a sales tax in a way that minimizes deadweight loss. To achieve this goal it should tax:

goods whose supply and demand curves are relatively inelastic.

School districts in which relatively more parents choose to not have their children immunized:

have higher rates of the diseases for which immunization is normally required.

A group of physicians that provides medical services to members for a fixed annual fee is termed a:

health maintenance organization.

Pat goes to the local electronics store to learn about high-end audio equipment. The salesperson spends an hour talking with Pat and demonstrating equipment. Pat then leaves and orders an audio system on the Internet for $250 less than the price at the store. Pat's behavior:

illustrates the free-rider problem.

Suppose the elasticity of labor demand is less than 1 in absolute value. Imposing a minimum wage above the equilibrium wage will:

increase the earnings of workers as a group.

According to the textbook, the percentage of gross domestic product devoted to healthcare between the years 1940 and 2013:

increased from 4% to more than 17%.

Statistical discrimination occurs when:

individuals are judged on the basis of the groups to which they belong.

If the marginal cost of pollution abatement differs across firms, then regulations that require all polluters to reduce pollution by a fixed proportion will be:

inefficient

The value of a worker's marginal product of labor:

is higher for workers with more human capital.

In a competitive labor market, the equilibrium wage rate is determined by:

labor demand and labor supply.

The overconsumption of medical care due to first-dollar health insurance coverage is:

larger the higher the elasticity of demand for medical care.

The greater the degree of labor market mobility, the

more likely it is that firms will provide the socially optimal level of workplace safety.

The value of marginal product curve is downward sloping because

of the law of diminishing returns.

Suppose a study that finds that the income elasticity of demand for a public good is greater than 1. This implies that the public good should be financed through a ______ income tax system.

progressive

An economic argument in favor of providing medical care through HMOs is that they:

reduce incentives for providing unnecessary or excessive care.

Suppose Ginger is going to buy a house and a dishwasher. Assuming the marginal cost of searching for both is the same, one can predict that Ginger will:

spend more time searching for the house than the dishwasher.

The optimal amount of information to acquire before making a purchase is

the amount such that the marginal cost of acquiring information equals the marginal benefit.

To say that a given welfare program is means-tested implies that:

the more income one earns, the smaller the size of the benefit.

One disadvantage of using the government to provide pure public goods is that everyone receives ______ of the public good and has ______ for the public good.

the same amount; a different reservation price

If workers' compensation premiums reflected the full social cost of the injuries sustained by each employer's workers, then this would lead to:

the socially optimal number of workplace injuries.

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

they fear ending up in a disadvantaged position themselves.

The seller of an existing house claims that it is in great shape, and he is offering a 2-year warranty on the house. His statements about the quality of his house are likely to be:

true because offering a warranty is a costly-to-fake signal.

One reason nonunionized firms do not always drive unionized firms out of business is that:

unionized firms hire more selectively, employing workers with greater human capital.

For many pure public goods like fireworks displays, weather forecasts, and television broadcasts the marginal cost of serving one more consumer is ______, and the optimal quantity of the public good occurs when ______.

zero; the marginal benefit of the public good equals zero.