Microeconomics Study
The most common international poverty measure is the number of people living on less than $_____ per day, which is _____ than the official U.S. poverty line.
- 1.90 - lower
Research suggests that only about _____ percent of people living under the poverty line in any given year are _____ poor.
- 3 - chronically
In the case of the labor market, we often see that women earn less than men. From this, we can conclude which of the following?
- An omitted variable is possibly responsible for the variation - Income is correlated with gender
Which three of the following concepts are particularly useful in evaluating the costs and benefits of alternative types of taxes?
- Incidence - Revenue - Efficiency
Which of the following is correct?
- Under some conditions, markets may help to eliminate discrimination. - Discrimination can be consistent with an efficient market.
One type of inefficiency of a tax is _____ burden, which represents the effort to manage and collect _____.
- administrative - taxes
When we consider the income differences between men and women, we have to be careful not to confuse _____ with _____.
- correlation - causation
_____ can have long-lasting effects on people and markets, even after the active _____ itself ends.
- discrimination - discrimination
The goal of _____ _____ is not only the immediate effect of the policy on poverty but also the growth it will produce for the entire economy in the future.
- economic - development
The tax revenue collected is smaller in the market with price-_____ demand, because the equilibrium quantity shrinks more than in a market with a price-_____ demand.
- elastic - inelastic
Because income is not distributed perfectly equally anywhere in the world, the top quintiles earn a disproportionately _____ share of income and the lower quintiles earn a disproportionately _____ share of income.
- high - low
Because income is not distributed perfectly equally anywhere in the world, the top quintiles earn a disproportionately _____ share of income and the lower quintiles earn a disproportionately ______ share of income.
- high - low
People who grow up in poor families or communities are likely to have reduced opportunities to acquire _____ _____.
- human - capital
The simplest method of summarizing _____ _____ divides households into five equally sized groups.
- income - distribution
The ability to improve one's economic circumstances over time is known as _____ _____.
- income - mobility
A tax may create a(n) _____, and the revenue it generates may be used to fix another _____.
- inefficiency - inefficiency
All else equal, imposing taxes in markets where demand and supply are price-_____ not only causes less _____ but also raises more _____.
- inelastic - inefficiency - revenue
The federal government calculates taxes by fiscal year, which begins on the first day in _____ of one calendar year and runs through the last day in _____ of the following year.
- october - september
_____ insurance programs are similar to _____ insurance programs in that they pool risks across a large population.
- private - social
The design of the _____ U.S. federal income tax system has the effect of reducing income inequality: Those with _____ income pay a larger proportion of their income than those with _____ income.
- progressive - higher - lower
Economists and policymakers classify taxes in one of three categories. These three categories are which of the following?
- proportional - progressive - regressive
Policies that benefit the poor may _____ resources with the explicit purpose of reducing chronic poverty or lessening income inequality.
- redistribute - reallocate
We can distinguish among three different types of public policy approaches related to poverty and inequality:
- safety nets - economic development - redistribution of resources
_____ incidence of the tax has no effect on the _____ incidence of the tax.
- statutory - economic
With a tax, the value of the _____ that is lost to buyers and sellers but converted into tax revenue may be transferred to someone else through _____ policies, but it is not lost.
- surplus - government
The _____ that is lost to buyers and sellers but converted into tax _____ is not considered a cost, because the the money funds public services.
- surplus - tax revenue
Under a _____, the consumer and producer surplus that is no longer generated is _____ loss.
- tax - deadweight
Calculating the revenue raised by a tax is simple: Multiply the _____ rate by the _____ of units of the thing being taxed.
- tax - number / quantity
To determine revenue from a _____ on a toll road, multiply the fee per car by the _____ of cars.
- tax - number / quantity
the Gini coefficient for complete inequality is
1
2 ways to measure income inequality
1) distribution by income category 2) distribution by quintiles (fifths)
Causes of growing inequality
1) greater demand in highly skilled workers 2)demographic changes 3)international trade, immigration, and decline in unionism
the case for inequality:
1) it results from differences in the quantity and quality of labor and other resources supplied by individuals to the economy 2) it is unavoidable consequence of maintaining the incentives needed to motivate people to produce output and income year after year
The US income-maintenance system consists of two kinds of programs, eltitlement programs:
1) social insurance 2) public assistance or "welfare"
Suppose the government wants to levy a new excise tax. For each of the following goods, determine whether you would expect an excise tax to result in large or small deadweight loss. 1. Alcohol Deadweight loss is relatively a. large b. small 2. Milk Deadweight loss is relatively a. large b. small 3. Diamonds Deadweight loss is relatively a. large b. small 4. Tropical vacations Deadweight loss is relatively a. large b. small 5. Socks Deadweight loss is relatively a. large b. small
1. b 2. b 3. a 4. a 5. b
according to the most recent estimates, 869 million people lived in poverty (living on less than $1.90 per day) in 2012, or roughly ______ of the worlds population
13%
Let's say that you are a single person who earned $30,000 in 2017. Using that tax table from the book (Table 20.1), your average tax rate is
13.55%
Let's say that you are a single person who earned $34,000 in 2010. Using that tax table from the book (Table 20.1), your average tax rate is
13.72%
The percent of the population living under the official federal poverty line in the United States was approximately _____ percent in 2014.
15
the percent of the population living under that official federal poverty line in the US was appoximatley ____ percent in 2014
15
Suppose the figure shown represents the production possibilities frontier for Country A. Country B offers to trade four trucks for every airplane. Assuming Country A specializes in airplane production, which of the following combination of goods could Country A consume?
15 airplanes, 20 trucks
Consider the production possibilities frontier displayed in the figure shown. Which of the following combinations could be produced?
15 watermelons, 100 bushels of apples
Transient poverty is usually measured as a spell of poverty that lasts at least _____ consecutive months within a year.
2
When dividing a population into five groups, each group represents _____ percent of the population.
20
Imagine a person who makes $400 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income equal to or less than $20,000, that gives her $800 a year. No such program is available to people with income above $20,000 per year. Her boss offers her a promotion that would increase her wage by 25 cents per hour. a. Her total income before the promotion is __________ b. Her total income if she accepts the promotion is _________ c. She (should or should not) accept the promotion if she wants to have higher income.
20800, 20500 should not
In the United States, the poverty line was set in the 1960s by taking the cost of food for a family of a given size and multiplying it by
3
Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day building bombs, he will build 7 bombs. For Tom, the opportunity cost of building a bomb is __________ traps set.
4
Suppose the price of a sweater is $56. Julia's marginal benefit for purchasing each additional sweater is given in the table below. Julia gets the most benefit from the first sweater and less benefit from each additional sweater. If Julia is behaving rationally, how many sweaters will she purchase?
4 +/- 2%
Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day builiding bombs, he will build 7 bombs. The opportunity cost of one bomb is _____ for Tom and ______ for Jerry. Therefore Tom should specialize in _____.
4 traps; 2 traps; traps
Suppose the quantity of apples supplied in your market is 2,400. If there are 60 apple producers, each with identical cost structures, how many apples does each producer supply to the market? _______ apples
40
the simplest method of summarizing income distribution divides households into ______ equally sized groups
5
Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combination of goods could Country A consume?
5 airplanes, 30 trucks
Maya and Max are neighbors. Each grows lettuce and tomatoes in their gardens. Maya can grow 45 heads of lettuce or 9 pounds of tomatoes this summer. Max can grow 42 heads of lettuce or 6 pounds of tomatoes this summer. If Maya and Max specialize and trade, the price of tomatoes (in terms of lettuce) would be: 1 pound of tomatoes would cost between _____ heads of lettuce.
5 and 7
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. A Canadian worker, on the other hand, can produce 10 pairs of shoes or grow 20 apples per day. The opportunity cost for the United States is:
5 apples for each pair of shoes
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The opportunity cost of one tomato in Country A is:
5 bananas
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Two possible consumption bundles that Country A could produce are:
5,000 bananas, 0 tomatoes & 2,500 bananas, 500 tomatoes
Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. A Bangladeshi worker, on the other hand, can produce 100 pairs of gloves or grow 200 radishes per day. The opportunity cost of one pair of gloves is
6 radishes for the United States and 2 radishes for Bangladesh
private insurance programs
65% of the U.S. population has private insurance, although few such programs pay all medical costs (protect agains unexpected events)
Which of the following could be considered a microeconomic issue?
A family decides to drive their child to school instead of relying on a school bus. Apple releases a new version of the iPhone. Coors Light packages alcohol in bottles that turn blue when cold. ALL OF THESE ARE EXAMPLES OF MICROECONOMIC ISSUES.
welfare state
A government that undertakes responsibility for the welfare of its citizens through programs in public health and public housing and pensions and unemployment compensation etc. (promote economic well being of citizens)
A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run? A. Produce where MC = MR to minimize losses if P > AVC. B. Shut down if price is greater than average variable costs. C. Produce where MC = MR to minimize losses if P < AVC. D. Shut down.
A. Produce where MC = MR to minimize losses if P > AVC.
In an effort to lose weight, Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food. Sam's flyers are an example of: A. a commitment device. B. price-optimization theory. C. the law of supply. D. a way to deal with inconsistent costs.
A. a commitment device.
An example of a fixed cost for a shoe factory would be buying: A. a sewing machine, and would be included in total cost. B. a sewing machine, and would be excluded from total cost. C. leather to make the shoes, and would be included in total cost. D. leather to make the shoes, and would be excluded from total cost.
A. a sewing machine, and would be included in total cost.
Economies of scale refers to returns that occur when: A. an increase in the quantity of output decreases average total cost in the long run. B. an increase in the quantity of output increases average total cost in the long run. C. average total cost does not depend on the quantity of output in the long run. D. None of these is true.
A. an increase in the quantity of output decreases average total cost in the long run.
An essential characteristic of a perfectly competitive market is: A. buyers and sellers have no control over the market price. B. sellers are selling unique products. C. buyers have some control over the market price. D. sellers have some control over the market price.
A. buyers and sellers have no control over the market price.
A natural monopoly is a market in which a single firm: A. can produce, at a lower cost than multiple firms, the entire quantity of output demanded. B. owns a key resource or input into the production of the good. C. is protected from competition through government legislation. D. gains market share over time through aggressive tactics.
A. can produce, at a lower cost than multiple firms, the entire quantity of output demanded.
Which of the following statements is true about consumers and utility? A. consumers always seek to maximize utility. B. consumers always seek to maximize their income, not utility. C. consumers will either minimize or maximize utility depending on the situation. D. consumers try to maximize their profit.
A. consumers always seek to maximize utility
The prisoner's dilemma is a game of strategy: A. in which people make rational choices that lead to a less-than-ideal result for all. B. in which people make rational choices that lead to the ideal result for all. C. that leads everyone to be as well off as possible without making another worse off. D. that leads people to make irrational choices that lead to the ideal result for all.
A. in which people make rational choices that lead to a less-than-ideal result for all.
A dominant strategy: A. is the best one to follow no matter what strategy other players choose. B. exists in every game. C. is always the same for all players of a game. D. All of these statements are true.
A. is the best one to follow no matter what strategy other players choose.
For a firm in a perfectly competitive market with increasing marginal cost, if it produces where marginal cost exceeds marginal revenue: A. it should cut back production to increase profits. B. it should increase production to increase profits. C. it is producing a profit-maximizing quantity. D. The firm is not maximizing profits, but it is impossible to tell how quantity should be changed without more information
A. it should cut back production to increase profits.
Firms in perfectly competitive markets who wish to maximize profits should produce where: A. marginal revenue and marginal cost are equal. B. marginal revenue and market price are equal. C. marginal revenue and average revenue are equal. D. marginal cost and average cost are equal.
A. marginal revenue and marginal cost are equal.
Firms in perfectly competitive markets who wish to maximize profits should produce where: A. marginal revenue and marginal cost are equal. B. marginal revenue and market price are equal. C. marginal revenue and average revenue are equal. D. marginal cost and average cost are equal.
A. marginal revenue and marginal cost are equal.
When demand increases in a perfectly competitive market, in the short run __________________, and in the long run __________________. A. prices increase; supply increases B. prices increase; prices stay permanently higher C. quantity supplied increases; prices increase D. quantity supplied decreases; prices decrease
A. prices increase; supply increases
Adverse selection: A. results from unobserved characteristics of people or commodities. B. is about the actions of people. C. occurs after the parties have entered into an agreement. D. All of these statements are true.
A. results from unobserved characteristics of people or commodities.
When one person or company has to make a decision before the other in a game, it is called a: A. sequential game. B. commitment strategy. C. simultaneous game. D. prisoner's dilemma.
A. sequential game.
A dominant strategy is one: A. that is the best one to follow, no matter what strategy other players choose. B. in which a player is forced to choose given the rules of the game. C. in which a player must choose, even though it does not optimize his outcome. D. that is best to follow only for certain strategy choices of rivals.
A. that is the best one to follow, no matter what strategy other players choose.
Marginal cost of output is: A. the additional cost a firm will incur by producing one additional unit of output. B. the additional output a firm will get by employing one additional unit of input. C. the total cost a firm will incur by producing a given level of output. D. the costs that sit on the margin, that do not change regardless of the level of output.
A. the additional cost a firm will incur by producing one additional unit of output.
The revenue curves the monopoly faces are different from that a perfectly competitive firm faces in that: A. the marginal revenue curve is downward sloping instead of flat. B. the average revenue curve is no longer equal to price. C. the marginal revenue curve is now flat instead of downward sloping. D. The revenue curves are the same for a firm regardless of market structure.
A. the marginal revenue curve is downward sloping instead of flat.
Moral hazard is: A. the tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions. B. when people engage in behavior that is considered highly desirable by the person who bears the cost of the behavior. C. when buyers and sellers have different information about the quality of a good or the riskiness of a situation. D. when buyers and sellers with the same information about the quality of a good or the riskiness of a situation agree to a somewhat shady deal.
A. the tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions.
Procrastination can be seen as irrational behavior on the surface. One tool that behavioral economists have developed to account for this typical behavior is: A. the time inconsistency of our decision-making. B. the fungibility of money. C. thinking inconsistently about prices. D. None of these is a tool that has been developed by behavioral economists
A. the time inconsistency of our decision-making.
Utility is: A. useful in describing a person's preferences for one good over another. B. useful in comparing different people's preferences for a particular good. C. useful in predicting when to put an item on sale. D. an interesting concept, but not really useful for anything.
A. useful in describing a person's preferences for one good over another.
The graph below shows Tanya's weekly production possibilities frontier for doing homework (writing papers and doing problem sets). The vertical intercept (point A) is 8, and the horizontal intercept (point B) is 2. A: The slope of the production possibilities frontier is B: The opportunity cost of doing one problem set is C: The opportunity cost of writing one paper is
A: -4 B: 0.25 paper C: 4 problem sets
Your friend Sam has been asked to prepare appetizers for the university reception. She has an unlimited amount of ingredients and six hours in which to prepare them. Sam can make 360 mini-sandwiches or 180 servings of melon slices topped with smoked salmon and a dab of sauce per hour. A: Sam's opportunity cost of making one mini-sandwich is: B: Sam's opportunity cost of making one melon appetizer is: C: Suppose the reception has been postponed, so Sam has an extra four hours to prepare. The opportunity cost of making one mini-sandwich is now: D: Suppose the reception has been postponed, so Sam has an extra four hours to prepare. The opportunity cost of making one melon appetizer is now: E: Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 360 mini-sandwiches or 360 melon appetizers per hour. The opportunity cost of making one mini-sandwich is now: F: Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 360 mini-sandwiches or 360 melon appetizers per hour. The opportunity cost of making one melon appetizer is now
A: 0.5 melon appetizers B: 2 mini-sandwiches C: 0.5 melon appetizers D: 2 mini sandwiches E: 1 melon appetizer F: 1 mini-sandwich
Suppose that workers in a country can produce either yams or potatoes, and that all inputs are equally well-suited to the production of both goods. If all workers produce yams, 40 million yams can be produced. If all workers produce potatoes, 20 million potatoes can be produced. A: The opportunity cost of producing a potato is B: The opportunity cost of producing a yam is C: Suppose that there is an increase in resources that shifts the horizontal intercept to 40 million potatoes. The opportunity cost of potatoes is now
A: 2 B: 0.5 C: 1
Seller Willingness to sell one unit A $4 B $9 C $12 D $14 E $15 F $21 G $23 H $30 I $51 A: The quantity supplied at a price of $10 is B: The quantity supplied at a price $25 is
A: 2 B: 7
Vietnam and Ecuador both produce shrimp and rice. Vietnam can produce 140 thousand pounds of shrimp or 70 thousand pounds of rice in a year. Ecuador can produce 90 thousand pounds of shrimp or 15 thousand pounds of rice in a year. A: Vietnam's opportunity cost of producing one pound of rice is equal to B: Ecuador's opportunity cost of producing one pound of rice is equal to C: The two countries decide to specialize and trade with each other. The country that produces rice will sell one pound of rice for no less than _______ pounds of shrimp. The other country will pay no more than _______t pounds of shrimp for the one pound of rice.
A: 2 pounds of shrimp B: 6 pounds of shrimp C: 2 pounds of shrimp, 6 pounds of shrimp
The Red Cross and WIC (Women Infants Children program) both provide emergency food packages and first-aid kits to New York City homeless shelters. The table below shows their weekly production possibilities in providing emergency goods to NYC homeless shelters. Red Cross WIC Food packages 300 or 0 200 or 0 First-aid kits 0 50 0 20 NYC homeless shelters need a total of 20 first-aid kits per week. Currently, they get 10 kits from the Red Cross and 10 kits from WIC. With their remaining resources, how many food packages can each organization provide to NYC homeless shelters? A: red cross B: WIC
A: 240 B: 100
Katrina and David can both produce pizzas and loaves of bread. In one hour, Katrina can produce 10 pizzas or 15 loaves of bread. In one hour, David can produce 8 pizzas or 16 loaves of bread. Each person has 6 hours to spend baking. A: If Katrina and David split their time equally between pizza and bread, the total production of pizza will be ______ pizzas, and the total production of bread will be _______ loaves of bread. B: If Katrina and David each produce the good in which she or he has a comparative advantage, the total production of pizza will be _________ pizzas, and the total production of bread will be _______ loaves of bread.
A: 54, 93 B: 60, 96
Eleanor and her little sister Joanna are responsible for two chores on their family's farm, gathering eggs and collecting milk. Eleanor can gather 9 dozen eggs or collect 3 gallons of milk per week. Joanna can gather 2 dozen eggs or collect 2 gallons of milk per week. A: The family wants 2 gallons of milk per week and as many eggs as the sisters can gather. Currently, they collect one gallon of milk each and as many eggs as they can. How many dozens of eggs does the family have per week? B: If the sisters specialized, which sister should collect the milk? C: If the sisters specialized, how many dozens of eggs would the family have per week?
A: 7 dozen eggs B: Joanna C: 9 dozen eggs
Buyer Willingness to pay for one unit A $35 B $33 C $27 D $22 E $21 F $13 G $13 H $12 I $6 A: The quantity demanded at a price of $10 is: B: The quantity demanded at a price of $25:
A: 8 B: 3
Two students are assigned to work together on a project that requires both writing and an oral presentation. Steve can write 1 page or prepare 3 minutes of a presentation each day. Anna can write 2 pages or prepare 1 minute of a presentation each day. A: Who has a comparative advantage at writing? B: Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 3 pages each day. Now who has a comparative advantage at writing?
A: anna B: anna
You've been put in charge of a bake sale for a local charity at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. Suppose you have a comparative advantage at baking cookies and the other volunteer has a comparative advantage at baking cupcakes. A: In this case, you should bake ________ and the other volunteer should bake _________. B: You should split up the baking because:
A: cookies, cupcakes B: there will be more cookies and cupcakes produced between you than if you each spent half of your time baking each good.
Assume the market for wine is functioning at its equilibrium. For each of the following situations, say whether the new market outcome will be efficient or inefficient. A: A new report shows that wine is good for heart health: B: The government sets a minimum price for wine, which increases the current price: C: An unexpected late frost ruins large crops of grapes: D: Grape pickers demand higher wages, increasing the price of wine:
A: efficient B: inefficient C:efficient D: efficient
You've been put in charge of a bake sale for a local charity at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. A: If one of you has a comparative advantage at baking cookies, it means that one of you: B: Could one of you have an comparative advantage at baking both items?
A: gives up fewer cupcakes for each cookie baked. B: No, because each person can have a comparative advantage in only one task.
Suppose that the manager of a restaurant has two new employees, Rahul and Henriette, and is trying to decide which one to assign to which task. Rahul can chop 20 pounds of vegetables or wash 100 dishes per hour. Henriette can chop 30 pounds of vegetables or wash 120 dishes. A: Who should be assigned to chop vegetables? B: Who should be assigned to wash dishes?
A: henriette B: Rahul
New York City has a long-standing policy of controlling rents in certain parts of the city—in essence, a price ceiling on rent. A: The market for apartments is likely to be: B: The size of total surplus will be:
A: inefficient because the quantity supplied will be less than the quantity demanded. B: smaller than if there was not market restriction.
The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 5 thousand barrels of rum. Nicaragua can produce 15 thousand tons of coffee per year or 3 thousand barrels of rum. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. A: Which country should specialize in coffee? Nicaragua Correct B: Which country should specialize in rum? The Dominican Republic C: The minimum price at which these countries will trade coffee is _________ barrel of rum per ton of coffee and the maximum price is ________ barrel of rum per ton of coffee
A: nicaragua B: Dominican republic C: 0.200, 0.250
You've been put in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. A: If one of you has an absolute advantage at baking cookies or cupcakes, it means that: B: Could one of you have an absolute advantage at baking both items?
A: one of you can produce more cupcakes (or cookies) in total with the same amount of resources than the other person. Correct B: Yes, if one of you is more productive in both goods than the other. Correct
What would it mean for one of you to have an absolute advantage over a product?
Absolute advantage in production of one item means your can produce more of that one item in total with the same amount of resources than the other volunteer: greater productivity
Prior to 1996, the federal government administered a program called _____ which gave money to poor households with children.
Aid to Families with Dependent Children
Some economists have studied the effects of "lookism," or discrimination based on how attractive a person is. Which of the following are positions where the market might encourage lookism?
Airplane cabin crew Automobile Sales Hotel and Hospitality
Use the information below to construct a step-graph of the six sellers' willingness to sell. Seller Willingness to sell one unit ($) Joseph 25 Juan 20 Kristin 60 Peter 10 &Candice 25 Solomon 50
At a price of $10, one producer is willing to sell the good (Peter). At a price of $20, two producers are willing to sell the good (Peter and Juan). At a price of $25, four producers are willing to sell the good (Peter, Juan, Joseph, and Candice). At a price of $50, five producers are willing to sell the good (Peter, Juan, Joseph, Candice, and Solomon). At a price of $60, all six producers are willing to sell the good.
Use the information below to construct a step-graph of the six consumers' willingness to pay. Consumer Willingness to pay for one unit ($) Fred 8 Ann 2 Morgan 16 Andre 12 Carla 2 Hanson 4
At a price of $16, one consumer is willing to buy the good (Morgan). At a price of $12, two consumers are willing to buy the good (Morgan and Andre). At a price of $8, three consumers are willing to buy the good (Morgan, Andre, and Fred). At a price of $4, four consumers are willing to buy the good (Morgan, Andre, Fred, and Hanson). At a price of $2, all six consumers are willing to buy the good.
Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - chocolate producers will ______ the market A. enter B. Exit
B
For a monopolist, total revenues: A. decrease and then increase as output increases. B. increase and then decrease as output increases. C. increase as output increases. D. decrease as output increases.
B. increase and then decrease as output increases.
A monopoly: A. is constrained because its decisions cannot affect market price. B. is constrained by demand. C. faces a horizontal demand curve. D. is constantly threatened by the entry of new firms.
B. is constrained by demand.
In a monopolistic market, consumer surplus is: A. higher than that of a competitive market. B. lower than that of a competitive market. C. the same as that of a competitive market. D. Any of these is possible.
B. lower than that of a competitive market.
A budget constraint: A. shows different bundles of goods that all yield the same total utility. B. shows different bundles of goods that all cost the same amount. C. shows different bundles of goods that all maximize an individual's utility. D. shows how much income is needed to maximize total utility.
B. shows different bundles of goods that all cost the same amount.
A budget constraint: A. shows different bundles of goods that all yield the same total utility. B. shows different bundles of goods that all cost the same amount. C. shows different bundles of goods that all maximize an individual's utility. D. shows how much income is needed to maximize total utility.
B. shows different bundles of goods that all cost the same amount.
Taking action to reveal one's own private information is called: A. screening. B. signaling. C. statistical discrimination. D. proofing.
B. signaling.
Total revenue is: A. the amount that a firm spends on all inputs that go into producing a good or service. B. the quantity sold multiplied by the price paid for each unit. C. the quantity produced multiplied by the cost of producing each unit. D. the amount that an individual gets paid over a specified period of time, typically annually
B. the quantity sold multiplied by the price paid for each unit.
If a firm produces nothing, then its: A. fixed costs equal zero. B. variable costs equal zero. C. total costs equal zero. D. All of these are true.
B. variable costs equal zero.
If a firm produces nothing, then its: A. fixed costs equal zero. B. variable costs equal zero. C. total costs equal zero. D. All of these are true.
B. variable costs equal zero.
Barbie and Ken are married. Barbie stays home and cares for the children, while Ken spends his day at work earning money to support the household. Economists might conclude:
Barbie has the comparative advantage in caring for the children, and so the family benefits by Barbie staying home and Ken earning money at work.
Which one is true about average cost (AC) and marginal cost (MC) curves: A. AC is U-shaped and MC is always increasing. B. ATC crosses MC at the minimum point of marginal cost curve. C. MC crosses ATC at the minimum point of average total cost curve. D. In long run they are the same.
C. MC crosses ATC at the minimum point of average total cost curve.
Altruism describes: A. a motive for action in which a person's utility is unaffected when another's utility increases. B. a motive for action in which a person's utility is decreased when another's utility increases. C. a motive for action in which a person's utility is increased when another's utility increases. D. a motive for action in which a person's utility becomes negative when another's utility increases.
C. a motive for action in which a person's utility is increased when another's utility increases.
Moral hazard: A. always happens when adverse selection is a problem. B. never happens when adverse selection is a problem. C. can happen when adverse selection is a problem. D. None of these statements is true.
C. can happen when adverse selection is a problem.
A monopolist can maximize profits by: A. selling as much as he can produce. B. producing at the level of output at which MR = 0. C. following the same rules as a perfectly competitive firm. D. maximizing revenue.
C. following the same rules as a perfectly competitive firm.
Dave and Buster play two games of tennis, then decide to go have lunch. Using the concept of utility to explain their choices, we can conclude that: A. they each won one game of tennis. B. the marginal utility from playing a third game must be negative for them. C. the marginal utility from playing a third game must be less than the utility from having lunch. D. All of these must be true.
C. the marginal utility from playing a third game must be less than the utility from having lunch
Procrastination can be seen as irrational behavior. One tool that behavioral economists have developed to account for this typical behavior is: A. thinking inconsistently about prices. B. the fungibility of money. C. the time inconsistency of our decision-making. D. None of these is a tool that has been developed by behavioral economists.
C. the time inconsistency of our decision-making.
Sadie has just eaten a donut and received a utility of 6. If she chooses to eat another donut: A. we can assume she will get at least a utility of 6 from this extra donut. B. we can assume she will get a utility of 6 from this extra donut. C. we can assume she will get less than a utility of 6 from this extra donut. D. we can assume Sadie's total utility will fall because of diminishing marginal utility.
C. we can assume she will get less than a utility of 6 from this extra donut.
Trade:
Can benefit both parties
Trade:
Can benefit everyone involved
The United States and Canada trade hockey skates and apple pie. The United States has an absolute and a comparative advantage in the production of apple pie, therefore:
Canada must have the comparative advantage in the production of skates
Suppose that, given the same number of workers, the United States can produce two times as many TVs or 20 times as many potatoes as Chile. Which of the following statements is true?
Chile should trade with the United States for potatoes because the United States has an absolute advantage in the production of potatoes. Chile should trade with the United States for TVs because the United States has an absolute advantage in the production of potatoes. The United States can benefit from trading TVs but not potatoes with Chile. NONE OF THESE STATEMENTS IS NECESSARILY TRUE
the global reduction in poverty has been heavily concentrated in
China
Public-opinion polls in a small city have revealed that citizens want more resources spent on public safety, an annual fireworks display, and more community swimming pools. Which of these three citizen requests could be privatized by assigning property rights?
Community swimming pools. correct
What would it mean for one of you to have an comparative advantage over a product?
Comparative advantage in production means you have a lower opportunity cost than the other volunteer - not possible to have comparative advantage in two products
Correlation and causation can be confused in which of the following ways?
Correlation without causation Omitted variables Reverse causality ALL OF THESE
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements can be said of Country A?
Country A has the comparative advantage in car production only.
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After comparing each country's production possibilities curves, it is clear that:
Country A should specialize in cars and Country B should specialize in trucks, and both will benefit from trade
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering both country's production possibilities frontiers, we can guess that:
Country A will specialize in cars, and be willing to give no more than 5 cars for each truck.
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining the production possibilities of each country, we can surmise that:
Country A's opportunity cost of a car is lower than that of Country B, and so they should specialize in cars and trade.
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Which of the following is true?
Country B should produce tablets and Country A should produce iPods, and they could benefit from trade.
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Suppose Country A specializes in bananas, and Country B specializes in tomatoes. The limits to the terms of trade that Country B would find acceptable are:
Country B will accept no less than 3 bananas for each tomato.
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering both country's production possibilities frontiers, we can conclude that:
Country B will specialize in trucks, and be willing to accept no less than 3 cars for each truck.
When economic profits are negative, accounting profits could be: A. positive. B. negative. C. zero. D. All of these are possible.
D. All of these are possible.
For firms that sell one product in a perfectly competitive market, average revenue: A. is calculated by total revenue divided by total output. B. is equal to marginal revenue. C. is equal to the market price. D. All of these are true.
D. All of these are true.
For firms that sell one product in a perfectly competitive market, the market price: A. is constant, regardless of quantity sold. B. is equal to average revenue for a firm. C. is equal to marginal revenue for a firm. D. All of these are true.
D. All of these are true.
For firms that sell one product in a perfectly competitive market, the market price: A. is constant, regardless of quantity sold. B. is equal to average revenue for a firm. C. is equal to marginal revenue for a firm. D. All of these are true
D. All of these are true.
In the long run, firms in a perfectly competitive market: A. produce a quantity that maximizes profits. B. earn a zero economic profit. C. choose the level of output that minimizes average total costs. D. All of these are true.
D. All of these are true.
A monopoly: A. has no competition at all. B. has complete market control. C. restricts output to maximize profits. D. All of these statements are true.
D. All of these statements are true.
In the prisoner's dilemma game: A. the players can not reach to socially optimal point. B. a dominant strategy exists for both players. C. a noncooperative equilibrium can be predicted. D. All of these statements are true.
D. All of these statements are true.
Perfect price discrimination: A. eliminates all consumer surplus. B. maximizes producer surplus. C. creates no deadweight loss. D. All of these statements are true.
D. All of these statements are true.
The monopolist is able to enjoy profits in the long run because: A. the firm's price is set above its marginal costs. B. there is no threat of competition. C. the firm can charge a price higher than its average total costs in the long run. D. All of these statements are true.
D. All of these statements are true.
The presence of adverse selection in a market causes: A. some transactions fail to take place. B. a loss of surplus. C. market failure. D. All of these statements are true.
D. All of these statements are true.
When the trade-offs you face are determined by the choices someone else will make, behaving rationally involves: A. behaving strategically. B. taking into consideration the actions of others. C. acting in your own self-interest. D. All of these statements are true.
D. All of these statements are true.
If Bella eats one piece of pie, she gains a utility of 10. If she continues, a second piece yields a marginal utility of 8, a third will bring marginal utility of 2, and a fourth piece of pie will yield a marginal utility of -2. We can say: A. Bella's total utility from eating four pieces of pie would be 22. B. Bella's total utility will decrease if she eats the third piece of pie. C. Bella's total utility decreases after the first piece of pie. D. Bella's total utility will be maximized if she eats three pieces
D. Bella's total utility will be maximized if she eats three pieces.
Suppose England has a comparative advantage over the United States in producing tea. If this is true, then:
England should produce more tea than it needs and sell the rest to the United States.
The graph below shows supply and demand in the market for automobiles. For each of the following events, determine the new market outcome and indicate where the new equilibrium point will be.
Environmentalists launch a successful One Family, One Car campaign; A A steel tariff increases the price of steel; B A baby boom occurred 16 years ago.; C An oil shortage causes the price of gasoline to soar; A Improvements in robotics increase efficiency and reduce costs; D The government offers a tax rebate for the purchase of commuter rail tickets; A
Assume the graph shown represents the market for bottles of wine and was originally in equilibrium with D and S. Something changes and demand shifts to D2. Which of the following is true?
Equilibrium price increased by $5.
For which product would you expect producers to have a stronger reaction to a ban on advertising: music artists or fast-food burgers?
Fast-food burgers because their products are less differentiated. (find other answers)
Which actor in the circular flow model is on the supply side of goods market?
Firms
If France is capable of producing either cheese or wine or some combination of those two products, then:
France should produce the one for which it has a lower opportunity cost
Your best friend has an idea for a drive-thru bar. Indicate the best explanation for why other have not taken advantage of her idea:
Government intervention.
Which of the following is an example positive statement?
Individuals with a bachelor's degree earn higher average incomes than those with only a high school diploma
Which of the following interrupt, or change a market that prevents it from acting "normally"?
Innovation Intervention Market failure ALL OF THESE ARE REASONS FOR THE MARKET TO VEER FROM ITS NORMAL PATH
Based on the table below, calculate consumer surplus for each consumer when the price is $17. Buyer Willingness to pay for one unit A $6 B $27 C $13 D $21 E $33 F $35 G $12 H $13 I $22
Instructions: Round your answers to the nearest whole number. Consumer consumer surplus A 0 B 10 C 0 D 4 E 16 F 18 G 0 H 0 I 5
Explain how income inequality in the US is measured and described
LO1
Discuss the extent and sources of income inequality
LO2
Demonstrate how income inequality has changed since 1975
LO3
Debate the economic arguments for and against income inequality
LO4
Relate how poverty is measured and its incidence by age, gender, ethnicity, and other characteristics
LO5
Identify the major components of the income maintenence program in the US
LO6
Discuss labor market discrimination and how it might affect hiring decisions and wages
LO7
Which of the following is an example of a disincentive?
Law enforcement creates a "Mug Shots" section to post all recent arrests online in order to discourage potential law breakers
Mitt Romney argued in a debate with President Obama that the economy had grown more slowly in each year of the President's term than in the previous year. This claim is most related to the field of:
MACROeconomics
The field of _____ would most likely study how all consumers respond to a hike in cigarette taxes, and the field of _____ would most likely study how Bob responds to the tax.
MICROeconomics; MICROeconomics
You've been put in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes. What would a production possibilities graph of this situation show?
One axis shows the total number of cookies you can bake if you spent all of your time and resources baking cookies, other axis would show the total amount of cupcakes you could bake if you spent all of your time and recources baking cupcakes. Slope would represent the tradeoff faced between baking cookies and baking cupcakes
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Suppose Country B decides to specialize in tomatoes, and Country A specializes in bananas. What terms of trade would both countries agree to?
One tomato for four bananas
Suppose you manage a firm in a monopolistically competitive market. Which of the following strategies will do a better job of helping you maintain economic profits: Option A: Obtaining a celebrity endorsement for your product. Option B: Supporting the entry of firms that will compete directly with your biggest rival.
Option A because consumers may have positive feelings about a good that is endorsed by a celebrity correct.
chronic poverty
Permanent, persistent poverty conditions (3 or more years in poverty)
From the list below, select the characteristics that describe a good economic model.
Predicts that A causes B. Makes approximately accurate assumptions. Predicts things that are usually true.
collective bargaining
Process by which a union representing a group of workers negotiates with management for a contract
when to operate
Produce if P ≥ ATC Because Profit = (P - ATC)*Q Profit ≥ 0 if P ≥ ATC Exit in the Long Run if P < ATC Profit < 0 if P < ATC Shut Down in the Short Run if P < AVC
Consider the production possibilities frontier displayed in the figure shown. Which of the following statements is true?
Producing at point B is impossible.
social insurance programs
Programs to help the elderly, ill, and unemployed if the claimant has paid into them (more open to who can participate)
Progressive taxation serves which of the following goals of economic welfare policy?
Redistribution of wealth
"Which cam first, the chicken or the egg?" This question seeks to address which common source of confusion between correlation and causation?
Reverse causality
Which of the following are types of public policy approaches related to poverty and inequality?
Safety Nets Economic Development Redistribution of resources
In the United States, public schools are often funded by property taxes levied on the property in surrounding areas. Which of the following statements explains how this can result in a poverty trap? Select all that apply.
Schools in areas with cheaper housing will receive less funding. Individuals must buy a higher-priced home in order to attend a school that receives more property taxes.
You are in the market for a new couch and found two advertisements for the kind of couch you want to buy. Seller One notes in her ad that she is selling because she is moving to a smaller apartment and the couch won't fit in the new space. Seller Two says he is selling because the couch doesn't match his other furniture. You will probably get a better deal from:
Seller One because the couch must be removed from her home.
Consider a policy to help struggling farmers by setting a minimum trade price for wheat. Which of the following statements is true?
Some farmers would gain surplus at a higher price but fewer trades would occur and some farmers will be unable to trade.
Suppose two artists are selling paintings for the same price in adjacent booths at an art fair. By the end of the day, one artist has nearly sold out her paintings while the other artist has sold nothing. Which characteristic of competitive markets has not been met and best explains this outcome?
Standardized good.
Which of the following statements explain(s) why the government may need to subsidize loans for a college education?
Students from low-income families often cannot borrow from their parents
Consider the market for ride-on lawn mowers and the recent increases in the price of oil. The recent increase in the price of oil makes it more expensive to manufacture ride-on lawn mowers. An increase in the price of oil also makes it more expensive to run a ride-on mower. What is likely to happen to equilibrium price and quantity of lawn mowers as a result in the changing price of oil?
Supply and demand will both decrease, decreasing equilibrium quantity and having an indeterminate effect on price.
Total revenue from a tax =
Tax per unit x Number of units.
the law of supply
Tendency of suppliers to offer more of a good at a higher price
Which of the following is an example of a normative statement?
The American Recovery and Reinvestment Act should not have been passed during the Great Recession.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. A Canadian worker, on the other hand, can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?
The United States has the absolute advantage in the production of both shoes and apples.
Which of the following is an example of a normative statement?
The United States ought to adopt a flat rate personal income tax.
Your neighbor never mows her lawn. You don't have any legal right to force her to mow, but the mess in her front yard is making your neighborhood unsightly and reducing the value of your house. The reduction in the value of your house is $5,000, and the value of her time to mow the lawn once a week is $1,000. Suppose you offer her a deal in which you pay her $3,000 to mow. How does this deal affect surplus?
The deal increases both your surplus and your neighbor's.
Suppose there is a tornado that levels a city. As rebuilding begins, how might you analyze this effect in the market for lumber?
The demand for lumber will increase, increasing both the equilibrium price and quantity
John Rawls is a philosopher famous for his "maxi-min" principle, which states that society should maximize the position of the people with the minimum amount of goods and not only focus on the level of inequality. For instance, Rawls would favor a society in which the bottom 10 percent earn $30,000 per year and the top 10 percent earn $2 million over a society in which the bottom 10 percent earn $28,000 per year and the top 10 percent earn $40,000 per year. Which of the following statements best explain why Rawls would favor economic development that encourages growth but creates inequality over redistribution that limits growth but creates equality?
The economic position of people at the lowest end of society is likely to improve over time when the whole economy is growing
Consider a market that is in equilibrium. If it experiences both an increase in demand and an increase in supply, what can be said of the new equilibrium?
The equilibrium quantity will definitely rise, while the equilibrium price cannot be predicted.
Suppose that the government decides to start regulating use of its forests, charging anyone who wants to log. Which of the following ways of calculating the price to charge for each acre will lead to an efficient quantity of logging?
The external cost that logging an acre imposes on all citizens
Assume the market in the graph shown was originally at an equilibrium with demand D and supply S. Suppose Demand shifts and becomes D2. What might have caused such a shift?
The good became more popular.
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Which of the following is true?
The opportunity cost of 1 tablet in Country A is 2 iPods.
The slope of a production possibilities frontier measures:
The opportunity cost of producing one good in terms of the other. the trade-off inherent in the production of one good versus the other. how much of one good that must be given up in order to produce the other. ALL OF THESE STATEMENTS ARE TRUE
There was a bumper crop of blueberries last year due to the increased rainfall. This plentiful supply of blueberries caused their price to drop. Bakeries regularly produce and sell blueberry pie. Considering the market for blueberry pies, what factor of supply has been affected, and what was the overall effect on the supply?
The price of an input has been affected; supply will increase.
Consider a market that is in equilibrium. If it experiences a decrease in supply, what will happen?
The supply curve will shift to the left and the equilibrium price will increase and the equilibrium quantity will decrease.
A paper mill discovers that burning old tires is a far cheaper way to get power than using coal, and they quickly adopt the new technology. We can assume which of the following will happen in the market for paper?
The supply of paper will increase.
Many theaters sell empty seats at a deep discount just before showtime. What economic concept is displayed by this behavior?
Thinking at the margin
Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day building bombs, he will build 7 bombs. If Tom decides to specialize in setting traps, he would agree to which terms of trade with Jerry?
Tom is willing to accept no more than 4 bombs for each trap.
"There is no such thing as a free lunch." This is an example of which economic concept?
Trade-offs
Consider the production possibilities frontier displayed in the figure shown. The fact that the line slopes downward displays which economic concept?
Trade-offs
Which of the following countries has lower income mobility than the United States?
United Kingdom
Suppose two countries produce the same two goods and have identical production possibilities frontiers. Do you expect these countries to trade? Explain why or why not.
We would not expect countries with the same production possibilities frontiers to trade. Identical production possibilities frontiers would indicate that the two countries faced the same opportunity costs. The basis for gains from trade is specializing according to differing opportunity costs.
The idea of efficiency is used to address which of the following questions?
Why isn't everyone already doing it?
Lemons Problem
With asymmetric information, low-quality goods can drive high-quality goods out of the market.
Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). a. Income tax The primary public policy goal is most likely a. raising revenue b. to change behavior and raise revenue c. to change behavior
a
Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). c. Payroll tax The primary public policy goal is most likely raising revenue correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior
a
Curling is a sport that involves sliding a granite stone over a patch of ice. The Winter Olympics has generated a lot of excitement about the fascinating sport of curling. As a result, demand for curling stones has increased. Curling stones are made from blue Trefor granite. There are limited deposits of blue Trefor, and other types of granite are poor substitutes. If the increase in demand for curling stones persists, do you expect the long-run equilibrium price to increase, decrease, or stay the same? a. increase b. stay the same c. decrease
a
Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. A gated community passes a bylaw requiring all homeowners to mow their lawns once a week during the summer: a. Increase supply b. decreasing demand
a
Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. a. A city government increases the frequency of street sweeping: a. Increase supply b. decreasing demand
a
Determine whether each of the following taxes is proportional, regressive, or progressive. A fee of $500 per year for municipal services, charged to everyone who lives within the city limits. This tax is a. regressive. b. progressive c, proportional
a
Determine whether each of the following taxes is proportional, regressive, or progressive. A payroll tax of 10 percent on income under $200,000. This tax is a. regressive. b. progressive c, proportional
a
For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: A nonprofit organization spray-paints signs on storm drains reminding everyone that it "drains to the ocean" with a picture of a fish: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.
a
Identify whether each of the following goods is a. rival b. nonrival.
a
Identify whether each of the following goods is usually a. excludable b. nonexcludable.
a
Identify which way the labor supply curve would shift under the following scenarios. Changes in technology increase the marginal productivity of labor: a. no shift, movement along the labor supply curve. b. right c. left
a
In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. In response to concerns about chewing gum in schools, the government raises the tax on packs of gum from 20 cents per pack to 30 cents per pack. Before the tax increase, 50 million packs were sold each year. After the tax increase, 40 million packs are sold each year. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates
a
In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. The government raises taxes on the 10 million iPods sold each year from $10 per iPod to $20 per iPod. The new equilibrium quantity is 9 million iPods. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates
a
In each of the following scenarios, will wages rise above the market equilibrium or fall below it? All the software engineers in Silicon Valley organize into a union and go on strike: a. rise b. fall
a
Indicate which of the following are means-tested programs. Canada begins to pay half of the cost of public transportation for people who do not own a car. This ________ a means-tested program. a. is b. is not
a
Indicate which of the following are means-tested programs. The United Kingdom decides to start giving out pension benefits based on individuals' prior amount of savings. This _______ a means-tested program. a. is b. is not
a
State whether each of the following primarily causes an external cost or an external benefit. Occupying a seat on a bench in a crowded park: a. External cost b. external benefit
a
State whether each of the following primarily causes an external cost or an external benefit. Fishing at a popular lakeside vacation spot: a. External cost b. external benefit
a
State whether each of the following primarily causes an external cost or an external benefit. Littering: a. External cost b. external benefit
a
Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - the long run supply curve will A. not change B. shift left C. shift right
a
You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes external costs. more then one answer. a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none
a
there are imperfect substitutes for the goods a. monopolistic competition b. monopoly c. oligopoly
a
A price taker is:
a buyer who cannot affect the market price
*Lorenz Curve*
a curve showing the distribution of income in an economy
A drought causes most fruit crops to fail, decreasing the amount of available fruit. The fruitcake market would see:
a decrease in the supply of fruitcake
A drought causes most fruit crops to fail, decreasing the amount of available fruit. the fruitcake market would see.
a decrease in the supply of fruitcake
Lorenz Curve
a graphic representation of income distribution that maps percentage of the population against cumulative percentage of income earned by those people
absolute poverty line
a measure that defines poverty as income below a certain amount, fixed at a given point in time
relative poverty line
a measure that defines poverty in terms of the income of the rest of the population
An increase in the price of ice cream is likely to cause:
a movement along the demand curve
Darren loves to go to the movies, and he just learned that he can buy a ticket at a discounted price if he shows his student ID. Darren now attend the movies even more often. The change in Darren's behavior would be shown graphically by:
a movement down along his demand curve
As corn prices rise, salsa sales tend to fall. This is an example of:
a negative correlation.
Conditional Cash Transfers
a program in which financial support is given only to people who engage in certain actions
in-kind transfer
a program that provides specific goods or services, rather than cash, directly to needy recipients
A change in a nonprice factor of supply will cause:
a shift of the supply curve
According to the table shown, at a price of $1.00:
a shortage will exist.
Gini Coefficient
a single-number measure of income inequality; ranges from 0 to 1, with higher numbers meaning greater inequality
moral hazard.
a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other
The term "surplus" refers to:
a situation in which the quantity demanded is less than the quantity supplied.
In the United States, smaller corporations pay _____ percentage of their income compared to larger corporations.
a smaller
if every person in a population earned the exact same amount, the Lorenz curve would be
a straight line with the slope of 1
Suppose that workers in a country can produce either cars or cheese, and that all inputs are equally well-suited to the production of both goods, so that opportunity costs are constant. The production possibilities frontier will be _________. In the real world, it is unlikely that all resources will be perfectly substitutable in making these goods. Thus, the production possibilities frontier will be ___________. This means that every time the country decides to shift production from cheese to cars, the opportunity cost of the additional car will be_______ than the last.
a straight line, a curve that is bowed outward, higher
You decided to take a college accounting course to brush up on you knowledge of the language of business. The tuition expense was $500. After the date has expired to receive a refund for the course, you are offered a job that would conflict with your class time. In making the decision to accept or decline the offer, the $500 is:
a sunk cost
If producers incorrectly set the price of their product too high:
a surplus will result and excess good in inventory will signal the producers to lower their prices.
If producers incorrectly set the price of their product too high:
a surplus will result and excess goods in inventory will signal the producers to lower their prices.
Suppose a country where capital is scarce and most of industry is labor-intensive with low-skilled labor moves from autarky to free trade. Which of the following do you expect to happen? may be more then one answer a. Wages for labor increase b. Owners of capital become wealthier c. the returns to capital (surplus) decrease
a, b
You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes private costs. benefits. more then one answer a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none
a, b
Johnston Forest in Rhode Island has a cave that houses thousands of fruit bats. Bat droppings are highly acidic and have ruined the paint on many Rhode Island cars. The flying radius of the Johnston Forest bats encompasses two towns, Johnston and Foster. The residents of Johnston collectively value bat removal at $400,000. Foster residents collectively value bat removal at $500,000. Pest control experts estimate that the cost of bat removal would be $450,000. Which of the following scenarios would lead to removal of the bats? Check all that apply. a. Foster pays Johnston $50,000 to contribute to bat removal. b. Foster and Johnston evenly split the cost of bat removal. c. a,b,cJohnston contributes nothing toward bat removal.
a, b, c
Nature's Crunch is currently the only certified organic produce grower in a region that produces lots of non-organic produce alternatives. Which of the following scenarios would increase Nature's Crunch's profits? (choose all that apply) a. A tomato blight affecting chemically treated plants. b. An increase in the cost of chemical pesticides. c. A new report about the environmental dangers of chemically treated plants. d. Income tax cuts for all consumers. e. A new report showing that there is no nutritional difference between organic and non-organic produce.
a, b, c, d
Which of the following subway announcements are attempts to establish or enforce a social norm? a. "Loud music and phone conversations are discourteous to fellow riders. Please keep the noise down." b. "If you see something, say something." c. "Please watch your step as you exit. Be careful of the gap between the train and the platform edge." d. "Please be patient and allow others to exit the train before you attempt to enter." e. "The train is being held at the station due to traffic ahead. We apologize for the inconvenience."
a, b, d
Consider the following government-provided goods. Which of these goods necessarily require funding via general taxation (as opposed to direct user fees)? a. Street lights b. A park c. A fireworks display d. Public radio e. A library
a, c, d
In a perfectly competitive market, MR = (may be more then 1 answer) a. price b. total revenue c. average revenue d. change in total revenue / change in quantity
a, c, d
From the list below, which of the following do you expect to suffer from a free-rider problem? Check all that apply. a. Pay-what-you-can yoga classes. b. Unlimited yoga classes with monthly membership dues. c. Fundraiser for public television. d. Neighborhood park cleanup day. e. Housecleaning business operating in your neighborhood. f. Suggested museum-admission donation.
a, c, d, f
Suppose Ghana discovers it has lost its comparative advantage in the production of maize. Which of the following could explain the loss of comparative advantage? may be more then one answer a. Maize-processing technology developed in Ghana spreads to other maize-producing countries. b. Decline in global demand for maize. c. Immigration of cheap labor into Ghana. d. Growth of low-skill service jobs in Ghana.
a, d
Suppose two countries each produce only paper and cars. Russia can produce 8 tons of paper or 4 million cars each year. Sweden can produce 25 tons of paper or 5 million cars each year. a. In the diagram above, draw the possibilities frontier for each country. b. Both countries want 2 million cars each year and as much paper as they can produce along with 2 million cars. Find this point on each production possibilities frontier. c. Suppose the counties specialize.______ will produce cars. d. Once they specialize, suppose they work out a trade of 2 million cars for 6 tons of paper.
a. b. c. Russia will produce cars d.
Suppose that Canada produces two goods: lumber and fish. It has 18 million workers, each of whom can cut 10 feet of lumber or catch 20 fish each day. a. What is the maximum amount of lumber Canada could produce in a day? b. What is the maximum amount of fish it could produce in a day? c. How many fish can be caught if 60 million feet of lumber are cut.
a. 10 feet x 18 million workers = 180 million feet b. 20 fish x 18 million workers = 360 million fish c. The opportunity cost of producing 1 foot of lumber is 2 fish. Therefore, the opportunity cost of producing 60 million feet of lumber is 120 million fish. If Canada produces 60 million feet of lumber, then it can only produce 360 - 120, or 240 million fish.
Eleanor and her little sister Joanna are responsible for two chores on their family's farm, gathering eggs and collecting milk. Eleanor can gather 18 dozen eggs or collect 6 gallons of milk per week. Joanna can gather 2 dozen eggs or collect 2 gallons of milk per week. a. The family wants 2 gallons of milk per week and as many eggs as the sisters can gather. Currently, they collect one gallon of milk each and as many eggs as they can. How many dozens of eggs does the family have per week? b. If the sisters specialized, which sister should collect the milk? c. If the sisters specialized, how many dozens of eggs would the family have per week?
a. 16 dozen eggs b. Joanna c. 18 dozen eggs
Recently, some college alumni started a moving service for students living on campus. They have three employees and are debating hiring a fourth. The hourly wage for an employee is $18 per hour. An average moving job takes three hours. The company currently does three moving jobs per week, but with one more employee, the company could manage five jobs per week. The company charges $80 for a moving job. a. The new employee's marginal product of labor is moving jobs. b. The value of that marginal product is $. c. should they hire a fourth worker.
a. 2 b. 160 c. yes
The table below shows a data set that contains the income of 20 households, each with a household size of four people. The national poverty line is $18,250 for a household of four people.
a. 20% of these households are below the national poverty line. b. The average income of the bottom 20 percent of the households is $12750 c. The national poverty measurement gives a higher poverty rate.
Your friend Sam has been asked to prepare appetizers for a university reception during homecoming weekend. She has an unlimited amount of ingredients but only 6 hours to prepare them. Sam can make 300 mini-sandwiches or 150 servings of melon slices topped with smoked salmon and a dab of sauce per hour. a. Draw Sam's production possibilities frontier.b. Now suppose that the university decides to postpone the reception until after the big game, and Sam has an extra 4 hours to prepare. Redraw Sam's production possibilities frontier to show the impact of this increase in resources. b. Now suppose that the university decides to postpone the reception until after the big game, and Sam has an extra 4 hours to prepare. Redraw Sam's production possibilities frontier to show the impact of this increase in resources. c. Now, in addition to the extra time to prepare, suppose Sam's friend Chris helps by preparing the melon slices. Sam can now make 300 mini-sandwiches or 300 melon appetizers per hour. Redraw Sam's production possibilities frontier to show the impact of increased productivity in making melon appetizers.
a. 300 mini-sandwiches/hour = 1,800 mini-sandwiches in 6 hours. This is the endpoint on the y axis. 150 melon appetizers/hour = 900 melon appetizers in 6 hours. This is the endpoint on the x axis. b. 300 mini-sandwiches/hour = 3,000 mini-sandwiches in 10 hours. This is the endpoint on the y axis. 150 melon appetizers/hour = 1,500 melon appetizers in 10 hours. This is the endpoint on the x axis. c. 300 mini-sandwiches/hour = 3,000 mini-sandwiches in 10 hours. This is the endpoint on the y axis. 300 melon appetizers/hour = 3,000 melon appetizers in 10 hours. This is the endpoint on the x axis.
Two students are assigned to work together on a project that requires both writing and an oral presentation. Steve can write 3 pages or prepare 6 minutes of a presentation each day. Anna can write 5 pages or prepare 2 minutes of a presentation each day. a. Who has a comparative advantage at writing? b. Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 6 pages each day. Now who has a comparative advantage at writing?
a. Anna b. Anna
Two students are assigned to work together on a project that requires both writing and an oral presentation. Steve can write 1 page or prepare 3 minutes of a presentation each day. Anna can write 2 pages or prepare 1 minute of a presentation each day. a. Who has a comparative advantage at writing? b. Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 3 pages each day. Now who has a comparative advantage at writing?
a. Anna b. Steve
The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 10 thousand barrels of rum. Nicaragua can produce 30 thousand tons of coffee per year or 5 thousand barrels of rum. a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. Which country should specialize in producing coffee? Which country should specialize in producing rum? b. What are the minimum and maximum prices at which these countries will trade coffee?
a. Comparing their opportunity costs for producing coffee, we see that Nicaragua has a lower opportunity cost for producing coffee (1/6 of a barrel of rum, versus the Dominican Republic's opportunity cost of 1/2 barrel of rum). Nicaragua, therefore, should specialize in coffee b. The minimum price at which these countries will trade coffee is 1/6 (0.167) of a barrel of rum per ton of coffee and the maximum price is 1/2 (0.500) of a barrel of rum per ton of coffee.
Consider the market for cars. Which determinant of demand is affected by each of the following events? a. Environmentalists launch a successful One Family, One Car campaign: b. A baby boom occurred 16 years ago: c. Layoffs increase as the economy sheds millions of jobs: d. An oil shortage causes the price of gasoline to soar: e. The government offers tax rebates in return for the purchase of commuter rail tickets: f. The government announces a massive plan to bail out the auto industry and subsidize production costs
a. Consumer preferences b. Number of buyers c. Incomes d. Prices of related goods. e. Prices of related goods. f. Expectations
You are looking for a new apartment in Manhattan. Your income is $4,000 per month, and you know that you should not spend more than 25 percent of your income on rent. You have come across the following listing for one-bedroom apartments on craigslist. You are indifferent about location, and transportation costs are the same to each neighborhood. Chelsea-- $1,200 Battery Park--$2,200 Delancey--$950 Midtown--$1,500 a. Which apartments fall within your budget? b. Suppose you adhere to the 25 percent guideline but also receive a $1,000 monthly cost-of-living supplement since you are living and working in Manhattan. Which apartments fall within your budget now?
a. Delancey b. Chelsea, Delancey, Midtown
Suppose that three volunteers are preparing cookies and cupcakes for a bake sale. Diana can make 23 cookies or 22 cupcakes per hour; Andy can make 21 cookies or 21 cupcakes; and Sam can make 6 cookies or 16 cupcakes a. Who has the absolute advantage at making cookies? b. At making cookies?
a. Diana b. Diana
Suppose that three volunteers are preparing cookies and cupcakes for a bake sale. Diana can make 27 cookies or 18 cupcakes per hour; Andy can make 25 cookies or 17 cupcakes; and Sam can make 10 cookies or 12 cupcakes. a. Who has the absolute advantage at making cookies? b. At making cupcakes?
a. Diana b. Diana
Suppose that the manager of a restaurant has two new employees, Rahul and Henriette, and is trying to decide which one to assign to which task. Rahul can chop 20 pounds of vegetables or wash 100 dishes per hour. Henriette can chop 30 pounds of vegetables or wash 120 dishes. a. Who should be assigned to chop vegetables? b. Who should be assigned to wash dishes?
a. Henriette b. Rahul
Imagine a person who makes $400 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income equal to or less than $20,000, that gives her $800 a year. No such program is available to people with income above $20,000 per year. Her boss offers her a promotion that would increase her wage by 25 cents per hour.
a. Her total income before the promotion is 20800 b. Her total income if she accepts the promotion is 20500 c. She should not accept the promotion if she wants to have higher income.
Imagine a person who makes $480 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income equal to or less than $24,000, that gives her $800 a year. No such program is available to people with income above $24,000 per year. Her boss offers her a promotion that would increase her wage by $0.5 per hour.
a. Her total income before the promotion is 24800 b. Her total income if she accepts the promotion is 25000 c. She should accept the promotion if she wants to have higher income.
Consider the market for corn. Indicate whether each of the following events will cause a shift in the supply curve or a movement along the curve. If it will cause a shift, specify the direction. a. A drought hits corn-growing regions b. The government announces a new subsidy for biofuels made from corn: c. A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is a normal good): d. A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre: e. An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef:
a. Leftward shift of supply b. Movement along the supply curve c. Movement along the supply curve d. Rightward shift of supply e. Movement along the supply curve
Consider the market for corn. Indicate whether each of the following events will cause a shift in the demand curve or a movement along the curve. If it will cause a shift, specify the direction. a. A drought hits corn-growing regions, cutting the supply of corn: b. The government announces a new subsidy for biofuels made from corn: c. A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is normal good): d. A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre: e. An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef:
a. Movement along the demand curve b. Rightward shift of demand c. Leftward shift of demand d. movement along the demand curve e. Rightward shift of demand
Your friend Sam has been asked to prepare appetizers for the university reception. She has an unlimited amount of ingredients and six hours in which to prepare them. Sam can make 300 mini-sandwiches or 150 servings of melon slices topped with smoked salmon and a dab of sauce per hour. a. What is Sam's opportunity cost of making one mini-sandwich? b. What is Sam's opportunity cost of making one melon appetizer? c. Suppose the reception has been postponed, so Sam has an extra four hours to prepare. What is the opportunity cost of making one mini-sandwich now? d. Suppose the reception has been postponed, so Sam has an extra four hours to prepare. What is the opportunity cost of making one melon appetizer now? e. Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 300 mini-sandwiches or 300 melon appetizers per hour. What is the opportunity cost of making one mini-sandwich now? f. Suppose Sam's friend Chris helps by pre-paring the melon slices, increasing Sam's productivity to 300 mini-sandwiches or 300 melon appetizers per hour. What is the opportunity cost of making one melon appetizer now?
a. Opportunity cost of one mini-sandwich: giving up 1/2 a serving of melon slices b. Opportunity cost of one melon slice: giving up 2 serving of mini-sandwiches c. Remains the same, doesn't affect opportunity cost d. Remains the same e. Cost of 1 mini-sandwich: 1 melon slice f. Cost of 1 melon slice: 1 mini-sandwich
Paula and Carlo are coworkers. Their production possibilities frontiers for counseling clients and writing memos are given below. Identify which worker has an absolute advantage and comparative advantage in counseling clients. a. Absolute advantage in counseling clients b. Comparative advantage in counseling clients Identify which worker has an absolute advantage and comparative advantage in writing memos. c. Absolute advantage in writing memos d. Comparative advantage in writing memos
a. Paula b. Paula c. Paula d. Carlo
Consider the following examples. For each one, say whether the incentive is positive or negative. a. Bosses who offer time-and-a-half for working on national holidays: b. Mandatory minimum sentencing for drug offenses: c. Fines for littering: d. Parents who offer their children extra allowance money for good grades:
a. Positive b. Negative c. Negative d. Positive
Determine whether each of the following statements is positive or normative. a. People who pay their bills on time are less likely than others to get into debt: b. Hard work is a virtue: c. Everyone should pay his or her bills on time: d. China has a bigger population than any other country in the world: e. China's One-Child Policy (which limits families to one child each) helped to spur the country's rapid economic growth: f. Lower taxes are good for the country:
a. Positive b. Normative c. Normative d. Positive e. Positive f. Normative
Consider the market for cars. Which determinant of supply is affected by each of the following events? a. A steel tariff increases the price of steel. b. Improvements in robotics increase efficiency and reduce costs. c. Factories close because of an economic downturn. d. The government announces a plan to offer tax rebates for the purchase of commuter rail tickets. e. The price of trucks falls, so factories produce more cars. f. The government announces that it will dramatically rewrite efficiency standards, making it much harder for automakers to produce their cars.
a. Prices of inputs b. Technology c. Number of sellers d. Expectations e. Prices of related goods f. Technology
Determine whether each of the following statements is best explained by correlation without causation, an omitted variable or reverse causation. a. In cities that have more police, crime rates are higher: b. Many retired people live in states where everyone uses air conditioning during the summer. c. More people come down with the flue during the Winter Olympics than during the Summer Olympics: d. For the last five years, Punxsutawney Phil has seen his shadow on Groundhog Day, and spring has come late:
a. Reverse causation b. An omitted variable c. Correlation without causation d. Correlation without causation
Think about how and why goods and resources are scarce. Goods and resources can be scarce for reasons that are inherent to their nature at all times, temporary or season, or artificially created. For each of the following goods and resources, indicate whether the good is artificially scarce, inherently scarce, scarce on occasion, or not scarce. a. Holiday lights in mid-December: b. Air regardless of quality: c. Land: d. Patented goods: e. Original Picasso paintings:
a. Scarce on occasion b. Not scarce c. Inherently scarce d. Artificially scarce e. Inherently scarce
Tanya's weekly production possibilities frontier for doing homework (2 writing papers for every 6 problem sets). What is the slope of the production possibilities frontier? b. What is the opportunity cost of doing one problem set? c. What is the opportunity cost of writing one paper?
a. The slope of the production possibilities frontier is -(6/2) = -3. b. The opportunity cost of doing one problem set is (2 papers/6 problems sets) = 1/3 paper. c. The opportunity cost of writing one paper is (6 problems sets/2 papers) = 3 problems sets.
The graph below shows Tanya's weekly production possibilities frontier for doing homework (writing papers and doing problem sets). The vertical intercept (point A) is 10, and the horizontal intercept (point B) is 5.
a. The slope of the production possibilities frontier is -2. b. The opportunity cost of doing one problem set is 0.5 paper. c. The opportunity cost of writing one paper is 2 problem sets.
The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 4 thousand barrels of rum. Nicaragua can produce 12 thousand tons of coffee per year or 2 thousand barrels of rum. a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. Which country should specialize in coffee? Which country should specialize in rum? b. The minimum price at which these countries will trade rum is ____ barrel per ton of coffee and the maximum price is _____ barrel per ton of coffee.
a. coffee - Nicaragua rum - The Dominican Republic b. 0.167 +/- 0.0102; 0.200+/- 0.0102
In much of the United States and Canada, logging takes place in both privately owned and government-owned forests. a. Privately owned forests are: ____________ b. Suppose that anyone is legally allowed to enter a government-owned forest and start logging. These forests are:____________ c. The rate of logging in a government-owned forest would be____________ correct the efficient level.
a. private, rival, and excludable. b. common resources. c. faster then
Consider community safety or defense, meaning freedom from crime and threats, to answer the following questions. a. Community safety is a _________ good. b. If you lived in a place with no government-funded police force, you would expect community safety to be __________ c. Suppose that some neighbors get together and organize a block watch group. What term do economists use to describe someone who lives in the neighborhood but chooses not to volunteer as part of the block watch? Economists refer to this person as__________
a. public b. undersupplied c. Free rider
Refer to the demand and supply schedule shown in the table below. a. If pizza parlors charge $3.50 per slice, there will be an excess: b. If pizza parlors charge $1.00 per slice, there will be an excess: c. The equilibrium price of $___ per slice, and the equilibrium quantity is ___ slices of pizza.
a. supply of 400 units b. demand of 100 units c. 1.5 + 2%; 200+/- 2%
Two students are assigned to work together on a project that requires both writing an an oral presentation. Steve can write 1 page or prepare 3 minutes of a presentation each day. Anna can write 2 pages or prepare 1 minute of presentation each day. a. Who has a comparative advantage at writing? b. Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 3 pages each day. Now who has a comparative advantage at writing?
a.Anna b. Anna
Defining poverty as income below a certain amount, fixed at a given point in time, is using a(n) _____ poverty line.
absolute
Making a decision "on the margin" involves comparing:
additional benefits against additional costs.
Two types of inefficiencies associated with taxes are
administrative burden and deadweight loss.
*entitlement programs*
all eligible persons are legally entitled to receive benefits set forth in the programs
The law of supply can be stated as:
all else equal, quantity supplied rises as price rises.
You've been put in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes. A production possibilities graph of this situation would show:
all of the combinations of cookies and cupcakes you are able to produce with your time and resources.
The graph depicts the demand for a normal good. A movement from A to B in the graph shown might be caused by:
an increase in income
The graph depicts the demand for a normal good. A movement from A to B in the graph shown might be caused by:
an increase in income
Perfectly competitive markets:
are hard to find.
You manage two employees at the flower shop. They perform two tasks: caring for the displays of cut flowers and making flower arrangements to fill customer orders. In organizing your employees and assigning them tasks, you should:
assign the two tasks according to which worker has a comparative advantage in each task.
transient poverty is usually measured as a spell of poverty that lasts
at least 2 consecutive months in a year
Models should:
attempt to include every detail of the situation being studied. attempt to describe a situation with perfect accuracy. not be applied to microeconomics. NONE OF THESE
Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). b. Cigarette tax The primary public policy goal is most likely to change behavior and raise revenue correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior
b
Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. London begins charging a toll to all vehicles that drive within the city limits: a. Increase supply b. decreasing demand
b
Determine whether each of the following policy interventions is designed to increase supply or decrease demand for a public good or common resource. The National Park Service increases the cost of a pass to enter the Everglades: a. Increase supply b. decreasing demand
b
Determine whether each of the following taxes is proportional, regressive, or progressive. A capital gains tax that charges a flat rate of 40 percent, but only on capital gains over $1 million. This tax is a. regressive. b. progressive c, proportional
b
Determine whether each of the following taxes is proportional, regressive, or progressive. An income tax with three brackets and corresponding marginal tax rates: 10 percent for income up to $50,000; 20 percent for income up to $100,000; and 30 percent for income over $100,000. This tax is a. regressive. b. progressive c, proportional
b
Identify whether each of the following goods a. rival b. nonrival.
b
Identify whether each of the following goods is a. rival b. nonrival.
b
Identify whether each of the following goods is usually a. excludable b. nonexcludable.
b
Identify which way the labor supply curve would shift under the following scenarios. A country experiences a huge influx of immigrants who are skilled in the textile industry a. no shift, movement along the labor supply curve. b. right c. left
b
In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied. Worried that Americans are addicted to coffee, the government raises the 5 cent tax on a cup of coffee to 10 cents. Before the tax increase, 10 billion cups were sold each year. Afterward, 5 billion cups are sold each year. a. The price effect dominates. b. The price and quantity effects are the same. c. quantity effect dominates
b
In each of the following scenarios, will wages rise above the market equilibrium or fall below it? A major grocery store chain buys out all the other stores in the city a. rise b. fall
b
In each of the following scenarios, will wages rise above the market equilibrium or fall below it? All but one of the factories in a town go out of business: a. rise b. fall
b
Indicate which of the following are means-tested programs. A government decides to give tax credits to anyone who purchases computers made domestically. This ________a means-tested program. a. is b. is not
b
Indicate which of the following are means-tested programs. a. A local public university starts to give financial aid to individuals who score above the 98th percentile on the SAT. this ______ a means-tested program. a. is b. is not
b
State whether each of the following primarily causes an external cost or an external benefit. Spaying or neutering your pet: a. External cost b. external benefit
b
State whether each of the following primarily causes an external cost or an external benefit. Buying a fax machine: a. External cost b. external benefit
b
State whether each of the following primarily causes an external cost or an external benefit. Conducting research to find an AIDS vaccine: a. External cost b. external benefit
b
Suppose the market for bottled water and the market for soft drinks both have large numbers of buyers and sellers. Which of these markets is likely to be more competitive? a. soft drinks b. bottled water
b
Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - Demand will a. not shift b. shift left c. shift right
b
there are no substitutes for the goods a. monopolistic competition b. monopoly c. oligopoly
b
Suppose two countries are considering a new agricultural trade agreement with each other. Country A has abundant low-skill labor and scarce land. Country B has abundant arable land but little population. Land owners support a trade agreement in n/r incorrect. a. Country A b. Country B Workers support a trade agreement in n/r incorrect. a. County A b. Country
b, a
Suppose a market is initially in equilibrium and supply increases. The consumer surplus will:
be higher since the price is lower and equilibrium moves down along the demand curve.
Suppose a market is initially in equilibrium and demand decreases. The producer surplus will:
be lower since the price is lower and equilibrium moves down along the supply curve.
Over the last 50 years, the rich have:
become richer, and the poor have become richer, too.
Whenever receipt of _____ is tied to income, the incentive to seek out more work and higher pay is reduced at least somewhat.
benefits
it is possible to moderate the (often) perverse incentive of a means-tested program by phasing out _____________ as income increases
benefits
One reason the supply of cell phones has increase is:
better technology allows them to be produced more cheaply.
The most likely substitute good for hot dogs would be:
burgers
you currently have a television that you want to sell. You can either pick a price and try to sell it at a yard sale or auction it off on eBay. Which of the following might be logical reasons for producer surplus to be higher if you sell on eBay?
buyers are forced to reveal their willingness to pay, and there are more buyers to bid up the price
Consider each of the following tax policies and decide for each whether the primary public policy goal is most likely raising revenue or changing behavior (with or without a market failure). d. Income tax exemption for charity donations The primary public policy goal is most likely to change behavior correct. a. raising revenue b. to change behavior and raise revenue c. to change behavior
c
Determine whether each of the following taxes is proportional, regressive, or progressive. a. An income tax of 25 percent on income from all sources. This tax is a. regressive. b. progressive c, proportional
c
For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. In England, municipal-waste authorities are given a percentage of an overall limit that can be put in the landfill each year. These percentages can be traded among municipalities: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.
c
Identify which way the labor supply curve would shift under the following scenarios. Wages increase in an industry that requires similar job skills: a. no shift, movement along the labor supply curve. b. right c. left
c
Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - profits for chocolate producers in the short run will A. not change B. increase C. decrease
c
Which (if any) of the following scenarios is the result of a natural monopoly? (select all that may apply) a. Patent holders of genetically modified seeds are permitted to sue farmers who save seeds from one planting season to the next. b. Doctors in the United States are prohibited from practicing without a medical license. c. There is one train operator with service from Baltimore to Philadelphia. d. Coal is used as the primary energy in a country with abundant coal deposits.
c
You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes private benefits. more then one answer a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none
c
the goods may or may not be standardized a. monopolistic competition b. monopoly c. oligopoly
c
The concepts of comparative advantage, specialization, and trade:
can be useful in explaining why countries import and export certain goods. can be useful in explaining why individuals typically work at one job, and buy the other goods and services they need. can be useful in explaining why we allow ourselves to be interdependent on others. ALL OF THESE STATEMENTS ARE TRUE
When a producer has an absolute advantage at producing a good, it means the producer:
can produce more of that good than others with the same number of workers
Capital gains are taxed separately from other types of income, under the appropriately-named
capital gains tax.
if we believe that people make considered choices to maximize their own welfare, then in-kind transfers are inefficient because
chase provides recipients with the flexibility to choose the goods that will do them the most good
If the Gini coefficient is 1, there is
complete income inequality.
When toilet paper sales increase, quarterly economic growth tends to rise. This is an example of:
correlation without causation
When two variables have been observed to have a tendency to occur at the same time, we can say there is ______ but not necessarily _______.
correlation; causation
Deadweight loss is usually considered a _____ of taxation.
cost
An absolute poverty threshold is usually set based on the
cost of certain essential goods.
The purchasing power parity index accounts for differences in the price of goods across _____.
countries
Community-wide poverty:
creates problems beyond those faced by poor individuals living in wealthier communities.
because _________ constraints can limit the ability of talented but poor individuals to make potentially profitable investments, starting with a low income can cause low ________ capital
credit, human
For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. A city starts a free program that collects recyclable glass, paper, and plastic from residents' doorsteps: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.
d
You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes external benefits. a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest. d. none
d
If a tax is implemented in an already-efficient market, it causes _____ loss.
deadweight
_____ loss is value that disappears as the result of a tax.
deadweight
When a government spends more than it earns in revenue, we say that it has a budget _____.
deficit
Means tested government programs:
define eligibility for benefits based on recipients' income.
absolute poverty threshold measure
defining poverty as an income below a certain amount, fixed at a given point or time
Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The b. The "Flatulence Tax": Proposed, but ultimately not adopted in New Zealand to help reduce methane emissions from livestock. tax_____did_or_did_ not______ address a market failure.
did
Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The d. The Cowardice Tax: Introduced in medieval England and applied to people who refused to defend the country at request of the king. tax_____did_or_did_ not______ address a market failure.
did
Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. The c. The Window Tax: Levied by English King William III on the number of windows in a house, which tended to be more numerous in wealthier homes. tax_____did_or_did_ not______ address a market failure.
did not
Governments throughout history have levied some very interesting taxes (http://azweird.com/history/weirdest_taxes_in_history-731.html). Each of the following taxes changed citizens' behavior. Determine whether it's likely that the tax also addressed a market failure. a. The Hat Tax: Adopted by the British government, requiring every hat to bear a stamp on the inside showing it was legal. The tax_____did_or_did_ not______ address a market failure.
did not
The effect that discrimination has on people's earnings and opportunities is: If people of different sexes or races earn, on average, different amounts of money:
difficult to measure. there may be a number of explanations.
The law of supply describes the:
direct relationship between price and quantity supplied.
Economists think about _____ as the practice of making choices using generalizations based on observable characteristics to fill in missing information.
discrimination
The lingering effects of historical _____ can affect new generations because people's chances in life are affected by the human capital of those around them.
discrimination
The practice of making choices using generalizations based on observable characteristics to fill in missing information is _____.
discrimination
Under some conditions, markets may help to eliminate _____; under other circumstances, it can be consistent with an efficient market.
discrimination
the lingering effects of historical ___________ can affect new generations because people's chances in life are affected by the human capital of those around them
discrimination
The practice of making choices using generalizations based on observable characteristics to fill in missing information is called
discrimination.
under some conditions, markets may help to eliminate
discrimitation
For each of the following examples, state which of these approaches is being taken to manage a common resource or supply a public good: social norms, quota, tradable allowance, government provision, or property rights. American bison, which once roamed freely across the Great Plains, are now raised on ranches for commercial purposes: a. social norms b. quota c. tradable allowance d. government provision, e. property rights.
e
Who actually loses surplus as a result of the tax is the _____ incidence of the tax.
economic
education is a tool for __________ development: better-educated children grow up to be more productive workers who contribute the economy and are less likely to be poor and unemployed
economic
Programs that policy makers believe will act as investments in future economic growth can be grouped under the category
economic development.
conditional cash transfers programs often combine redistributive goals with
economic-development goals
The net _____ effect of a tax is specific to each tax, and to each use of government proceeds from the tax.
efficiency or inefficiency
Discrimination can be consistent with an
efficient market
the longer the time period considered, the more __________ the distribution of income becomes
equal
When quantity supplied equals quantity demanded:
equilibrium is reached.
The poverty rate is the percentage of the population that
falls below the absolute poverty line.
Because the U.S. poverty line is an absolute measure rather than a relative one, the official U.S. poverty rate:
fell steadily when there was economic growth that raised the incomes of low-income families.
The simplest method of summarizing income distribution divides households into _____ equally sized groups.
five
A proportional income tax is sometimes called a "_____ tax."
flat
With a tax that is _____, people are taxed in proportion to their income.
flat
Suppose a person earning $20,000 pays 20 percent of income in taxes and a person earning $200,000 pays 20 percent of income in taxes. This tax is _____.
flat / proportional
In the United States, the official poverty line is based on the price of
food
in the US the official poverty line is based in the price of
food
A perfectly competitive market is one in which:
fully informed, price-taking buyers and sellers easily trade a standardized good or service
When producers specialize and exchange goods and services, outcomes improve because of:
gains from trade
Aid to Families with Dependent Children (AFDC)
gave money to poor households with children (prior to 1996)
higher numbers correlate with greater income inequality for a
gini coefficient
The United States Postal Service maintains a monopoly on mail delivery in part through its exclusive right to access customer mailboxes. Which barrier to entry best describes this situation?
government intervention
social insurance
government programs under which people pay into a common pool and are eligible to draw on benefits under certain circumstances
*equality-efficiency trade-off*
greater income equality comes at the opportunity cost of reduced production and income.. and greater production and income comes at the expense of less equality of income
Applying for a loan in five-group persons is called:
group responsibility
solutions to poverty must involve ways to
grow the economy and expand the range of opportunities available to the population
When a producer has the ability to produce a good or service at a lower opportunity cost than others, economists say the producer:
has a comparative advantage at producing that good
In order to sell certified diamonds, the seller must be certified gemologist. This means the diamond market therefore:
has incomplete information. has transaction costs. has price-makers. ALL OF THESE STATEMENTS ARE TRUE.
People who grow up in poor families are more likely to be poor because the parents
have limited resources to pass along.
the poor are ____________, they can be found in all parts of the nation, all races and ethnicities, rural, urban, young and old.
heterogeneous
_____-income countries, especially those with extensive government-provided social benefits, tend to collect taxes that represent a greater share of their GDP.
high
because income is not distributed perfectly equally anywhere in the world, the top quintiles earn a disproportionately ___________ share of income and the lower quintiles earn a disproportionately _______ share of income
high, low
Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day building bombs, he will build 7 bombs. Because Tom has a ____________ opportunity cost for one bomb compared to Jerry, we know Tom has _________________________.
higher; the comparative advantage in trap production
The two most important actors of the economy are:
households and firms
You acquire _____ capital by getting a good education, being healthy, and gaining experience in jobs, but also by watching and learning from the people around you.
human
credit constraint
inability to get a loan even though a person expects to be able to repay the loan plus interest
Taxes change behavior because they alter the _____ faced by market participants.
incentives
The Gini coefficient would be zero if the:
income distribution were perfectly equal.
If the Gini coefficient is zero, there is
income distribution would be perfectly equal
one way to consider the relationship between inequality and opportunity is to look at
income mobility
One way to consider the relationship between inequality and opportunities is to look at
income mobility.
A relative poverty line defines poverty in terms of
income of the rest of the population.
Assuming that workers are not all equally productive in producing each good, the opportunity cost of producing one good in terms of the other:
increases as more of a good is produced, because skills vary among workers.
Specialization _________ total world production using __________ workers and _________ technology.
increases, the same number of, the same
Purchasing Power Parity (PPP) index
index that describes the overall difference in prices of goods between countries
_________ within countries has largely been on the rise for all countries
inequality
The two flows, or things being exchanged, in the circular flow model are:
inputs/outputs and money
Points ______ the production possibilities frontier are inefficient while points ______ the production possibilities frontier are efficient.
inside, on
The law of demand describes the:
inverse relationship between price and quantity demanded
*poverty*
is a condition in which a person or family does not have the means to satisfy basic needs for food, clothing, shelter, and transportation
Opportunity Cost:
is the value of your next best alternative
A payroll tax is is deducted directly from your paycheck, and
is used to pay for Social Security and Medicare.
complete information.
knowledge about other market participants or players is available to all participants
Lower Gini ratios denote
less income inequality
means-testing can also have perverse incentives because recipients have an incentive to
limit their means in order to receive benefits
Means-testing can also create perverse incentives because recipients have an incentive to
limit their means in order to receive benefits.
Means-testing can also create perverse incentives because recipients have an incentive to:
limit their means in order to receive benefits.
You would expect ________correct to be more likely to give up their seat on a bus to an elderly person.
locals
most of Europe has relatively ________ low inequality; Much of Latin American and southern African has relatively _______ inequality
low, high
In the United States, the sale of a house that was used as a primary residence is taxed at a _____ rate than other real estate.
lower
For almost all goods, the:
lower the price goes, the higher the quantity demanded
Discrimination
making choices by using generalizations based on people's observable characteristics, like race, gender, age
Which of the following is not one of three categories economists and policymakers use to classify taxes?
marginal
The buyers and sellers who trade a particular good or service make up what we call a:
market
In general, the _____________ __________ is permissive of a high degree of income inequality because it rewards individuals based on the contributions they make, or resources they own
market system
price-optimization theory
mathematical analysis by a company to determine how customers will respond to different prices for its products and services through different channels
The case for equality:
maximizes total consumer satisfaction (utility) from any level of output and income
The value of the surplus that is lost to buyers and sellers but converted into tax revenue
may be transferred to someone else through public policies, but it is not lost.
the goal of using ____________ programs is is to target resources toward those who need them the most
means-tested
In the US the three biggest social insurance programs are
medicare, social security, and unemployment security
A normative statement is generally based upon:
moral beliefs
Higher Gini ratios denote
more income inequality
People who grow up in poor families are
more likely to be poor.
You manage two employees at a pet salon. Your employees perform two tasks: giving flea baths and grooming animals. If you constructed a single production possibilities frontier for flea baths and grooming that combined both of your employees' work efforts, you would expect the production possibilities frontier to be:
not a straight line because each worker would likely differ in her relative skills at grooming and giving flea baths and would therefore differ in the opportunity cost for performing each task.
Suppose two countries produce the same two goods and have identical production possibilities frontiers. You would expect these countries:
not to trade because identical production possibilities frontiers would indicate that the two countries face the same opportunity costs, so there are no gains from trade.
Which of the following is a positive incentive?
offering a reward to anyone that can find you missing pet
Anti-poverty programs:
often involve trade-offs between efficiency and equity.
Suppose a country has abundant capital but scarce labor. __________would be more harmed by a trade embargo.
owners
*social insurance programs*
partially replace earnings that have been lost due to retirement, disability, or temporary unemplyment. and health insurance for the elderly
the percentage of the population that falls below the absolute poverty line is the
poverty rate
The percentage of the population that falls below the absolute poverty line is the
poverty rate.
the inability to get a loan even though a person likely would be able repay the loan plus interest is a
poverty trap called a credit constraint
At Zooey's elementary school, children are not allowed to trade lunches or components of their lunches with other students. Lunchroom monitors watch closely and strictly enforce this policy. If Zooey prepares an argument about the inefficiency of this policy to her principal, she can say that the school policy is:
preventing a market that would generate mutually beneficial trades.
Taxes drive a wedge between the
price paid by buyers and the price received by sellers.
In the United States, the corporate income tax is _____.
progressive
The design of the U.S. federal income tax system is _____, charging lower rates to those with lower incomes.
progressive
*noncash transfers*
provide specific goods or services rather than cash
Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials. The government's decision to offer low tax rates to entrepreneurs is:
providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth.
because governments redistribute income through the ________ budget, after-tax income distribution is ________ equal that the income distribution before taxes were paid and public services provided
public, more
Accounting for differences in the price of goods across countries is done using a tool called the
purchasing power parity index.
Which of the following is not one of the three concepts useful in evaluating the costs and benefits of alternative types of taxes?
quantity
A _____ represents 20 percent of the population.
quintile
Homeless shelters and food banks are examples of programs designed to _____ resources.
redistribute
most people consider the primary purpose of programs designed to ____________ resources to be using resources provided by society's wealthier members to ensure a basic minimum standard of living for its poorer members
redistribute
one economic function of government is to _______ ___________, if society so desires.
redistribute income
A(n) _____ poverty measure is not directly tied to the cost of living.
relative
In the UK, the poverty line is set at 60% of the median income. this is a _____________________
relative poverty measure
Quintile
represents 20% of the population
Tax _____ allows governments to provide goods and services to citizens, from national defense to highway building.
revenue
Tax per unit x Number of units equal total _____ from a tax.
revenue
3 types of public policy approaches related to poverty and inequality
safety nets, redistribution of resources, and economic development
A non-specific tax based on the value of a good or service being purchased is called a
sales tax.
Individuals, firms, and societies are limited in the amount of goods and services that they can produce. This is a direct result of:
scarcity
poverty traps
self-reinforcing mechanisms that cause the poor to stay poor
An economic model:
should describe the real world accurately. should accurately predict cause and effect. should make clear assumptions. ALL OF THESE ARE TRUE
A production possibilities frontier is a line or curve that
shows all the possible combinations of outputs that can be produced using all available resources
people in rich countries are specializing more and more in high-tech, high-skill, high-education work, and they reap huge benefits because if the
skill-based technical change
Government programs under which people pay into a common pool and are eligible to draw on benefits under certain circumstances is referred to as _____ insurance.
social
Important examples of _____ insurance programs in the United States include unemployment insurance, Social Security, and Medicare.
social
Government programs under which people pay into a common pool and are eligible to draw on benefits under certain circumstances is referred to as
social insurance.
economic research shows that people at all income levels find jobs and other opportunities through friends, parents, and other in the community through
social networking
A nonprice determinant of demand refers to:
something that affects demand other than the price
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The workers in Country B will benefit from trade if they:
specialize in tomatoes because their opportunity cost of tomatoes is lower than Country A's.
Who is legally obligated to pay the tax to the government is the _____ incidence of the tax.
statutory
After getting raise at work, Jennie now regularly buys steak instead of hamburger. Based on this behavior, we can assume:
steak is a normal good, and hamburger is an inferior good for jennie
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Country B has the comparative advantage in the production of:
tablets only
Deadweight loss is value that can disappear as the result of a _____.
tax
The concept of _____ incidence describes how a tax burden is distributed among buyers and sellers, old people or young people, rich people or poor people, and so on.
tax
_____ change behavior because they alter the incentives faced by market participants.
taxes
Poverty:
tends to pass from generation to generation. Correct
the international poverty line is 1.90 prepay at purchasing power parity which means that in each country the poverty line is the amount in local currency that will allow you to buy the same basket of good that $1.90 would buy in
the United States
income mobility
the ability to improve one's economic circumstances over time
The term market refers to:
the buyers and sellers who trade a particular good or service, not to a physical location
means-tested
the characteristic of a program that defines eligibility for benefits based on recipients income
An absolute poverty line is usually set based on:
the cost of certain essential goods.
The Lorenz curve maps:
the cumulative percentage of the population against the cumulative percentage of income earned by those people.
In an efficient market, a tax causes the demand curve to shift down by the amount of the tax because
the effective price paid by consumers is now higher at any given market price.
*income mobility*
the extent to which income receivers move from one part of the income distribution to another over some period of time
In which of the following situations can you say, without further information, that consumer surplus decreases relative to the market equilibrium level?
the federal government enforces a law that raises the price of dairy goods above the equilibrium and if your city passes a local property tax under which buyers
Economics is the study of:
the government's decision making process. why state and federal governments disagree. the study of how people manage resources. ALL OF THESE ARE TRUE.
production possibilities frontier
the line or curve that shows all possible combinations of two outputs that can be produced using all available resources and technology
The equilibrium price is sometimes called:
the market-clearing price.
Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. A Bangladeshi worker, on the other hand, can produce 100 pairs of gloves or grow 200 radishes per day. Using the concepts of advantage and trade, we can say that:
the opportunity cost of one pair of gloves is higher for the United States than Bangladesh, therefore the United States has a comparative advantage in radish production.
The Federal Drug Administration slows the pace at which helpful medications reach the marketplace. The alternative of having the medication available to consumers earlier is an example of:
the opportunity cost of the Federal Drug Administration's regulation
poverty rate
the percentage of people who live in households with income below the official poverty line
*poverty rate*
the percentage of the population living in poverty
Demand for Shell gasoline will increase if:
the price of BP gasoline increases
adverse selection
the problem of incomplete information - of choosing alternatives without fully knowing the details of available options
human capital
the skills and knowledge gained by a worker through education and experience
A recent epidemic of mad cow disease caused the government to mandate that thousands of cows be completely destroyed. This will likely cause:
the supply of leather shoes to decrease.
The surplus that is lost to buyers and sellers but converted into tax revenue is not considered a cost, because
the tax revenue funds public services.
*income inequality*
the unequal distribution of an economy's total income among households or families
Economic analysis requires us to combine:
theory with observations
Brazil is the largest coffee producer in the world and coffee is one of Brazil's major export goods. Suppose that in 20 years, Brazil no longer produces much coffee and imports most of its coffee instead. Brazil's pattern of trade has changed over time because:
there was a change in its comparative advantage.
People will choose to specialize and trade if:
they can acquire the goods they want at a lower cost than it will cost them to make the good themselves
Rent control creates deadweight loss for both consumers and suppliers of housing. Consumers are often in favor of this policy because:
they think they will be able to find an apartment at a lower price.
Economic theory states that losing comparative advantage in one good means creating a comparative advantage in another. This suggests that:
those who experience the transition may find it difficult in the short run. it can be seen as a success in the long run. outsourcing can be good overall for a society. ALL OF THESE STATEMENTS ARE TRUE
Earned Income Tax Credit
those with low income are eligible for tax credit, proportional to the amount of income they earn and the size of their families
Economic development, safety nets, and redistribution of resources are
three different types of public policy approaches related to poverty and inequality.
distribution by quintiles
to divide the total number of individuals, households, or families into five numerically equal groups
When two countries specialize and trade with one another
total production increase, but only if comparative advantage exists
Which contributes more to redistribution, government taxes or government transfers?
transfers
More than a quarter of the population experiences _____ poverty at some point in their lives, perhaps due to losing a job or experiencing sickness or injury.
transient
Research shows programs like unemployment insurance, disability or health insurance, and job training can be effective in fighting:
transient poverty, but not chronic poverty.
True or false: Just because a tax creates inefficiency does not necessarily mean that the tax is bad.
true
True or false: Taxes result in a lower equilibrium quantity of the good or service being consumed.
true
Aid to Families with Dependent Children was an _____ cash-transfer program because it provided financial support to any eligible person without any stipulations on how the money could be used.
unconditional
the distribution of income has become more _____________ since 1975
unequal
The supply curve is a ______ line that reflects the ______ relationship between price and quantity supplied.
upward-sloping; direct
statistical discrimination
using information about group averages to make conclusions about individuals
A demand curve:
visually siplays the demand schedule. is a graph depicting various price-quantity combinations of a good. is a graph that shows the quantities demanded by consumers of a particular good or service at various prices. ALL OF THESE STATEMENT ARE TRUE
A _____ tax is a tax on the wages paid to an employee.
wage / payroll
there is no single programs in the US called ________, rather, that term is used to refer broadly to the various income-support groups for the poor run by each state
welfare
Programs that describe a(n) _____ range from food stamps that help the poor buy food to Head Start, an early education program.
welfare state
The basics of the _____ started in the United States during the Great Depression when the government rolled out a variety of programs, including Social Security and the Civilian Conservation Corps, which were intended to help the large rolls of poor and unemployed.
welfare state
The concept of incidence is used to describe
who bears the burden of any sort of tax.
You need to paint your fence but you really hate this task. You decide to hire the kid next door to do it for you. You would be willing to pay him up to $100, but you start by offering $50, expecting to negotiate. To your great surprise, he accepts your $50 offer. When you tell your friend about the great deal you got, she is shocked that you would take advantage of someone. To assure your friend that you did not cheat the kid next door, you tell her that:
with voluntary exchange both parties are better off, and are satisfied when accepting the exchange price.
If we consider the reality that each worker has different skills, then the production possibilities frontier:
would have a concave shape
If people have never implemented an idea that you believe offers substantial opportunity:
you might be missing something in your evaluation. You should carefully revisit the first three economists' questions
You may incorrectly conclude that an idea no other person has implemented is highly profitable because:
you misjudged people's wants and constraints. you miscalculated the trade-offs they face. you misunderstood how people would respond to incentives. ALL OF THESE.
the Gini coefficient for complete income equality is
zero
Suppose a monopolist discovers a way to perfectly price-discriminate. Under this scenario, consumer surplus is ___________ What are the efficiency costs (deadweight loss)? ____________
zero, zero
he most common international poverty measure is the number of people living on less than
$1.90
the international poverty line is _________ per day at purchasing power parity
$1.90
Factors that contribute to income inequality:
-ability -education and training -discrimination -preferences and risks -unequal distribution of wealth -market power -luck, connections, misfortunes
Katrina and David can both produce pizzas and loaves of bread. In one hour, Katrina can produce 10 pizzas or 20 loaves of bread. In one hour, David can produce 6 pizzas or 18 loaves of bread. A: Which of the following is a true statement about absolute advantage? B: Which of the following is a true statement about comparative advantage?
A: Katrina has an absolute advantage in both goods. B: Katrina has a comparative advantage in pizza. Correct
When the price of gasoline was very high in the summer of 2008, several U.S. presidential candidates proposed implementing a national price ceiling to keep fuel affordable. A: How would this policy have affected producer and consumer surplus? B: This policy would cause total surplus to:
A: Producer surplus would fall, and individual consumer surplus may increase or decrease. B: decrease
Which of the following is an example of a positive statement?
An increase in minimum wage results in higher teenage unemployment
Information asymmetry is a problem when: A. a buyer and seller have aligned incentives. B. a buyer and seller have opposing incentives. C. a market is highly efficient. D. a market is highly inefficient.
B. a buyer and seller have opposing incentives.
The "lemons" problem is used to explain the concept of: A. complete information. B. adverse selection. C. moral hazard. D. collective bargaining.
B. adverse selection.
People will consistently sit through terrible movies at the theater instead of leaving early. This behavior makes no sense because it implies people are: A. ignoring sunk costs, which is irrational. B. considering sunk costs, instead of thinking at the margin. C. thinking at the margin, instead of considering sunk costs. D. not thinking at the margin, which is rational.
B. considering sunk costs, instead of thinking at the margin.
Suppose Sam's Shoe Co. makes one kind of shoe. An example of a variable cost for this company would be: A. a sewing machine. B. the leather needed to make the shoes. C. the lease to the factory building. D. All of these are examples of variable costs.
B. the leather needed to make the shoes.
Economic profits are calculated as: A. total revenue minus explicit costs. B. total revenue minus all costs, explicit and implicit. C. total revenue minus implicit costs. D. None of these is true.
B. total revenue minus all costs, explicit and implicit.
According to the table shown, what can be said of Betty and Barney's demand for this good
Betty's and Barney's demand both follow the law of demand.
Bill is a professional photographer. His camera is broken and he needs a new one within the next hour or he will miss an important deadline. Lisa is a high school student who doesn't have a camera but wants to get one to take pictures at her prom next month. Who can be expected to have a higher willingness to pay for a particular camera today?
Bill, because he needs the camera for work and has little time to look for alternatives.
The poverty rate dropped from 84 percent in 1981 to 11.2 percent in 2010 in what country?
China
If successive units of a good are consumed, the marginal utility gained typically: A. increases at the same rate for all people. B. increases at different rates for different people. C. decreases at the same rate for all people. D. decreases at different rates for different people.
D. decreases at different rates for different people
Mika borrows $100,000 to start up her own beauty shop. She pays 5 percent interest on her loan. In order to account for all costs of her business, Mika must not forget: A. the implicit cost of $100,000. B. the implicit cost of $5,000. C. the explicit cost of $105,000. D. the explicit cost of $5,000.
D. the explicit cost of $5,000.
Identify whether each of the following goods is a. rival b. nonrival.
a
A budget deficit occurs when
a government spends more than it earns in revenue.
When a produce is acting efficiently:
they are producing at a point on their production possibilities frontier
A main purpose of taxes is
to raise public revenue.
