Econ 1B Final Part 2

The primary eligibility requirement for Social Security is

Age.

Moral hazard is

An incentive to engage in undesirable behavior.

The marginal revenue product establishes

An upper limit to the wage rate an employer is willing and able to pay

The marginal revenue product (MRP) establishes

An upper limit to the wage rate an employer is willing to pay

Recipients of TANF funds are identified

By the federally established poverty line.

If the Gini coefficient is greater for the United Kingdom than for Japan, we can conclude that the

Distribution of income in the United Kingdom is less equal than in Japan

When quotas are eliminated, losers include

Domestic producers

Marginal physical product diminishes as additional workers are hired because

Each worker has an increasingly smaller amount of other factors with which to work.

Horizontal equity can be determined by comparing the

Effective tax rates for two taxpayers with the same nominal incomes.

The purpose of the World Trade Organization (WTO) is to

Enforce the rules of free trade.

Brand loyalty

Exists even when products are virtually identical

The benefits from international trade include

Greater efficiency in the use of the world's limited resources

The intent of the 1996 Freedom to Farm Act was to accomplish all of the following except

Increase interest rates charged to farmers

If we move to the right along the upward-sloping labor supply curve, we observe that the cost of labor

Increases due to the increasing opportunity cost

Specialization in production

Increases output

Monopolistic competition results in allocative

Inefficiency and productive inefficiency.

A country has a comparative advantage in a good if

It can produce a good at a lower opportunity cost relative to another country. Correct

Brand loyalty usually makes the demand curve for a product

Less price-elastic.

If income is distributed equally, the

Lorenz curve is a straight line

A graphic illustration of the cumulative size distribution of income is known as the

Lorenz curve.

Government subsidies on the purchase of fertilizer by farmers result in

Lower costs of production and increased output.

The cost efficiency of labor is equal to the

MPP of labor divided by the wage rate

The equilibrium wage rate is determined by

Market labor supply and market labor demand

If economic profits are earned in a monopolistically competitive market,

More firms will enter the market.

The effective tax rate is

Never higher than the nominal tax rate

The U.S. tax system as a whole is basically

Proportional.

Nonprice competition results in

Resource misallocation.

The tax elasticity of supply measures the

Response of workers to a change in the tax rate.

Because of the law of diminishing returns, as additional workers are hired, total output

Rises at a diminishing rate initially and eventually falls.

The federal income tax is designed to

Shift the Lorenz curve inward

The market supply of labor is

The amount of labor all workers supply at different wage rates

The marginal physical product of labor is equal to

The change in total output divided by the change in quantity of labor

The marginal wage is measured by

The change in total wages paid divided by the change in the quantity of labor employed.

The main difference between perfect competition and monopolistic competition is

The degree of product differentiation

The breakeven level of income equals the

The highest level of income at which a household ceases to receive welfare benefit.

A market failure exists when an imperfection in

The market mechanism prevents an optimal outcome

A competitive firm should continue to hire workers until the MRP is equal to

The market wage rate.

The wage rate is

The payment for labor.

A country will not trade unless

The terms of trade are superior to domestic opportunities

Use the following formula to answer the indicated question:Welfare benefit = Maximum benefit - WagesA welfare system based on the welfare formula given

Will increase the risk of moral hazard

A firm that attempts to pass along the cost of higher union wages to consumers in the form of higher prices will be more successful if the price elasticity of demand for its product is

Inelastic

In-kind benefits are a way of correcting

Inequity

In-kind transfers

Provide the direct transfer of goods and services

The poverty gap is the

Shortfall between a household's actual income and the poverty threshold

Means-tested income transfer programs are referred to as

Welfare programs.

Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table 30.3, the marginal revenue product of the second worker hired is

$24 per hour.

Use the following formula to answer the indicated question:Benefit amount = Maximum award - 0.4 (Wages in excess of ceiling)Lucy is retired and earns $12,000 per year working part-time. She is entitled to a maximum Social Security retirement benefit of $14,000. Social Security regulations allow her to earn $9,000 and still get maximum benefits. Lucy's total income, including Social Security benefits, is

$24,800

If 10 workers will be hired by a firm at a wage rate of $15 per hour, but the 11th worker will be hired only if the wage rate falls to $14 per hour, then the marginal wage of the 11th worker is

$4 per hour

Table 30.2 shows how many hairstyling appointments a hair salon can schedule per week based on the number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hair stylists, total revenue, and marginal revenue product of the stylists, assuming that a hair stylist charges $60 per appointment. What is the marginal physical product of the fourth hairstylist?

0

Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between

1/2 and 2/3 of an HDTV per ton of paper

In Alpha the lowest 20 percent of families receive approximately what percentage of income? (See Figure 33.1)

5 percent.

Refer to Table 26.1. In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each

7 beach balls; $10

Social Security is an example of

A cash transfer program

When only one buyer has access to a particular labor market,

A monopsony exists

A flat tax is

A tax system in which tax rates are constant

Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or 200 DVD players. In terms of TV production we can conclude that

China has a comparative advantage

The General Agreement on Tariffs and Trade (GATT)

Committed GATT members to a reduction of protectionism.

If the price for a box of kiwis is $40, the wage rate for kiwi laborers is $10 per hour, and a laborer can pick 3 boxes of kiwis per hour, the

Cost efficiency is 3/10 of a box per dollar

The principal form of direct farm income support is

Countercyclical payments.

Refer to Figure 26.4 for a monopolistically competitive firm. In the long run this firm is most likely to face

Demand2 and MR2

The Bush tax cuts of 2001-2010 reduced

The top marginal tax rate from 39.6 percent to 35 percent

Two countries with differing comparative advantages may engage in trade because

They will be able to consume more goods in total due to specialization and trade.

When interest rates rise, potential income for farmers ________ and their future income becomes _______.

falls; less valuable

A monopsonist must pay a higher net wage rate to hire additional workers because as a single

Buyer in the market, it faces an upward-sloping supply curve for labor

A goal of income transfer programs is to do all of the following except

Change how output is produced

Suppose a taxpayer has an income of $50,000 and a taxable income of $45,000, and pays $5,000 in taxes. If the taxpayer talks of being taxed at a 10 percent tax rate, she is referring to the

Effective tax rate

Dumping is said to occur when

Foreign producers sell their goods abroad at prices lower than those prevailing in their own countries.

The competitive dimension of monopolistic competition is that

Low barriers to entry tend to push economic profits toward zero

A profit-maximizing monopsonist will hire the quantity of labor where

MRP equals MFC.

Lower marginal tax rates for welfare programs will

Make more people eligible for welfare.

If new firms enter a monopolistically competitive market, the demand curves for the existing firms will

Shift to the left

Because a union is a form of monopoly, it must be concerned about the ________ slope of the demand curve for labor.

downward

Union shops are subject to potential competition

From replacement or substitute workers

If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per year as a high school teacher and pays $6,500 in taxes, this is an example of

Horizontal inequity

Tariffs tend to reduce the volume of imports by

Making them more expensive to domestic consumers.

An oligopsony exists if

Only a few firms account for most of the industry's employment

Transfer payments are

Payments to individuals for which no current goods or services are exchanged.

Suppose a poverty program has a basic benefit of $5,000, zero deductions, and a marginal tax rate of 0.50. The breakeven level of income is

$10,000.

Assume the marginal tax rate is 10 percent for the first $30,000 of income, 15 percent for income between $30,000 and $70,000, and 20 percent for any income over $70,000. If Emily has taxable income equal to $80,000 for the year, what is her tax bill?

$11,000

Monopolistically competitive firms have a "monopoly" element to them because

Brand loyalty gives them a captive audience