Econ 202 Exam 2

When trying to infer causality, economists define bias as any source of difference between treatment and control groups that is correlated with the treatment but is not due to the treatment. a) True b) False

a) True

When the government imposes price floors or price ceilings, which of the following occurs? a) some people lose b) some people win c) there is a loss of economic efficiency d) all of the above

a) some people lose

True or False. Parker et al. (2016) find evidence that infant mortality increased in the Democratic Republic of Congo after the United States imposed economic sanctions (trade restrictions) on the country. a) true b) false

a) true

True or false. Total economic surplus is the sum of consumer surplus and producer surplus. a) true b) false

a) true

Correlation implies causation. a) True b) False

b) False

Comparative advantage is the ability of an individual, firm, or country to produce a good or service at a) a higher opportunity cost than competitors b) a lower opportunity cost than competitors c) a higher absolute cost than competitors d) a lower absolute cost than competitors

b) a lower opportunity cost than competitors

A Wall Street Journal article noted that a study by the U.S. Congressional Budget Office "estimated raising the minimum wage to $10.10 an hour would reduce U.S. employment by 500,000 but lift 900,000 Americans out of poverty." The minimum wage might reduce employment because a) it would require training and benefits which would be too expensive to hire new workers b) employer costs would increase c) the increase in the minimum wage raises the wage for all workers d) some workers may choose not to work at the higher wage

b) employer costs would increase

True or false. By law, the current tax rate is 6.2% for the employer and 6.2% for the employee. Therefore, the tax incidence for employers and employees is identical. a) true b) false

b) false

True or false. Economists generally believe tariffs reduce total surplus more than quotas. a) true b) false

b) false

True or false. Suppose you create a clone of yourself, who has the same exact relative costs of production as you do (in terms of both absolute and comparative advantage). You and your clone can still benefit from specialization and trade. a) true b) false

b) false

A price ceiling is a legally determined _____ sellers may charge; a price floor is a legally determined _____ sellers may receive a) minimum; maximum b) maximum; minimum c) minimum; minimum d) maximum; maximum

b) maximum; minimum

Consumer and producer surplus measure the _____ benefit rather than the _____ benefit. a) total; net b) net; total c) marginal; additional d) objective; subjective

b) net; total

"International trade raises total economic surplus." This statement is _____. "Therefore, we should encourage international trade." This statement is _____. a) positive; positive b) positive; normative c) normative; positive d) normative; normative

b) positive; normative

Which of the following is considered the "gold standard" for inferring causality? a) observational data b) randomized control trials c) quasi-experiments d) regression estimation

b) randomized control trials

Comparative advantage a) is independent of a country's skilled and unskilled labor quantities b) is unlikely to change, once it has been defined c) may change as time passes and circumstances change d) is unrelated to absolute advantage

c) may change as time passes and circumstances change

Economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely. Why? a) consumers in different countries have homogeneous tastes b) some countries do not have an absolute advantage producing anything c) some goods and services cannot be traded internationally d) production of most goods involves decreasing opportunity costs

c) some goods and services cannot be traded internationally

Tax incidence refers to a) the type of product the tax is levied on b) the amount of revenue collected by the government from a tax c) the actual division of the burden of a tax on between buyers and sellers in a market d) who is legally required to send a tax payment to the government

c) the actual division of the burden of a tax on between buyers and sellers in a market

Consumer surplus is the difference between a) the lowest price a firm would be willing to accept and the price it actually receives b) the highest price a consumer is willing to pay and marginal benefit c) the highest price a consumer is willing to pay and the price the consumer actually pays d) the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept

c) the highest price a consumer is willing to pay and the price the consumer actually pays

Plywood is frequently used to board windows in homes during hurricanes. Suppose the government bans suppliers from raising the price of plywood in anticipation of a hurricane in Houston. How are markets likely to respond to the intervention? a) suppliers from other parts of the country will send less plywood to Houston than they would have without the ban b) consumer in other parts of the country will benefit from lower prices for plywood c) consumers who need plywood the most are not necessarily the ones who will receive it d) a and c but not b

d) a and c but not b

Suppose Chicago decides to impose a price ceiling on the rent tenants can pay to landlords. Which of the following market inefficiencies might result from the price control? a) as a result of a shortage in rental units, the potential renters who value apartments the most are not necessarily the renters who find them b) land developers devote less land to residential buildings c) landlords invest less money in repairing and maintaining their property d) all of the above

d) all of the above

Which of the following are possible motivations for governments to intervene in markets? a) a desire to achieve economic efficiency b) regulations can reward lobbyists for political donations c) corruption d) all of the above

d) all of the above

Economic efficiency is a market outcome in which a) the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production b) the sum of consumer and producer surplus is at a maximum c) every individual is better off than they would be with any other market outcome d) both a and b but not c

d) both a and b but not c

Juan notices healthy people tend to have higher incomes than less healthy people. Health and income are a) economically uninteresting b) not correlated c) negatively correlated d) positively correlated

d) positively correlated

When the government imposes trade restrictions, a) everyone wins, goods and services distribution is more just, and there is a loss of economic efficiency b) everyone wins, goods and services distribution is more just, and there is an increase in economic efficiency c) some people win, some people lose, and there is an increase in economic efficiency d) some people win, some people lose, and there is a loss of economic efficiency

d) some people win, some people lose, and there is a loss of economic efficiency

Economists have historically distrusted survey data because a) surveys do not provide measurable, economic variables b) surveys do not provide control variables c) response rates are always low d) the incentive for respondents to report accurate information is weak

d) the incentive for respondents to report accurate information is weak

Although international trade leads to substantial net benefits, not everyone gains from international trade. Which of the following groups is most likely to lose from trade? a) consumers b) businesses that use inputs and products that are being imported c) businesses outside the import sector d) the workers and companies in the industries that compete with the imports

d) the workers and companies in the industries that compete with the importsd) the workers and companies in the industries that compete with the imports