Econ 3

10. Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: A. each would create less pollution B. each would lower production to decrease pollution levels C. their supply curves will represent all of those social costs D. the price of goods will rise and a and b above

D

35. Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? A. intellectual property rights B. government research and development grants C. cooperative research ventures between companies D. patents, copyrights, and each of the above

D

4. Command-and-control regulation is a body of law that _______________. A. fails to consider private costs of firms B. specifies allowable quantities of pollution C. details which pollution-control technologies must be used D. can include both b and c

D

45. Education is often considered a positive externality because more education is associated with ___________. A. better health outcomes for the population B. lower levels of crime C. a more stable, democratic government D. all of the above

D

48. In the case of public goods, if the government does not provide them, then ___________. A. quantity produced will always be zero B. there will be forced riders C. everyone will be a free rider D. social pressures and personal appeals can reduce the number of free riders

D

54. The absence of which of the following best explains why government agencies are slower to correct mistakes than private firms? A. imperfect information B. discrimination in wealth distribution C. monopoly over the economy D. competition or a threat of new entry

D

56. In a 1948 novel titled "Walden II", one of the characters states: "The chance that one man's vote will decide the issue in a national election...is less than the chance that he will be killed on his way to the polls." This statement addresses __________________. A. why laws against pork-barrelling and logrolling cannot be legislated. B. why the United States spends too much money on elections. C. why the margin of victory in elections is measured in hundreds, thousands, and millions of votes. D. why a utility-maximizing person may rationally decide not to vote or become informed about elections.

D

59. When the U.S. Congress begins to draft laws and regulations that attempt to reduce the harmful effects of environmental pollution, industry lobbyists will _______________. A. study every word and comma, becoming well-informed on the issue. B. suggest alternate wording. C. often contribute to campaigns of legislators on key committees. D. do all of the above in order to influence legislation in their favour.

D

6. Property rights are the legal rights of ownership on which others are ___________________. A. allowed to infringe by paying the property owner's pollution tax B. able to enforce use of pollution-control technologies C. able to specify allowable quantities of pollution D. not allowed to infringe without paying compensation

D

73. Once a government program is put into place, the employees of the bureau put in charge of administering the program _____. A. become profit maximizers B. begin working in the public interest C. start rent seeking D. become an interest group

D

77. Colombia produces coffee with less labor and land than any other country; it therefore necessarily has ___________. A. a comparative advantage in coffee production B. both a comparative and absolute advantage in coffee production C. an absolute advantage and comparative disadvantage in coffee production D. an absolute advantage in coffee production

D

78. The idea behind comparative advantage reflects the possibility that one party _____________. A. may be able to produce everything relatively more efficiently than another party B. may be able to produce something at a lower dollar cost than another party C. with an absolute advantage in producing two different may export goods both of those goods to the other party D. may be able to produce something at a lower opportunity cost than another party

D

81. Which of the following is true? A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. C. A nation cannot have an absolute advantage in the production of every good. D. A nation cannot have a comparative advantage in the production of every good.

D

84. Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true? A. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing. B. Georgeland has both a comparative and absolute advantage in producing clothing. C. Alland has a comparative advantage, but not an absolute advantage, in producing food. D. Alland has an absolute advantage, but not comparative advantage, in producing food.

D

87. Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange? A. 1 orange for 0.2 apples B. 2 apples for 3 oranges C. 3 apples for 3 oranges D. 1 apple for 3 oranges

D

93. Because of improvements in ________________ it has become easier to split up the value chain by shipping more specialized goods. A. sharing information B. communication technology C. transportation D. all of the above

D

55. The theory of _______________ holds that people won't bother incurring the costs of becoming informed and voting, because they know that their vote _______________. A. rational ignorance; won't be decisive in the election B. imperfect competition; has little impact on election outcomes C. inequality of incomes; won't be decisive in the election D. democracy by majority rule; won't impact election outcomes

A

57. Why are politicians more likely to focus their political actions on individuals with higher incomes and higher levels of education? A. research shows this group has greater informed voter participation B. research shows this group has a higher percentage of conservatives C. research shows this group has a higher percentage of liberals D. research shows members of this group have employment concerns

A

62. Congress proposes a tax reform in which a small group of wealthy people receive a large tax cut while everyone else receives a small tax increase. When voters are rationally ignorant, what will happen? A. This proposal will pass because the benefits are concentrated on a small group and the costs are spread thinly across a large group. B. This proposal will pass because the costs are concentrated on a small group and the benefits are spread thinly across a large group. C. This proposal will fail because the benefits are concentrated on a small group and the costs are spread thinly across a large group. D. This proposal will fail because the costs are concentrated on a small group and the benefits are spread thinly across a large group.

A

66. Political decisions will be _____ only if the decision was approved by _____. A. win-win; a unanimous vote B. in the public interest; a majority vote C. win-win; a majority vote D. undertaken; a unanimous vote

A

20. The production of paper creates dioxin emissions, which are released into the air. If the paper manufacturer does NOT bear the entire cost of dioxin emissions, then the market will ____________. A. produce less paper than is efficient B. produce more paper than is efficient C. produce the efficient quantity of paper D. stop producing paper

B

27. A public good is a good that is ___________, and thus is difficult for market producers to sell to individual consumers. A. excludable or rivalrous B. nonexcludable and nonrivalrous C. excludable and rivalrous D. unexcludable or unrivaled

B

30. If large numbers of individuals choose to behave as free riders, ___________. A. more of the public good will be available for paying riders B. the public good may never be provided C. public goods will quickly be privatized D. public domain technologies become more difficult to obtain

B

33. Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms ___________. A. derives more private benefits and provides less social benefit B. provides more social benefits than it derives in private benefits C. provides a marginal social benefit and derives a complete private benefit D. provides a complete social benefit and derives a marginal private benefit

B

39. A person with no children (and no plans to have children) must pay taxes every year to support the local public schools. This is an example of a _____________. A. free rider B. forced rider C. tragedy of the commons D. property rights solution to a commons problem

B

41. Positive externalities are _____ because their producers have no incentive to take the _____ into account. A. oversupplied; external cost B. undersupplied; external benefit C. oversupplied; external benefit D. undersupplied; external cost

B

43. Once produced, nonexcludable goods are ____________. A. difficult to keep employees from stealing B. difficult to keep people from consuming without paying for them C. difficult to keep people from consuming at any price D. available to anyone at a high enough price

B

44. A nonexcludable good ___________. A. is by definition also a collective consumption good B. usually suffers from the free rider problem C. will always lead to overproduction D. is frequently illegal

B

50. The Morgantown city government hiring private companies to plow snow off the roads during the winter is an example of a ______________. A. negative externality B. public-private partnership C. subsidy D. club good

B

51. _______________ are numerically small, but well organized groups that are able to exert a disproportionate effect on political outcomes. A. Bipartisan reform organizations B. Special interest groups C. Social scientists organizations D. Bipartisan campaign reformers

B

53. ______________ occurs when a group of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor. A. Pork-barrel spending B. Logrolling C. Competitive spending D. Politically conservative spending

B

58. A problem may arise when politicians are elected by the votes of 60% or less of the population, because these politicians may not enact _______________. A. legislation that is focused on numerically small special interest groups. B. economic policy in the best interests of 100% of the population. C. public policies that fail to benefit social surplus. D. pork-barrel legislation using logrolling.

B

61. When _____________ occurs, the result will be determined by the order in which choices are presented and voted on, not by____________ , because every choice is both preferred to some alternative and also not preferred to another alternative. A. vote splitting; special interests B. a voting cycle; majority rule C. vote splitting; a runoff round D. a voting cycle; a reduction in candidates

B

65. Translating the preferences of each individual into the preferences of the group is _____. A. a challenge faced only by clubs B. a challenge faced by all collective decision making organizations C. inherent in all decision making D. a challenge faced only by government

B

67. A unanimity rule for collective decision making has the disadvantage of _____. A. accepting too many inefficient outcomes B. high decision-making costs C. not clearly being a Pareto improvement D. increasing external costs

B

76. The slope of the production possibility frontier is determined by the _________ of expanding production of one good, measured by how much of the other good would be lost. A. absolute advantage B. opportunity cost C. relative advantage D. specialization

B

11. While the U.S. command-and-control environmental regulations initiated in the 1970s have been effective at reducing pollution, some economists have difficulty with the legislation because ___________________. A. it often requires different pollution-control technology for each polluter. B. it usually requires different standards for all current and potential polluters. C. it is full of fine print and exceptions, and costly for some firms to comply with. D. it is not subject to compromises in the political process and all of the above.

C

29. An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ___________. A. tax evader B. excludable C. free rider D. nonexcludable

C

3. Market failure describes a situation in which the market itself ___________ in a way that balances social costs and benefits. A. remains outside the transaction B. incurs the costs outside the production process C. fails to allocate resources efficiently D. avoids externalities

C

31. I'mAComputerCo. would likely be more willing to undertake an innovative research project to reduce the amount of electricity required to run its computers if there were some form of guarantee that if it succeeded, _________________________. A. it will enjoy a small temporary advantage over the competition B. it would be able to set price to compensate for development costs C. it could sell the new computers as a monopoly for at least a few years D. it would receive a government bailout if losses could drive it out of business

C

34. For a positive externality, _________________ than the social benefits. A. private benefits of an action are more B. social benefits of an action are more C. private benefits of an action are less D. social costs of an action are less

C

70. The median voter model suggests that _____. A. extreme candidates are unlikely to change positions over time B. extreme candidates have an easier time winning election because of the fervor of their supporters C. extreme candidates will have a difficult time winning election D. extreme candidates will be able to move a party's platform to better fit their positions

C

92. Producing the iPhone involves designing and engineering the phone in the United States, supplying parts from Korea, assembling the parts in China, and advertising and marketing in the United States. Production of the iPhone is an example of ____________________. A. absolute advantage B. negative externalities C. splitting up the value chain D. subjective value

C

95. One benefit of international free trade comes from __________________. A. a reduction in product variety for consumers B. higher average production costs through diseconomies of scale with business that produce for a larger, global market C. lower average production costs through economies of scale with business that produce for a larger, global market D. there are no benefits to international free trade

C

15. When the quantity of environmental protection is low so that pollution is extensive, then there are usually _______________ to reduce pollution and the ___________________. A. a few inexpensive and easy ways; average benefit are slightly higher B. a lot of expensive and innovative methods; marginal benefits are quite high C. only a few expensive and innovative methods; average benefits are higher D. a lot of cheap and easy ways; marginal benefits of doing so are quite high

D

17. Which of the following illustrates the concept of an external cost? A. Margaret purchases all of her food and clothing from a big city in the next county. B. Nicholas frequently buys raw materials for his small business by using his bank's line of credit. C. Aisha leaves a balance on her credit card, causing her to accrue interest charges. D. Raymond cannot open his windows because he lives downwind from a chemical factory.

D

21. According to the Coase theorem, private parties can solve an externality problem if ______________. A. each affected party has equal power in the negotiations B. the property right to the disputed resource is assigned to the party affected by the externality C. there are large numbers of people affected D. there are clear property rights and no transaction costs

D

22. With common ownership ______________. A. all owners have the right to use the resource and cannot exclude others B. the only way to benefit is to consume the resource before someone else does C. owners have an incentive to overuse the resource D. all of the above

D

26. When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being _____________. A. unexcludable B. free rider C. public good D. nonexcludable

D

63. The capture theory of regulation states that _____. A. regulators act in the best interests of regulators B. regulators act in the best interests of politicians C. regulators act in the best interests of the general public D. regulators act in the best interests of the regulated

D

68. A _____ of representative democracy is it _____. A. downside; increases decision-making costs B. benefit; increases decision-making costs C. downside; reduces decision-making costs D. benefit; reduces decision-making costs

D

72. Using potentially productive resources to try and obtain transfers from the government is called _____. A. vote trading B. logrolling C. agenda control D. rent seeking

D

5. A pollution charge is a form of tax imposed on _________________. A. the quantity of pollution that a firm emits B. pollution control technologies C. every economy in the world D. low-income market-orientated industries

A

1. ______________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A. Negative externality B. Positive externality C. A spillover benefit D. A market success

A

100. Even though high-income countries may have an ____________ in everything, gains from trade still come from specializing in one's ______________. A. absolute advantage; comparative advantage B. comparative advantage; absolute advantage C. environmental advantage; environmental disadvantage D. environmental disadvantage; environmental advantage

A

13. If a glass manufacturer has only a few _____________ of reducing pollutants, it will ________________. A. costly ways; end up paying the pollution tax B. inexpensive ways; incur the pollution tax instead C. costly ways; do so to minimize its pollution taxes D. inexpensive ways; buy the most expensive technology

A

14. If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will ___________________. A. take place in the firms where it is least expensive to do so B. take place in every firm within the time set by the permit C. be initiated at the household level D. be rewarded with refundable charges

A

2. ______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A. Social costs B. Private costs C. Market costs D. External costs

A

23. Economic reasoning suggests that ______________ can protect valuable animal populations better than _____________. A. clearly defined private property rights; a ban on hunting B. a ban on hunting; clearly defined private property rights C. pollution permits; corrective taxes D. corrective taxes; pollution permits

A

24. _________________ are externalities that cross national borders and that a single nation acting alone cannot resolve. A. International externalities B. External benefits C. Cost externalities D. Local externalities

A

28. In order for a good to be classified as ____________, when one person uses the good, others are also able to use it. A. nonrivalrous B. unrivalrous C. unexcludable D. nonexcludable

A

32. When a firm invests in new technology, the __________ that the firm receives are ________________. A. private benefits; only a portion of the overall social benefits B. social benefits; only a portion of the overall private benefits C. private benefits; about three-quarters of the economic benefits D. social benefits; about one-third of the overall private benefits

A

38. It may be efficient for the government to provide public goods because ______________. A. free-riders make it difficult for private sellers to be compensated for producing the goods B. public goods are too complicated to be produced by private sellers C. production is more efficient when guided by politicians D. anything produced by the government, by definition, becomes a public good

A

42. Positive externalities can be dealt with by ___________ them. A. subsidizing B. taxing C. regulating D. discouraging

A

69. The median voter model predicts that in a representative democracy _____. A. party platforms will converge to one preferred by the median voter B. successful politicians will emulate the median voter C. third parties will not exist D. successful politicians come from the median political party

A

71. Consider a policy proposal that aims to save small dairy farms by providing an annual lump sum subsidy to dairy farms with fewer than two hundred dairy cows. Why might this proposal pass, even if it benefits a few dairy farmers at the expense of the majority of voters? A. The program might only cost each voter a few pennies and yet benefit small dairy farmers immensely. B. The American people value the small dairy farm highly and want to see it preserved. C. A cyclical majority makes it possible for the proposal to pass although it is not generally preferred. D. Voters think it will result in cheap milk.

A

75. Entrepreneurial talent leaving the productive sector and entering the unproductive sector is one of the costs associated with _____. A. rent seeking B. bureaucratic inefficiency C. cyclical voting D. fiscal federalism

A

82. If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if ___________________________. A. The USA specializes in potatoes because of its comparative advantage in producing potatoes B. The USA specializes in wheat because of its absolute advantage in producing wheat C. The USA specializes in wheat because of its comparative advantage in producing wheat D. There can be no mutual gains from trade

A

91. _________________ is international trade of goods within the same industry. A. Intra-industry trade B. Interstellar trade C. Autarky D. Interstate trade

A

94. ________ economists are in favor of international free trade because _________________. A. Most; the benefits outweigh the costs B. Few; the costs outweigh the benefits C. Most; nobody is harmed by international free trade D. Few; everyone is harmed by international free trade

A

96. A __________ is a _________ on imported goods. A. tariff; tax B. tariff; subsidy C. monopoly; tax D. monopoly; subsidy

A

98. The world's nations meet through the ____________ to negotiate how they can reduce barriers to trade, such as tariffs. A. World Trade Organization (WTO) B. World Health Organization (WHO) C. Global Trade Alliance (GTA) D. Global Health Alliance (GHA)

A

16. Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the ____________ and the ______________. A. marginal benefits are least; marginal costs are greatest B. marginal benefits are greatest; marginal costs are least C. environmental benefits are greatest; social costs are least D. social costs are greatest; environmental benefits are least

B

25. According to the Environmental Kuznets Curve, there is not necessarily a trade-off between _____________ and _____________. A. supply; demand B. economic output; environmental protection C. beer; wine D. education; health

B

79. Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA __________________. A. has an absolute advantage over India in the production of textiles B. has an absolute advantage over India in the production of wheat C. has a comparative advantage in the production of textiles D. should export textiles to India

B

85. Intra-industry trade between similar trading partners allows the gains from _____________ that arise when firms and workers specialize in the production of a certain product. A. comparative advantage B. learning and innovation C. creating the value chain D. relative advantage

B

86. Trade allows each country to take advantage of _____________ in the other country. A. economies of scale B. lower opportunity costs C. specialization D. worker productivity

B

97. Assume that there is currently a 10% tariff on sugar. The tariff is likely to remain in place because of __________________. A. market competition B. concentrated benefits and dispersed costs C. price discrimination D. the domino effect

B

99. Most economists think that ____________ would lead to _______________. A. opening borders; a reduction in life expectancies B. opening borders; an increase in living standards C. closing borders; an increase in living standards D. closing borders; a reduction in gun violence

B

12. Market-oriented environmental tools _________________ for firms to take the social costs of pollution into account and _______________ in reacting to these incentives. A. draw distinctions; lower the social costs incurred B. lack incentives; prohibit firms from having flexibility C. create incentives; allow firms some flexibility D. specify particular technology; lower the social costs incurred

C

36. A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms ___________________. A. a permanent monopoly over all their inventions that never expires B. the option to fund all R&D projects through colleges or universities C. a reduction in corporate taxes based on amount of R&D performed D. assurance that antitrust authorities challenge cooperative R&D efforts

C

37. Suppose there are 100 homeowners in a neighborhood that needs street repairs. Each homeowner values street repairs at $3,000. The total cost of street repairs is $200,000. Which of the following is true? A. It is inefficient to repair the street. B. Voluntary contributions will raise enough funds to repair the street. C. It is efficient for the government to repair the street and tax each homeowner $2,000. D. It is efficient for the government to repair the street and subsidize each homeowner $2,000.

C

40. If all my neighbors have well-manicured lawns and well-maintained houses, their actions not only benefit themselves, but they generate a _____ externality because their actions _____the value of my home. A. negative; increase B. negative; decrease C. positive; increase D. positive; decrease

C

49. Which of the following is not an argument in favor of the market provision of public goods? A. Price signals encourage efficient resource allocation. B. Companies such as YouTube and Google offer a $0 fee but earn revenue through advertisements C. The private sector output for a public good will be lower than the public sector output. D. Public production requires taxes that come with a deadweight loss.

C

52. ______________ is a particular type of spending that mainly benefits a single political district. A. Logrolling B. Special interest spending C. Pork-barrel spending D. An appropriate spending program

C

60. Australian law may require people to vote, but mandatory voting laws are unlikely to mean that each vote cast in an election ____________________. A. will matter less than it does in a free society B. is worth the loss of freedom not to vote C. will be an informed or a thoughtful vote D. was cast by voters who don't care who wins

C

64. Which of the following statements provides the best description of one reason why regulation of an industry might not increase economic efficiency? A. There are more employees of regulated industries than affected customers. B. Insufficient regulator pay makes it difficult to hire effective regulators. C. The regulated industry has stronger incentives to be involved in the regulation process than the general public. D. Regulated industries have too much economic power and can litigate away most regulation.

C

7. Around the world, the cities with the dirtiest air and water are typically found in ____________. A. high-income countries like France and the US B. Australia C. low-income countries in Africa and Asia D. desert areas

C

74. According to the "Bootleggers and Baptists" theory, politicians exploit rational ignorance by_____. A. giving away free alcohol to religious people B. giving away free religious texts to alcoholics C. using virtuous groups as the public face of policies that secretly help interest groups D. using interest groups as the public face of policies that secretly help virtuous groups

C

8. If no externalities of pollution exist in a particular industry, the interaction of demand and supply _______________. A. is based on benefits individuals perceive while maximizing utility B. is based on choices about production relative to total average costs C. will coordinate social costs and benefits D. shifts so supply has no relation to social costs

C

80. Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are __________________. A. 0.25 apples; 0.5 apples B. 9 apples; 4 apples C. 0.5 apples; 0.25 apples D. 2 apples; 4 apples

C

83. When nations increase production in their area of _____________ and trade with each other, both sides can benefit. A. relative advantage B. absolute advantage C. comparative advantage D. opportunity cost

C

9. Why do U.S. economists commonly refer to externalities as an example of market failure? A. firms that are required to pay social costs of externalities produce more B. externalities present a case where markets consider all social costs C. externalities present a case where markets only consider some social costs D. firms avoid having to pay social costs of externalities by lowering prices

C