Econ Chapters 11 & 13

The essential reason some species of whales have nearly been driven to extinction is that:

it is difficult to define and enforce property rights to whales.

In terms of improving the standard of living of the poor, one drawback on the earned income tax credit (EITC) is that:

it provides no benefits to people who are unemployed

A minimum wage law prohibits employers from paying workers less than a specified hourly wage. If the minimum wage is above the equilibrium wage:

there will be an excess supply of labor.

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. As a result of the imposition of the minimum wage, total economic surplus falls by ________ per day

$12,000

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. The cost (in thousands of dollars) of the filter to Erie Textiles is ________, and the net benefit (in thousands of dollars) of the filter to the fishermen and bird watchers is ________

$200; $235

Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the accompanying table. Suppose the government imposes a tax of $56 per day on each ton of smoke emitted. Assuming the revenue the government collects from the tax is used to offset other taxes, what's the total cost to society of this policy?

$205 per day

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The most the coffee shop would be willing pay the third worker is ________ per hour

$22.50

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

$32.

Which of the following is NOT an example of an activity with external benefits?

Eating a sandwich in the dining hall

Suppose that a vaccine is developed for a highly contagious strain of flu. . At the private market equilibrium, the price of each dose is:

$50

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The marginal product of the fourthworker is ________ cups of coffee per hour.

10

Suppose that a vaccine is developed for a highly contagious strain of flu. . The socially optimal quantity of the vaccine is ________ doses per day

100

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. After the imposition of the minimum wage, employment will equal ________ person-hours per day.

2,000

Assume that this graph illustrates a perfectly competitive labor market. Equilibrium in this labor market is at a wage of ________ per hour and an employment level of ________ person- hours per day.

B) $30; 150

Which of the following is an example of a positional arms control agreement?

Campaign spending limits

The use of pollution permits by the government to reduce pollution is:

Common in several parts of the United States

Refer to the figure below. Private markets will provide ________ units of this good per day, and the socially optimal number of units per day is ________.

G;F

Which of the following is an example of an activity with an external cost?

Speeding on the interstate.

Which of the following investments is part of a positional arms race?

Studying hard for your economics exam because your professor grades on a curve

Which one of the following government actions is intended to generate positive externalities?

Subsidies for planting trees on hillsides

In order to achieve the socially optimal level of output, goods that entail positive externalities should be:

Subsidized

Suppose there are ten people playing cards in a room. If all ten people can negotiate with each other at no cost, then which of the following outcomes is consistent with the Coase theorem?

The cigar smoker will pay each of the other nine people fifty-five cents, and they will agree to allow smoking.

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

a combination of a negative income tax and public employment

A labor union in a labor market is analogous to a(n) ________ in an output market.

cartel

If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:

doctors' wages to increase.

If the production of a good generates a negative externality, then at the market equilibrium quantity, the marginal cost to society of another unit of the good will be:

greater than the marginal benefit of another unit.

Suppose that this graph describes the current labor market for high school teachers Suppose supply of labor decreases. At the new equilibrium, wages would be ________ and ________ teachers would be hired.

higher; fewer

In a perfectly competitive labor market, if the value of marginal product of the last worker hired is $20 and the wage rate is $25, then the firm should:

hire fewer workers.

To derive the labor demand curve for a particular market, one should ________ for all the firms in the market

horizontally sum the value of the marginal product of labor curves

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S0 to S1 and demand shifts from D0 to D1, then the equilibrium wage will ________, and the equilibrium number of nurses will _______

increase; stay the same

Refer to the figure below. At the private market equilibrium quantity, the marginal cost of the last unit produced is ________ the social marginal benefit of the last unit produced.

less than

An external benefit implies that private markets will provide ________ than the socially optimal quantity, and an external cost implies that private markets will provide ________ than the socially optimal quantity

less; more

Suppose Frank likes to snack on sugary candy. Frank knows that it's bad for his teeth to eat sugary candy, but he doesn't care. Frank's snacking habits have no impact on anyone other than Frank. In this case, Frank's consumption of sugary candy generates

neither a positive nor a negative externality.

A firm is unlikely to hire a worker if:

the additional revenue generated by hiring the worker is less than his or her wage.

Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. The actual monthly gain in surplus to Curly and Moe from living together after addressing the snoring problems in the least costly way is:

$150.

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. Prior to the imposition of the minimum wage, worker surplus is ________ per day, and after the imposition of the minimum wage, worker surplus is ________ per day.

$18,000; $14,000

Suppose that a vaccine is developed for a highly contagious strain of flu. The external benefit of each dose is

$20

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. If Leo earns $150, then he will receive ________ in total benefits from the two programs.

$225

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. In the absence of any earnings, Leo will receive ________ in cash from each program, for a total of ________ in benefits.

$225; $450

A village has five residents, each of whom has an accumulated savings of $50 What will be the total village income if each villager decides how to invest based on his or her individual self-interest?

$25

Matt is offered a job driving the campus shuttle bus from 4 p.m. to 6 p.m. each Monday. His reservation wage for this job is $7 per hour. If the campus transportation director offers Matt $50 per hour, how much economic surplus will Matt enjoy as a result of accepting the job?

$43 per hour

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. When Erie Textiles operates without a filter, the total gain (in thousands of dollars) to all three parties is ________.

$475

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The dollar value to the coffee shop of hiring the fifth worker is ________ per hour.

$7.50

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. Prior to the imposition of the minimum wage, employer surplus is ________ per day, and after the imposition of the minimum wage, employer surplus is ________ per day.

$9,000; $1,000

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. Employment will fall by ________ person-hours per day as a result of the minimum wage.

4,000

According to the textbook, the real mean income of the top 5 percent of families increased by ________ percent from 1980 to 2016.

75

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:

Human Capital

A village has five residents, each of whom has an accumulated savings of $50 If each villager is purely self-interested, how many goats will be sent onto the commons?

D) 5

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

Labor Union

Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. The least costly solution to the externality present in this situation is for:

Moe to eliminate his snoring

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a(n):

Negative income tax

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Is it socially optimal for Quick Burger to operate a drive-through window?

No, because total payoffs are higher when Quick Burger does not operate a drive- through window.

The level of income below which the federal government classifies a family as poor is called the:

Poverty threshold

Which of the following would be most vulnerable to the tragedy of the commons?

Timber on public land

The following payoff matrix shows the outcomes for the United States and Russia from relying on conventional weapons versus atomic weapons in a military conflict. The percentages refer to the fraction of the population that would die. This situation above illustrates a positional externality because:

Using atomic weapons improves each country's outcome but hurts the other country.

Matt is offered a job driving the campus shuttle bus from 4 p.m. to 6 p.m. each Monday. His reservation wage for this job is $7 per hour. Now suppose the director offers Matt $50 per hour, but also announces that the earnings from the job will be divided equally among Matt and four other students. Will Matt accept this job?

Yes, because $50 divided by five is greater than Matt's reservation wage

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates:

a negative externality.

Given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates ________ externality, and burning tires generates ________ externality

a positive; a negative

Technological advances that increase the marginal product of labor will lead to:

an increase in the demand for labor because workers will be more productive.

The following payoff matrix shows the outcomes for the United States and Russia from relying on conventional weapons versus atomic weapons in a military conflict. The percentages refer to the fraction of the population that would die. For the US, the dominant strategy is to have ________, and for Russia, the dominant strategy is to have ________.

atomic weapons; atomic weapons

On Saturdays, Stan goes to the park to play his saxophone. Some of the people in the park love listening to Stan play, while others find his music really annoying. In this case, Stan's saxophone playing generates:

both positive and negative externalities.

The following data show the relationship between the number of drivers who leave for work at 8 a.m., their average commute time, and their marginal benefit of commuting. One way for the government to increase economic efficiency would be for it to:

charge a toll to use the highway during rush hour.

Differences in wage rates associated with differences in working conditions are called:

compensating wage differentials.

In the absence of environmental protection laws, firms pollute because:

controlling emissions costs money, thereby reducing profits.

This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope. Picking up the 20th bag of litter would:

create deadweight loss.

Suppose there are ten people playing cards in a room.Declaring the card room a non-smoking area with no opportunity to negotiate would:

decrease total economic surplus.

Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains. Assuming that the supply of diesel fuel has a positive slope and demand has a negative slope, the quantity of diesel fuel sold after imposition of the regulation will:

decrease.

Your economics professor has announced that he or she will assign final grades as follows: the top 20 percent of students will get an A, the bottom 20 percent of students will get an F, and everyone else will get a C. You would expect that, as the semester progresses, students who really care about getting an A will

engage in a positional arms race, studying more and more.

In competitive labor markets, ________ demand labor and ________ supply labor.

firms; workers

According to John Rawls, if people had to choose an income distribution without any knowledge of their own talents and abilities, they would likely prefer an income distribution that:

gives everyone an equal share.

Refer to the figure below. If negotiation is impractical, the socially optimal level of production can be achieved by:

imposing a tax on paper equal to the external cost.

Food stamps and Medicaid are examples of:

in-kind transfer programs.

The growth in income inequality in the United States since the early 1980s has been driven primarily by the dramatic:

increase in real incomes for the top 1 percent of earners

Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel finds that when Fran's consumption rises, Shel feels worse off. Fran feels the same way about Shel's consumption. Fran has bought a new Jaguar (a luxury car), and shortly thereafter, Shel bought a new Mercedes (also a luxury car). Shel and Fran seem to be:

involved in a positional arms race

The value of marginal product of labor equals the

marginal product of labor times the net price for which each unit of output sells.

The additional output a firm gets from hiring an additional unit of labor is the

marginal product of labor.

Refer to the figure below. This graph suggests that the private market provides incentives to:

over-produce paper relative to the social optimum

The tragedy of the commons refers to the:

overuse of resources that have no price.

Jobs in which there is a higher risk of injury or death will:

pay more than otherwise similar jobs

In 1996, the Personal Responsibility Act:

placed a five-year lifetime limit on welfare payments to any given recipient.

A firm's demand for labor will increase if the:

price of the firm's output increases.

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ________, and the wages of nonunionized workers to ________

rise; fall

A winner-take-all labor market is one in which:

small differences in human capital translate into large differences in wages.

A policy maker has argued for higher taxes on gasoline to reduce the negative externalities associated with driving. This policy will lead to a relatively ________ reduction in driving if demand is ________.

small; relatively inelastic

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine.

subsidizing production of the vaccine.

For a fixed percent reduction in pollution emissions to be economically efficient, it would have to be the case that

the marginal cost of pollution control is the same across all firms

In professional baseball, some players earn over $20 million per year, while the average salary is about $4 million per year. The most likely explanation for this is that:

the market for baseball players is a winner-take-all market.

In the market for labor, the demand function describes

the number of workers a firm is willing to hire at each wage.

The optimal number of workers for a perfectly competitive firm to hire occurs when

the wage rate equals the value of marginal product of the last worker.

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. If pollution is unregulated, then a total of ________ tons of smoke will be emitted each day

• D) 8