Econ Exam 2 Prep. | Quiz (7-10) Questions

If a price ceiling is set at $400, the consumer surplus is equal to

400(400) + 400(400)/2

If Congress voted every few years to redefine the meaning of poverty, A it would be difficult to compare poverty rates over time. B then multiple poverty lines would exist that would more accurately measure poverty. C more people would be considered to be living in poverty. D poverty would be more current and better able to be tracked over time.

A

Imposing a corrective tax in a market, A would result in no dead weight efficiency loss. B does not create revenue for the government. C would increase the quantity of the good provided in the market. D would shift the demand curve to the right.

A

The extra benefit a producer gets from selling a good, beyond the price they would be willing to accept, is known as: A producer surplus. B social surplus. C producer benefit. D consumer benefit.

A

The notion of consumer's surplus suggests that: A the willingness to pay of the buyer can differ from the price the buyer actually pays. B the buyer will always pay the most they are willing to pay for any good or service. C consumers will buy different amounts of goods and services at alternative income levels. D consumers would like to have any good if it were available through a surplus and was therefore free.

A

If the market price is P1, consumer surplus is equal to

A+B+E

How does a marketable permit program encourage innovation? A By providing a market for companies that provide pollution testing. B By providing a market for companies who can pollute less to sell permits to those who pollute more. C By lowering the total allowable pollution each year. D By rewarding companies that reduce pollution.

B

If a steel manufacturer considers the costs of labor and materials, as well as the broader costs to others resulting from its manufacturing processes,: A too much of the product will be produced in the market. B its costs will be the same as society's costs. C the market outcome is less than the socially optimal outcome. D its supply curve will be based on the perceived benefits of maximizing utility.

B

Typically, command-and-control regulation A assigns a fee for each unit of pollution emitted. B details which pollution-control technologies must be used. C considers private costs of firms in its specifications. D sets a cap on pollution in a region.

B

When considering the tradeoff between economic output or growth and environmental protection: A one country effectively makes the decision for all economies with respect to environmental protection. B higher-income countries, where basic needs are already met, may be willing to place greater emphasis on environmental protection. C lower-income countries, where basic needs have yet to be met, may be willing to place greater emphasis on environmental protection. D higher-income countries, where basic needs are already met, may be less willing to place emphasis on environmental protection.

B

Which type of country would be most likely to invest heavily in environmental protection? A A country with high levels of natural resources B A country that has long-sustained high GDP per capita C A country with low GDP per capita D A country that has newly achieved high GDP per capita

B

A market is most efficient when: A consumer surplus is equal to producer surplus. B consumer surplus is greater than producer surplus. C social (or economic) surplus is maximized. D producer surplus is greater than social surplus.

C

As the size of a tax on a good increases, the size of the deadweight loss typically: A increases and then decreases. B increases at a constant rate. C increases at an increasing rate. D decreases steadily.

C

Command-and-control regulation refers to laws that A Establish a government control center that watches the pollution behavior of firms. B Establishes a citizen committee to oversee the pollution behavior of firms. C Specify allowable quantities of pollution. D Allow firms to control themselves without government involvement.

C

The social benefits of an innovation: A are very easy to measure. B are impossible to quantify and are therefore of no value. C account for the value of all the positive externalities of the new idea or product D are based on the social media attention generated by the innovation.

C

The supplemental poverty measure A only includes expenses in its calculations B was developed by an economist in the early 1960s. C includes in-kind income as well as some expenses, D includes cash assistance as income but not in-kind income.

C

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as: A Income elasticity B Unitary elasticity C Inelastic D Elastic

C

With some insurance policies, the policyholder must pay a _______________ for each ______________ service, before insurance covers the rest. A deductible premium; insured B deductible; uninsured C copayment; insured D copayment; uninsured

C

What factors account for the rise in income inequality across significant percentages of households? Changes in family structure Improvements in the gender pay gap Stagnant wage rates Increases in the population of America

Changes in family structure

Suppose a government program guarantees $ 2,000 a month in income, even for those who do not work at all. However, if the recipient earns income by working, the benefit is reduced by 50 cents for each $1 earned. Which of the following statements is true? A This program will reduce the incentive to work significantly. B While the goal may be to reduce poverty, people rarely respond to incentives. C This program will redefine the proverty line. D The goal of this program is to increase the incentive to work, reducing the poverty trap.

D

The price elasticity of demand measures the: A Responsiveness of quantity demanded to a change in income. B Responsiveness of quantity demanded to a change in quantity supplied. C Responsiveness of price to a change in quantity demanded. D Responsiveness of quantity demanded to a change in price.

D

Which of the following examples illustrates the tragedy of the commons? A Fruit and vegetables in a public garden go rotten because no one uses them. B Someone takes a public good to resell it. C Someone rides the bus without paying. D Someone takes all the books from a "take a book, leave a book" shelf at a town hall.

D

If incomes rise for high-income workers and rise for low-income workers as well, this would suggest that A income inequality will decrease while the poverty rate will increase. B the overall effect on the poverty rate and income inequality could either increase or decrease. C both the poverty rate and income inequality will fall. D the poverty rate and income inequality will increase. E the poverty rate will fall, but income inequality may increase or decrease.

E

In the United States, the official definition of the poverty line traces back to _________________________, whose idea was to _________________________. Max Lorenz; define the Lorenz curve to illustrate the poverty line Lawrence Ellison; develop a budgetary approach to defining the poverty line Mollie Orshansky; define a poverty line based on the cost of a healthy diet Mollie Orshansky; develop a budget approach to determining the poverty line

Mollie Orshansky; define a poverty line based on the cost of a healthy diet

___________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. Negative externality Positive externality A market failure An equilibrium outcome

Negative externality

Laws that the government enacts to regulate prices

Price Controls

____________________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. Private costs Market costs Social costs External costs

Social Costs

What do service contracts, occupational licenses and cosigners all share in common? They reduce risk of adverse selection. They reduce risk of moral hazard. They eliminate the risk of imperfect information. They reduce the risk associated with imperfect information.

They reduce the risk associated with imperfect information.

Programs to fight poverty that are set up so that the amount of government benefits will decline substantially as poor people earn income may create _________________________. income inequality a poverty line a poverty trap a safety net

a poverty trap

Using the term "spillover" is a less formal means of describing social costs. market failure. private costs. an externality.

an externality

Which of the following could be classified as a common resource? a large fireworks display in a city an open community-owned pasture used by villagers cable television available from the local utility company a pizza

an open community-owned pasture used by villagers

An binding price ceiling will

be imposed at a price below the equilibrium price.

The situation where an insurance policyholder is required to pay a percentage of a loss, and the insurance company pays the remaining cost is known as government regulation collateral an insurance policy coinsurance

coinsurance

Common resources differ from public goods in that

common resources are rival in consumption while public goods are not.

Another person or firm who legally pledges to repay some or all of the money loaned if the original borrower fails to do so is called a __________________________ . warrantor cosigner codebtor guarantee

cosigner

The loss in total surplus that occurs when a market produces an inefficient quantity is called

deadweight loss

When economists talk about _________________________, they are referring to a measure of responsiveness of one variable to changes in another.

elasticity

For economists, market failure describes a situation in which a market ______________________ in a way that balances social costs and benefits.

fails to allocate resources efficiently

A Lorenz curve refers to a graphic illustration of the share of population on the _________________________ and the cumulative percentage of total income received on the _________________________. vertical axis; horizontal axis left quintile; right quintile right quintile; left quintile horizontal axis; vertical axis

horizontal axis; vertical axis

Property rights are the legal rights of ownership. prohibited in market exchanges. used only in the cases of endangered species. able to specify allowable quantities of pollution.

legal rights of ownership

A ________________________ is a form of incentive to purchase a product on a 30 day trial basis. replacement guarantee warranty service contract money-back guarantee

money-back guarantee

Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is nonrivalrous and nonexcludable nonrivalrous and excludable rivalrous and excludable rivalrous and nonexcludable

non rivalrous and excludable

When one person uses a good while others are also able to use that good, we say that the good is unexcludable nonrival nonexcludable unrival

nonrival

If the maintenance fees for a lighthouse are paid in full each year by charging port fees, then the lighthouse is nonrivalrous and nonexcludable rivalrous and nonexcludable nonrivalrous and excludable rivalrous and excludable

nonrivalrous and nonexcludable

When it comes to public goods, the primary role of the government is typically to

provide the public goods

A method often used by economists to look at the distribution of income in a society's economy involves dividing the population evaluated into thirds. imposing taxes to redistribute wealth. quintiles, or dividing a whole group into fifths. quads, or dividing a whole group into fourths.

quintiles, or dividing a whole group into fifths.

Private goods can be considered: nonrival in consumption and excludable. nonrival in consumption and nonexcludable. rival in consumption and nonexcludable. rival in consumption and excludable.

rival in consumption and excludable.

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is

rivalrous and nonexcludable

A ________________ exists when the buyer pays an extra amount and the seller agrees to fix anything that goes wrong for a set time period. money-back warranty money-backed guarantee warranty service contract

service contract

Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has remained a non-issue. steadily declined. steadily improved. remained unchanged.

steadily improved

How a tax burden is divided between consumers and producers is called society's tax burden. tax incidence. tax experience. comparative advantage. tax relevence.

tax incidence

Typically, a pollution charge is a form of tax imposed on

the quantity of pollution that a firm emits.

If incomes rise by 10% for both low-income and high-income workers: poverty will rise and income inequality will also rise. income equality will fall and poverty will remain unchanged. poverty and income equality will both remain unchanged. poverty will fall and income inequality will also fall. then poverty will fall and income inequality will be unchanged.

then poverty will fall and income inequality will be unchanged.

If a demand curve is perfectly inelastic, the curve

vertical

Looking at the welfare implications of a price floor in a market for a specific good or service, a price floor will cause A the price to change, but no change in the consumer or producer surplus. B a decrease in both producer and consumer surplus. C consumer surplus to be transferred to producers. D producer surplus to be transferred to consumers.

Not A, Not D

When an antique dealer knows more about the quality of an item than the potential buyer, this is known as adverse selection imperfect selection adverse information asymmetric information

asymmetric info

A positive externality arises in a situation where a third party, outside the transaction,

benefits from a market transaction by others.

When buyers invest in the stock market, most face a situation of _____________________ . adverse selection adverse information imperfect information imperfect selection

imperfect info

When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called _____________________ . moral hazard moral risk hazard risk risk

moral hazard

An individual whose income level is just above the poverty line would most likely be classified as being a member of the _________________________. illiterate poor working poor near-poor poverty trapped

near-poor

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

nonexcludable and nonrivalrous

Payments made to an insurance company in return for a policy of insurance are called _________________ . premiums deductibles risk expenses risk expenditures

premiums

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

the public good may never be provided.

When considering most goods in most markets we would likely observe that they are public goods. they are quasi-public goods. they are common resources. they are private goods.

they are private goods.

Which of the following would most likely be the role of the government with respect to a common resource? to help inventors finance the resource. to prevent the overuse of the resource. to encourage consumers to use the resource. to provide the resource directly.

to prevent the overuse of the resource.