Econ Final Exam Willbanks

Corrective Tax

=Total Revenue/Total Units

_____ allows the government to collect wealth for redistribution based on the amount of stored wealth that is being passed on in the form of an inheritance

An estate tax

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate

excludable and not rival in consumption

Club Good; cable TV; uncongested toll road

nonexcludable and rival in consumption

Common resources; fish in ocean; no toll road

All but one of the following is a mechanism intended to provide reassurance against imperfect information. Which is it?

Financial capital markets

_____ often have deductibles, which is an amount that the insurance policyholders must pay out of their own pocket _________

Insurance companies; before the insurer pays its portion of the claim

Marginal Revenue Product=

Marginal Product x Marginal Revenue

Value of Marginal Product=

Marginal Product x Price

_____ is a particular type of spending that mainly benefits a single political district.

Pork-barrel spending

Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create____?

Poverty Trap

excludable and rival in consumption

Private goods; most goods; congested toll road

nonexcludable and not rival in consumption

Public goods; national defense, uncongested non toll road

Negative Externality Graphed

Shifts supply above the supply curve and the socially optimal quantity is less than equilibrium quantity

_____ are numerically small, but well-organized groups that are able to exert a disproportionate effect on political outcomes

Special interest groups

Tax vs Subsidy

Tax drives a wedge that increases prices consumers have to pay and decreases the price producers receive. Subsidy is a benefit given by the government to groups or individuals

Profit=

Value of Marginal Product - market wage rate

Positive Externality

a benefit received by someone who had nothing to do with the activity that generated the benefit

Imperfect information

a situation where either the buyer or the seller, or both, are uncertain about the qualities of what they are buying and selling

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 voting cycle; majority rule

What happens to the equilibrium wage and quantity of labor of output price rises?

The equilibrium wage and the equilibrium quantity of labor rise

Suppose the government enacts legislation which reduces the amount of legal immigration into the country. What is likely to happen to the equilibrium wage and quantity of labor?

The equilibrium wage rises and the equilibrium quantity of labor falls

All of the following will shift the labor supply curve EXCEPT

an increase in the wage rate

Which of the following will NOT result in a leftward shift of the market demand curve for labor

an increase in the wage rate

Poverty trap

antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain

Marginal Product=

change in quantity

The labor ______ curve(s) will shift _____ if there is an increase in productivity or an increase in the demand for a final product

demand; right

The problem of _____ arises when an antique dealer knows more about the quality of an item than a potential buyer, and as a result the buyer with less knowledge must worry about ending up at a _________

imperfect information; disadvantage

In the market for high-skill labor, improvements in technology will tend to:

increase wages

In the U.S., comparisons of high and low incomes raise issues of economic ______

inequality and poverty

A ____ is an organization of workers that negotiates with employers as a group over wages and working conditions.

labor union

Other things being equal, a ______ supply of workers tends to ______ real wages

larger; decrease

_____ occurs when a group of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor

logrolling

When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called a ______

moral hazard

The theory of _____________________ holds that people won't bother incurring the costs of becoming informed and voting, because they know that their vote _____

rational ignorance; won't be decisive in the election

Redistribution

taking income from those with higher incomes and providing income to those with lower incomes

If buyers become reluctant to purchase high-quality goods because they can't be confident of purchasing a high-quality product, then

the equilibrium price and quantity will be adversely affected by a thin market

Negative Externality

the harm, cost, or inconvenience suffered by a third party because of actions by others

Voting cycle

the situation in which a majority prefers A over B, B over C, and C over A

Logrolling

the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor

Poverty

the situation of being below a certain level of income one needs for a basic standard of living

Rational ignorance

the theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election

An externality is best defined as

the uncompensated impact of one person's actions on the well-being of a bystander

Median voter theory

theory that politicians will try to match policies to what pleases the median voter preference

An insurance company is likely to believe that having a major accident is a signal of being a ______ and thus try to _____

High-risk driver; raise this driver's insurance premiums

Adverse selection

when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system

Moral hazard

when people have insurance against a certain event, they are less likely to guard against that event occurring