Econ Final

20. When an infinite value is placed on human life, policymakers who rely on cost-benefit analysis a. are forced to pursue any project in which a single human life is saved. b. are likely to make decisions that optimally allocate society's scarce resources. c. would not pursue any public project that would not save human life. d. would be forced to rely on private markets to provide public goods.

a. are forced to pursue any project in which a single human life is saved.

9. Bob owns 5 acres of land. Bob sells the land to a real estate developer who builds a subdivision with 10 houses. The land is an example of a good that is a. both rival in consumption and excludable. b. neither rival in consumption nor excludable. c. excludable, but not rival in consumption. d. rival in consumption, but not excludable.

a. both rival in consumption and excludable.

7. All remedies for externalities share the goal of a. moving the allocation of resources toward the market equilibrium. b. moving the allocation of resources toward the socially optimal equilibrium. c. increasing the allocation of resources. d. decreasing the allocation of resources.

a. moving the allocation of resources toward the market equilibrium.

4. the national defense of the United States is not rival because a. my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States. b. my enjoyment of the national defense does diminish your enjoyment of the national defense of the United States. c. once the nation is defended, it is impossible to prevent any single person from enjoying the benefit of this defense. d. once the nation is defended, it is possible to prevent any single person from enjoying the benefit of this defense.

a. my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States.

7. Diminishing marginal product occurs when a. the increases to total output are declining. b. marginal product is negative. c. total output is decreasing. d. All of the above are correct.

a. the increases to total output are declining.

7. Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so? a. to prevent overuse b. to decrease taxes c. to fight poverty d. to increase consumption

a. to prevent overuse

13. The labor supply curve reflects how a. workers' decisions about the labor-leisure tradeoff respond to a change in the wage. b. workers' decisions about the opportunity cost of labor respond to a change in the quantity of labor supplied. c. firms' decisions about the labor-leisure tradeoff respond to the quantity of labor demanded. d. firms' decisions about how the quantity of labor they hire respond to changes in their opportunities to earn profits.

a. workers' decisions about the labor-leisure tradeoff respond to a change in the wage.

10. Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage and that labor is the only input that varies for the firm. If the firm pays a wage of $700 per week and the marginal product of labor equals 10 units per week, then the marginal cost of producing an additional unit of output is a. $7. b. $70. c. $700. d. We do not have enough information to answer this question.

b. $70

12. The tax on cigarettes is an example of a. a consumption taxes. b. a corrective tax. c. an income taxes. d. a command-and-control policy.

b. a corrective tax.

what is not a public good? a. a mathematical theorem b. an uncongested toll road c. national defense d. fighting poverty

b. an uncongested toll road

4. The difference between social cost and private cost is a measure of the a. loss in profit to the seller as the result of a negative externality. b. cost of an externality. c. cost reduction when the negative externality is eliminated. d. cost incurred by the government when it intervenes in the market.

b. cost of an externality.

16. Firms that are involved in more than one type of business could be evidence of an attempt to a. increase private profit at the expense of consumers. b. internalize some forms of positive externalities. c. reduce the impact of government regulations on their business. d. increase the private marginal cost of production.

b. internalize some forms of positive externalities.

8. For a profit-maximizing, competitive firm, the value of the marginal product of labor a. increases when the price of output decreases. b. is the firm's demand for labor. c. equals the marginal product of labor divided by the wage rate. d. All of the above are correct.

b. is the firm's demand for labor.

6. The marginal product of labor is defined as the change in a. output per additional unit of revenue. b. output per additional unit of labor. c. revenue per additional unit of labor. d. revenue per additional unit of output.

b. output per additional unit of labor.

2. Which of the following is not a public good? a. national defense b. patented technological knowledge c. general knowledge d. the elimination of poverty

b. patented technological knowledge

3. When a free-rider problem exists, a. the market will devote too few resources to the production of the good. b. the cost of the good will always be more than the benefit of the good. c. the good will not be produced. d. entrepreneurs will eventually find a way to make free-riders pay their share.

b. the cost of the good will always be more than the benefit of the good.

9. A worker's contribution to a firm's revenue is measured directly by the worker's a. marginal product. b. value of marginal product. c. marginal product multiplied by the worker's wage. d. value of marginal product multiplied by the output price.

b. value of marginal product.

1. In markets, the invisible hand allocates resources efficiently a. in all cases. b. when the buyers and sellers are the only interested parties. c. when there are positive externalities, but not when there are negative externalities. d. when there are negative externalities, but not when there are positive externalities.

b. when the buyers and sellers are the only interested parties.

19. The Coase theorem suggests that private markets may not be able to solve the problem of externalities a. if the government does not become involved in the process. b. when the number of interested parties is large and bargaining costs are high. c. if the firm in the market is a monopoly. d. if some people benefit from the externality.

b. when the number of interested parties is large and bargaining costs are high.

3. Suppose that a college professor is creating an exam in her university office. Which of the following would be an example of a factor of production used by the professor? (i) the professor's time (ii) a computer software program into which the professor types the exam questions (iii) the physical space of the professors office where she works when creating the exam (iv) the interest on the professor's home mortgage a. (i) only b. (i) and (ii) only c. (i), (ii), and (iii) only d. (i), (ii), (iii), and (iv)

c. (i), (ii), and (iii) only

20. Karen's cat causes Danny to sneeze. Karen values her cat's companionship at $300 per year. The cost to Danny of tissues and her allergy medication is $350 per year. Based on the Coase theorem, a. Karen should pay Danny $400 so that she may keep her cat. b. Karen should pay Danny $350 for tissues and allergy medication. c. Danny should pay Karen $325 to give away her cat. d. Danny should move.

c. Danny should pay Karen $325 to give away her cat.

8. A view of a spectacular sunset along a private beach is an example of a a. private good. b. public good. c. Non-rival but excludable good. d. rival but non-excludable good.

c. Non-rival but excludable good.

5. Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown? a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.

c. The equilibrium quantity is less than the socially optimal quantity.

14. Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy? a. The equilibrium quantity is greater than the socially optimal quantity. b. The equilibrium quantity is less than the socially optimal quantity. c. They are equal. d. There is not enough information to answer the question.

c. They are equal.

12. An upward-sloping labor supply curve means that a. workers prefer to buy more leisure time when their incomes increase. b. workers prefer to supply less labor when wages are high. c. an increase in the opportunity cost of leisure leads workers to increase the quantity of labor they supply. d. All of the above are correct.

c. an increase in the opportunity cost of leisure leads workers to increase the quantity of labor they supply.

3. Honey producers provide a positive externality to orchards because a. the honey producers get more honey. b. the orchard owner frequently gets stung by the honey producer's bees. c. the orchard owner does not have to purchase bees to pollinate his flowers. d. the honey producers have to rent access to the orchard grounds.

c. the orchard owner does not have to purchase bees to pollinate his flowers.

If a good is not rival but is excludable then what type of good is it?

common resources

13. A corrective tax a. can be used to internalize a negative externality. b. imposed on sellers shifts the supply curve to the left. c. imposed on buyers shifts the demand curve to the left. d. All of the above are correct.

d. All of the above are correct.

14. Which of the following events would shift the labor supply curve? a. changes in the number of women willing to work b. immigration of workers c. changing attitudes towards work d. All of the above are correct.

d. All of the above are correct.

15. Tradable pollution permits a. are widely viewed as a cost-effective way to reduce pollution. b. have helped reduce carbon emissions in Canada. c. have helped reduce sulfur dioxide emissions in the United States. d. All of the above are correct.

d. All of the above are correct.

5. Capital, labor, and land a. have derived demands. b. are factors of production. c. are inputs used in the production of goods and services. d. All of the above are correct.

d. All of the above are correct.

6. Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct? a. At the current output level, the marginal social benefit exceeds the marginal private benefit. b. The current output level is inefficiently low. c. A per-shot subsidy could turn an inefficient situation into an efficient one. d. All of the above are correct.

d. All of the above are correct.

6. When the absence of property rights causes a market failure, the government can potentially solve the problem a. by clearly defining property rights. b. through regulation. c. by supplying the good itself. d. All of the above are correct.

d. All of the above are correct.

15. If Sharnae's individual labor supply curve is backward sloping, then Sharnae responds to an increase in her a. wage by working fewer hours per week. b. opportunity cost of leisure by taking more hours of leisure per week. c. wage by working more hours per week. d. Both a and b are correct.

d. Both a and b are correct.

17. Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of a. an opportunity costs. b. an implicit cost. c. a sunk cost. d. a transaction costs.

d. a transaction costs.

5. Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except a. regulating the use or consumption of the common resource. b. taxing the use or consumption of the common resource. c. selling the common resource to a private entity. d. asking individuals to voluntarily reduce their use of the resource.

d. asking individuals to voluntarily reduce their use of the resource.

1. Goods that are not excludable are usually a. higher priced than excludable goods. b. higher priced than rival goods. c. in short supply. d. free of charge.

d. free of charge.

2. Because workers in the U.S. economy receive most of the total income earned, which of the following factors of production is considered to be the most important? a. profit b. wages c. interest d. labor

d. labor

2. A cost imposed on someone who is neither the consumer nor the producer is called a a. corrective tax. b. command and control policy. c. positive externality. d. negative externality.

d. negative externality.

18. The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called a. the Pigovian theorem. b. a corrective tax. c. the externality theorem. d. the Coase theorem.

d. the Coase theorem.

11. When a competitive firm produces output up to the point at which the price is equal to marginal cost, it also hires labor up to the point at which the wage is equal to the a. marginal cost of labor. b. marginal profit of labor. c. marginal product of labor. d. value of the marginal product of labor.

d. value of the marginal product of labor.

1. Total income in the United States is comprised of a. wages only. b. wages and fringe benefits only. c. rents, profits, and interest payments only. d. wages, fringe benefits, rents, profits, and interest payments.

d. wages, fringe benefits, rents, profits, and interest payments.

is a tornado siren rival and excludable

no

If a good is not rival and not excludable then what type of good is it?

public good

is a bottle of soda rival and excludable

yes