Exam 2 ECON 2301

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Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of

A. an external cost as the​ community, not the​ factory, is paying for the clean up.

A cost or benefit of an economic activity that has an impact on an​ individual's well-being, even though the individual was not directly involved in the​ activity, is known as​ a(n)

A. externality.

Marisa has just graduated from college and is seeking a job comma but hasn't found one yet.Marisa has just graduated from college and is seeking a job, but hasn't found one yet. Which type of unemployment is​ this?

A. frictional unemployment

Subsidizing medical services through Medicare

A. makes medical services available to a large percentage of the​ population, who otherwise could not afford them. B. drives a wedge between the price received by providers and the price perceived by consumers.

The study of collective decision​ making, or the process through which​ voters, politicians and other interested parties influence nonmarket choices is known as

A. public choice theory.

Market failure occurs because

B. the market system does not make individuals responsible for the social​ costs/benefits of their actions.

The theory of public choice is the study of

B. the process through which​ voters, politicians, and other interested parties interact to influence nonmarket choices.

Which of the following is most likely to gain from unanticipated​ inflation?

C. A consumer with a five year auto loan.

Which of the following measures will lower the natural rate of​ unemployment?

C. More high school graduates enter college without looking for employment right away.

A good that has been deemed socially desirable through the political process is known as

C. a merit good.

The type of unemployment that rises as the economy goes into a recession is called

C. cyclical.

Consider an economy with only two groups of​ people: Wage earners and Goods sellers. If the price level increases by​ 20% while the nominal wages remains the​ same,

C. income will be redistributed from wage earners to goods sellers.

Which of the following statements is true concerning the historical picture of business activity in the United​ States?

D. The frequency and size of fluctuations around the trend has decreased since World War II.

Other than correcting​ externalities, other economic functions of government include

D. providing a legal​ system, allocating public​ goods, promoting​ competition, and stabilizing the economy.

Full employment means

D. there is a level of unemployment consistent with​ "normal" frictions in the labor market.

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

D. transfer payments.

A true public good must be provided by the government. Which of the following goods provided by the government is a true public​ good?

Flood control.


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