Micro Test 3 Kendall Kennedy

Raising the minimum wage always decreases workers surplus

False

The only possible cause of a gender wage gap is prejudice against hiring female workers

False

The united states is a member of the World trade organization, NAFTA and the EU

False

Which of the following would NOT reduce income inequality in the US

Higher sales taxes

Which is a valid counterargument to the call for higher tariffs to save US jobs?

Imports may eliminate some US jobs but they create others, so they may have little or no effect on employment

NAFTA (North American Free Trade Agreement)

Is an agreement between the US and Canada and Mexico, eliminating most tariffs, trade barriers, and import restrictions

In 2010, the Gini ratio for Colombia was 0.56. By 2012 it was 0.54. Based on the information, how did income inequality in Colombia change during this time?

It decreased

A price ceiling will move a market away from equilibrium only if

It is set below the equilibrium price

If west lafayette believed that underprivileged students could not afford to attend Purdue, would rent controls be an effective way to lower the cost of attendance?

Maybe. there is no clear indication of who would get the new, lower rents in west lafayette and who would be forced to lafayette

Purely competitive labor market

Numerous employers compete with one another in hiring a specific type of labor Each of many works with identical skills supplies that type of labor Individual employers and individual workers are wage takers because neither can control the market wage rate

The OPEC sets production quotas for its member nations production for oil. What does this do to the market for oil

Oil prices rise and quantity sold falls, and consumer surplus falls

Suppose the city of west lafayette believes rent is too high and decides to put a rent ceiling in effect for all apartments in the city. Which of the following would you NOT expect to happen?

People move from lafayette to West Lafayette and as a result the quantity of apartments rented in West Lafayette increases

If the US government raises the federal minimum wage from $7.25 per hour to $15 per hour, which of the following would definitely not happen?

Producer surplus increases

skill-biased technological change (SBTC) is a potential explanation for which of the following trends?

Productivity growing faster than wages in the US Rising inequality in the US and worldwide Increased enrollment in college, coming from higher wages paid to skill workers

if everyone pays a fixed dollar amount of tax, then the tax is a

Regressive tax

Depreciation

currency means that more units of it are needed to buy a single unit of some other currency

In a purely competitive industry, a decrease in a firms marginal revenue product for an economic resource could result from a

decrease in demand for the firms final product

substituion effect

decreases the demand for labor indicates a firm will purchase more of an input whose relative price has declined and conversely, use less of an input whose relative price has increased

Derive demand

demand for labor is derived from the demand for products that labor helps to produce

A more equal distribution of income in the US would result in greater total consumer satisfaction. This statement is based on the concept that

incomes are subject to diminishing marginal utility

Output effect

increases the demand for labor the firm will purchase more of one particular input when the price of the other input falls and less of that particular input when the price of the other input rises

The equality efficiency trade off suggest that

inefficiencies result when income is transferred from rich to poor

Government programs that pay benefits to those who are unable to earn income because of permanent disabilities or to those who have very low incomes are called

public assistance programs

The Temporary Assistance for Needy Families program

put a limit on receiving welfare payments and required able bodied adults to work after receiving assistance for two years

Lorenz Curve

quintile distribution of personal income

Sales and excise taxes are levied on retailers, but retailers add these taxes to the prices of their products. This illustrates the

shifting of taxes to consumers

In effect, tariffs on imports are

subsidies for domestic producers

appreciation

takes fewer units of it to buy a single unit of some other currency

A progressive tax is such that

tax rates are higher the greater one's income

Payroll taxes

taxes based on wages and salaries Finance SS and Medicare

sales and excise taxes

taxes on commodities or on purchases

A tax structure is called progressive when

the average tax rate decreases if income decreases

Which of the following is an example of statistical discrimination

An employer refuses to hire a woman, believing that female employees will work fewer hours than male employees

regressive tax

average rate declines as income increases

progressive tax

average rate increases as income increases

proportional tax

average rate remains the same regardless of the size of income

Selection bias

causes us to overstate the returns to education

MRP

change in the total revenue resulting from the use of each additional unit of labor

If demand for a product is perfectly elastic and supply is upsloping, a $1 excise tax per unit on supplier will

not raise price at all

Gini ratio

numerical measure of the overall dispersion of income

Government programs that replace earnings lost when people retire or are temporarily unemployed would be considered to be

part of social insurance programs

Elasticity of labor demand

percentage change in labor quantity demanded Divided by percentage change in wage rate

The equality efficiency trade off refers to

possible conflicts between the goals of economic efficiency and greater income equality

If indiana increases tax on cigarettes by $2 per pack, which of the following would definitely occur?

producer surplus, consumer surplus, and total surplus all decrease

The EU

Abolished tariffs and import quotas on most goods traded between member nations Relaxed immigration restrictions between member nations Is a free trade zone between many, but not all, countries in Europe

Now assume in the market for cigarettes demand is perfectly inelastic and supply is perfectly elastic. What can we say about the tax incidence for a $2 per pack cigarette pack?

Consumers pay 100% of the tax

In general, a price floor imposed above the equilibrium price results in which of the following?

Deadweight loss

A segregated workforce is the result of which model of discrimination

Taste for discrimination/prejudice

Which of the following accurately describes the Lorenz curve?

The Lorenz curve is a bow shaped curve showing the distribution of income among households in the economy

What is deadweight loss?

The decrease in total surplus as a result of an inefficient level of production

Why is the US Gini ratio increasing over time, while the world's Gini ratio is decreasing over time?

The global Gini ratio is representing the fact that large countries are developing and catching up to the US and western europe

Marginal tax rate

The rate at which the tax is paid on each additional unit on taxable income

If the government imposes a tax in a market where supply is perfectly inelastic, what is the resulting deadweight loss?

There is no deadweight loss

A binding rent ceiling will always reduce producer surplus, but may increase consumer surplus

True

If two countries specialize in their comparative advantage and trade, they can both consume outside their individual production possibilities frontiers

True

Mississippi has a Gini ratio of 0.48. Louisiana has a Gini ratio of 0.50. This means that Louisiana has a greater inequality than Mississippi

True

Using income as the tax base, which of the following best illustrates a regressive tax

a 7 percent general sales tax

Monopsony

a market structure in which there is only a single buyer

The basic economic argument for greater income equality is that

a more equal distribution of a given amount of income will increase the total utility of consumers

MRC

amount that each additional unit of labor adds to the firms total cost

Tariff

excise taxes on imported goods

Government purchases

exhaustive; products purchased directly absorb resources and are part of the domestic output

European Union

free trade zones, 28 nations except US

export subsidies

government payments to domestic producers of export goods

Medicaid

helps finance the medical expenses of individuals participating in the SSI and the TANF programs

Exclusive unionism

higher wage rates

corporate income tax

is levied on a corporations profit the difference between its total revenue and its total expenses

The marginal revenue product of labor in a competitive market decreases as a firm increases the quantity of labor used because of the

law of diminishing returns

Personal income tax

levied on taxable income on households and unincorporated businesses.

Import quotas

limits on the quantities or total value of specific items that may be imported

The greater the degree of inequality in the size distribution of income, the more bowed will be the Lorenz curve toward the

lower right hand corner

Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the

marginal revenue product of the third worker is $14

Human capital

models say that college increases skills, and those skills increase productivity

Signaling

models say that college resolves information problems, and helps sort smart people into better jobs

Transfer payments

nonexhaustive, they do not directly absorb resources or create output

In a pure competition, a profit maximizing firm will equate the marginal revenue product of labor with the

wage rate

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that

wage rates and labor productivity are directly related

The World Trade Organization

was established to resolve disputes arising under world trade rules

The incidence of a tax pertains to

who actually bears the burden of a tax