Possible Test 3 Questions (Read Description)

12A. Which of the following is a good example of a "Pure Public Good"? A. National Defense. B. Public Transportation (e.g., the subway system). C. Denny's "Moons Over My Hammy"® breakfast sandwich. D. Mp3 files purchased from Amazon.com.

A

21A. Widgets are non-rival in consumption and non-excludable. As a result, if widgets were simply sold in the marketplace, we should expect A. less than the efficient amount of widgets to be traded. B. exactly the efficient amount of widgets to be traded. C. more than the efficient amount of widgets to be traded. D. None of the above answers are necessarily correct (since we need to know something about costs of production in order to be able to determine whether the resulting level of trade will be more than, less than, or exactly equal to the efficient level of trade).

A

22D. The central bank of the United Kingdom A. is the Bank of England, which was founded in 1694. B. is the Federal Reserve, which was founded in 1913. C. is the Bank of Parliament, which was founded in 1981. D. None of the above answers are correct, since the United Kingdom does not have (and has never had) a central bank.

A

23C. For a Regressive Tax A. the Average Tax Rate decreases as the level of income increases. B. the Average Tax Rate remains constant as the level of income increases. C. the Average Tax Rate increases as the level of income increases. D. the Average Tax Rate becomes negative at very high levels of income.

A

28C. Between 1974 and 2014, for the U.S. the value of the Gini Coefficient ___________ while the value of Real Median Household Income ___________. A. increased from .395 to .480; increased from $48,497 to $53,657. B. increased from .567 to .728; decreased from $51,984 to $39,994. C. decreased from .512 to .296; increased from $32,493 to $39,886. D. decreased from .442 to .397; decreased from $28,945 to $19,643.

A

2A. Government spending as a percentage of GDP is greatest in which of the following countries? A. Finland B. United States C. Singapore D. Hong Kong

A

4B. The "Economic Calculation Problem" posits that A. a system of planning will never be able to achieve efficient outcomes, precisely because under such a system the planners do not have access to the information generated by market transactions. B. in order for economic outcomes to be fair, it is necessary to redistribute wealth through a highly progressive tax structure. C. it is impossible to come up with any estimate of the costs of complying with government bureaucracy. D. calculating the true economic value of a worker can only be done under a socialist system.

A

6B. The ________________ refers to a situation in which a series of pair-wise majority votes over more than two options leads to a cycling of winners. A. Condorcet Paradox B. Buchanan Puzzle C. Coase Conjecture D. Shapley Value

A

7C. The ________________ provides a measure of the degree of progressivity of a tax, defined as the ratio of the area between the Lorenz Curve and the Tax Concentration Curve to the entire area below the Lorenz Curve. A. Stroup Coefficient B. Pechman-Okner Coefficient C. Gini Coefficient D. Lorenz Coefficient

A

8A. In the presence of a "negative externality," the free market would A. provide more than the efficient amount of the good. B. provide less than the efficient amount of the good. C. have trade take place at a price of $0. D. None of the above answers are correct.

A

Answer Questions 24 through 26 based upon the graph below. This graph illustrates the Lorenz Curve in "Country X," along with two different Tax Concentration Curves in "Country X" - one for "Tax Code A" (its current tax policy) and one for "Tax Code B" (a proposed different tax policy). The value of: "Area (i)" is equal to .15; "Area (ii)" is equal to .07; "Area (iii)" is equal to .10; and "Area (iv)" is equal to .18. 25C. Based upon the Tax Concentration Curves illustrated above, it appears as if "Tax Code A" is a __________ tax and "Tax Code B" is a __________ tax. A. progressive; progressive. B. progressive; proportional. C. proportional; progressive. D. proportional; regressive.

A

For questions 16 through 19, consider a situation in which three different candidates (Donald, Hillary, and Gary - denoted D, H, and G) are seeking an office. The person to fill the position will be decided by a vote. Voter preferences are summarized by the table below. 16B. In an election between all three candidates, __________ would receive the most votes. A. Donald B. Gary C. Hillary D. None of the above are correct (since the table does not provide enough information to answer this question).

A

For questions 16 through 19, consider a situation in which three different candidates (Donald, Hillary, and Gary - denoted D, H, and G) are seeking an office. The person to fill the position will be decided by a vote. Voter preferences are summarized by the table below. 18B. If the position were filled by first having a vote over all three candidates, followed by a head-to-head runoff between the two highest vote getters, the person chosen as the eventual winner would be A. Donald B. Gary C. Hillary D. None of the above are correct (since the table does not provide enough information to answer this question).

A

11C. The __________________ Function of Government refers to government policies aimed at changing the final allotment of goods/services across consumers, usually with the intention of realizing a "fairer" apportionment of consumption, income, and wealth. A. Allocation B. Distribution C. Stabilization D. Free Rider

B

11D. The _________________ is the Central Bank of the United States. A. Bank of America B. Federal Reserve C. U.S. Congress D. None of the above answers are correct (since the U.S. Central Bank was abolished by President Reagan in 1982).

B

13C. As of 2012, government spending on welfare programs in the U.S. was roughly A. $2,476 billion (about 16% of GDP). B. $952 billion (about 6% of GDP). C. $302 billion (about 2% of GDP). D. $156 billion (about 1% of GDP).

B

14C. ____________________ were two of the central figures in the formulation of the ideas of Utilitarian Justice, which argues that total social welfare can be increased by income redistribution, so long as people have a diminishing marginal utility for money. A. Yair Tauman and Pradeep Dubey B. Jeremy Bentham and John Stuart Mill C. Max Lorenz and Corrado Gini D. Joseph Pechman and Benjamin Okner

B

15D. According to the views held by Monetarists, if the money supply is drastically increased, then in the long run A. the level of real output will increase but prices will not increase. B. prices will increase but the level of real output will not increase. C. neither prices nor the level of real output will increase. D. both prices and the level of real output will increase.

B

16A. Government Spending as a Percentage of GDP in the United States is projected to A. decrease to less than 30% by 2020. B. remain at roughly 40% for the next several years. C. increase to roughly 60% by 2020. D. None of the above answers are correct.

B

18D. The Equation of Exchange is A. Y=C+I+G+NX B. MV =PQ C. D( p)=S( p) D. None of the above answers are correct.

B

1A. "Market Failure" can be described as a situation in which A. a single seller of a good has substantial control over the price of the good. B. the "free market outcome" is NOT efficient. C. government intervention leads to a greater Deadweight-Loss than does the "free market outcome." D. government imposes progressive taxes, in order to indirectly redistribute income.

B

20A. A government policy that attempts to "Internalize an Externality" can be generally described as A. a policy which completely bans an activity that generates an externality. B. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality. C. a policy which mandates the exact level of an activity that decision makers must engage in. D. None of the above answers are correct.

B

20C. Examining how Real (i.e., inflation adjusted) Household Incomes have changed over time in the U.S. in recent decades, the mean household income of the "middle 5th of all households" ____________ between 1994 and 2004 and then ____________ between 2004 and 2014. A. increased from $12,195 to $32,852; increased further to $87,834. B. increased from $51,198 to $55,661; decreased to $54,041. C. decreased from $47,212 to $42,910; increased to $61,235. D. decreased from $75,392 to $63,289; decreased further to $50,296.

B

22A. Which of the following was discussed in lecture to illustrate how something akin to the "Coasian Solution to Externalities" has been implemented in practice? A. How total social welfare (on a global level) was likely decreased by President Barack Obama flying to Copenhagen in order to lobby the International Olympic Committee on behalf of Chicago's bid to host the 2012 Summer Olympics. B. How the "Defenders of Wildlife" established the "Bailey Wildlife Wolf Compensation Trust" in order to facilitate the re-introduction of the gray wolf into the wild in the western United States. C. Why efficiency dictates that any activity which generates a negative externality should be completely banned. D. Why a free market would tend to provide less than the efficient amount of national defense.

B

27C. Which of the following countries currently has a progressive income tax? A. Romania. B. The United States. C. Iraq. D. More than one (perhaps all) of the above answers is correct.

B

29C. The country of Rawlslandia imposes an income tax which reduces the value of its Gini Coefficient from .40 to .36. This implies that the value of the Pechman-Okner Coefficient for this tax is equal to ______. A. .04 B. .10 C. .144 D. .76

B

2C. Under the current U.S. Federal Income Tax, the "Top 1% of wage earners" pay A. virtually no taxes, due to all of the loopholes in the current tax code. B. about 37.8% of all taxes collected, an amount which is greater than the 30.2% of all taxes collected paid by the "bottom 90% of wage earners." C. about 19.0% of all taxes collected, an amount exactly equal to their share of total adjusted gross income earned. D. about 12.7% of all taxes collected, an amount which is slightly less than their share of total adjusted gross income (which is 19.0% of total adjusted gross income).

B

3B. In the textbook, ______________ was described as "an ill-governed kleptocracy in which corruption is not a happy side-effect of power, but the core of the system." A. present day India B. present day Russia C. the United States during the 1930s D. Great Britain during the 1980s

B

3D. The ______________ refers to the periodic but irregular fluctuation in overall macroeconomic activity which occurs over time. A. Stabilization Function of Government B. Business Cycle C. velocity of money D. None of the above answers are correct.

B

4D. Which of the following is NOT one of the primary policy tools used by a central bank? A. Setting the "discount rate." B. Loaning money to low income home buyers at below market interest rates (in order to make housing "affordable for all"). C. Setting "reserve requirements." D. None of the above answers are correct (since each of the choices listed is one of the primary policy tools used by a central bank).

B

5A. Jim lives in a country in which military output is not provided by the government, but rather is supplied by profit maximizing firms and purchased by individual consumers in a free market. Jim chooses to enjoy the benefits of national security which result from military output purchased by others in society, while purchasing "zero units of military output" of his own. This example illustrates A. Joseph Schumpeter's account of a "gale of creative destruction." B. the Free Rider Problem. C. the "Coasian Solution" to the problem of externalities. D. Adam Smith's "Invisible Hand."

B

5C. One of the "7 Determinants of Productivity, Income, and Wealth" is "effort," which refers to the recognition that differences in income or wealth across individuals could result from differences in A. the amount of money that individuals receive as inheritances during their lifetime. B. how hard individuals choose to work. C. the natural talents that people are endowed with at birth. D. the skills and experiences that people acquire through education, training, and work experience.

B

6A. The _________________ function of government can be described as government production of goods or regulation of business, aimed at getting the right mix of products produced, each in the ideal quantity and at the ideal quality. A. Taxation B. Allocation C. Distribution D. Stabilization

B

6C. ________________ is defined as the flow of money earned by an individual during a period of time. A. Human Capital B. Income C. Wealth D. A Compensating Differential

B

6D. The phase of the business cycle that refers to the point in time at which overall economic activity reaches its maximum is the A. Recovery. B. Peak. C. Recession. D. Trough.

B

7B. _________________ is the process by which a legislator votes to approve one bill in exchange for favorable votes from other members on other bills. A. Rent Seeking B. Logrolling C. Rational Ignorance D. Regulatory Capture

B

8D. The U.S. economy grew for an uninterrupted 10 year period from A. August 2002 to the present day. B. March 1991 through March 2001. C. September 1979 through September 1989. D. June 1967 through June 1977.

B

9B. _________________ refers to a situation in which total social surplus is decreased as a result of government intervention in a market. A. Market Failure B. Government Failure C. The Free Rider Problem D. An Externality

B

For questions 12 through 15, consider a market with Supply and Demand as illustrated below 15B. Consider the following two proposed taxes: "Tax A" is a $3 per unit tax imposed on buyers; "Tax B" is a $2 per unit tax imposed on sellers. We can infer that A. Deadweight-Loss would be exactly the same under "Tax A" and "Tax B." B. consumers would prefer "Tax B" over "Tax A." C. producers would prefer "Tax A" over "Tax B." D. More than one (perhaps all) of the above answers is correct.

B

For questions 12 through 15, consider a market with Supply and Demand as illustrated below. 13B. In comparison to the "free market outcome," imposing a per unit tax of $4.00 on sellers in this market would A. decrease Producers' Surplus by "areas (e)+(f)." B. decrease Producers' Surplus by "areas (c)+(f)." C. increase Producers' Surplus by "area (g)." D. not have any impact on the value of Producers' Surplus.

B

For questions 16 through 19, consider a situation in which three different candidates (Donald, Hillary, and Gary - denoted D, H, and G) are seeking an office. The person to fill the position will be decided by a vote. Voter preferences are summarized by the table below. 17B. In a two candidate head-to-head election between just Donald and Hillary, Donald would receive A. 40% of the vote. B. 48% of the vote. C. 52% of the vote. D. 70% of the vote.

B

For questions 20 through 23, consider a situation in which representatives from five legislative districts need to consider two proposals. The surplus that would be realized by constituents in each legislative district for each project is given by the table below. 22B. Suppose that the representative from District 2 proposes the following vote trading scheme to the representative from District 3: "I will vote in favor of Proposal II so long as you vote in favor of Proposal I." Which of the following statements regarding this proposed vote trading is accurate? A. "The representative from District 3 would not want to agree to this vote trade." B. "If the representative from District 3 agrees to this vote trade, then both proposals would be approved." C. "If the representative from District 3 agrees to this vote trade, then both proposals would be rejected." D. None of the above answers are correct.

B

For questions 20 through 23, consider a situation in which representatives from five legislative districts need to consider two proposals. The surplus that would be realized by constituents in each legislative district for each project is given by the table below. 23B. Suppose that both proposals are voted on as a package (i.e., one single vote, to determine if either both are approved or both are rejected). In comparison to the outcome which would result from two separate votes on the two proposals, ____________________ when the two proposals are voted on as a package. A. Total Social Surplus is larger B. constituents in District 1 are better off C. constituents in District 3 are worse off D. More than one (perhaps all) of the above answers is correct.

B

10B. In advance of the election for County Sheriff, Edward and Mike are discussing the different candidates. Edward states: "I haven't really researched the positions and backgrounds of the two people running. In order to do so properly I would have to invest a great deal of time, and, after all, the chance of my vote deciding the election is very small and I don't think things will be very different for me regardless of who wins." His statement is closely related to the issue of A. the incidence of a tax. B. regulatory capture. C. rational ignorance. D. the Economic Calculation Problem.

C

10D. If the federal government of Keynesland (a small island nation off the western coast of Portugal, with an economy highly dependent upon bowling ball production) had revenues of €950,000,000 and expenditures of €800,000,000 in 2012, then in 2012 this government A. realized a budget deficit of €150,000,000. B. realized a budget deficit of €1,750,000,000. C. realized a budget surplus of €150,000,000. D. realized a budget surplus of €1,750,000,000.

C

11B. Regulatory Capture refers to a situation in which A. a government regulatory is thrown in jail for unethical behavior. B. legislators trade votes in order to have multiple policies enacted (each of which would otherwise not garner a majority of support). C. firms in a regulated industry influence a regulatory agency to the point where the agency makes decisions which are in the best interest of the firms (even if the decisions are not in the best interest of the public). D. government regulators collect bribes from the firms being regulated.

C

12D. ___________________ refers to decreases in private spending that occur following increases in government spending. A. Expansionary Fiscal Policy B. Contractionary Fiscal Policy C. Crowding Out D. Monetarism

C

13D. ________________ said that "Inflation is always and everywhere a monetary phenomenon. A. President Franklin D. Roosevelt B. John Maynard Keynes C. Milton Friedman D. Barrack Obama

C

14D. During the most recent recession in the U.S. (which officially lasted from December 2007 through June 2009) Real GDP _____________. A. increased by 1.2% B. decreased by 0.9% C. decreased by 4.1% D. decreased by 12.4%

C

15C. Focusing on the "Average Tax Rate" of the "Bottom 50% of Income Earners," this figure ______________ between 1980 and 2010 and then ______________ between 2010 and 2013. A. increased from 1.89% up to 4.35%; increased more from 4.35% up to 7.82% B. decreased from 9.76% down to 5.11%; decreased more from 5.11% down to 4.13% C. decreased from 6.10% down to 2.37%; increased from 2.37% up to 3.30% D. increased from 14.12% up to 18.09%; decreased from 18.09% down to 9.37%

C

16C. Incomes may differ across different individuals in a free market society due to A. only factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability"). B. only factors which are under the direct control of the individual (such as "how much education to acquire"). C. some factors which are under the control of the individual (such as "how much education to acquire") and some factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability"). D. None of the above answers are correct (since, in general, income levels in a free market society are "entirely random").

C

16D. The ________________ refers to the number of times that a typical dollar is used in a transaction in a given year. A. recycling ratio of money B. fractional reserve use of money C. velocity of money D. supply of money

C

19D. ____________________ refers to the time it takes a policymaker to decide upon the specific stabilization policies which should be enacted. A. An Information Lag B. A Recognition Lag C. A Decision Lag D. An Implementation Lag

C

1D. "Fiscal Policy" can be described as government policy A. which determines the "money supply" of an economy. B. aimed at changing the underlying institutions of a nation's economy. C. related to spending and revenue generation. D. related to securing the borders of and protecting the homeland of a nation.

C

20D. The Fed can increase the Money Supply in the U.S. by A. selling U.S. Treasury debt securities to the public. B. increasing the reserve requirement. C. decreasing the discount rate. D. More than one (perhaps all) of the above answers is correct.

C

21C. Suppose that the Lorenz Curve for the U.S. in 2010 lies completely below the Lorenz Curve for France in 2010. This implies that A. Per Capita Incomes are higher in France than in the U.S. B. the Unemployment Rate is lower in the U.S. than in France. C. incomes are distributed more equally in France than in the U.S. D. incomes are distributed more equally in the U.S. than in France.

C

22C. __________________ is a broad term which refers to monetary payments made by the government to certain individuals in society, with the impact of altering the distribution of income within a society. A. Monetary Policy B. Redistribution In-Kind C. Income Support D. Income Taxation

C

24A. On September 11, 2010, former heavyweight boxing champion Wladimir Klitschko defeated Samuel Peter by knockout in Frankfurt, Germany. This fight was only available in the U.S. on "Pay Per View." The broadcast of this bout on "Pay Per View" is excludable but non-rival, and was therefore a A. Public Good. B. Private Good. C. Club Good. D. Common Good.

C

26A. A good is "non-excludable" if A. consumption by one person does not diminish the quantity/quality of consumption by others. B. consumption by one person does diminish the quantity/quality of consumption by others. C. it is difficult (or very costly) to prevent consumption by those who do not pay for the good. D. it is easy (or relatively costless) to prevent consumption by those who do not pay for the good.

C

2D. The ______________ refers to government policies with the primary aim of minimizing fluctuations in overall macroeconomic activity. A. Allocation Function of Government B. Distribution Function of Government C. Stabilization Function of Government D. Taxation Function of Government

C

3C. As of 2015, the highest Marginal Tax Rate for the U.S. Federal Income Tax is A. 91%. B. 70%. C 39.6%. D. 15%.

C

4C. _________________ wrote A Theory of Justice (1971), in he argued that a "social contract" designed behind a "veil of ignorance" would aim to "maximize the well-being of the worst-off member of society." A. Karl Marx B. Max Lorenz C. John Rawls D. Robert Nozick

C

5B. Within our discussion of Logrolling, we noted that _______________ argued that politicians in a democracy often act to maximize the probability of their own re-election. A. Ronald Coase B. Gordon Tullock C. James Buchanan D. Jeremy Bentham

C

7A. A "4th of July Fireworks display in downtown Atlanta" is A. easily "Excludable." B. perfectly "Rival in Consumption." C. very "Non-Rival in Consumption." D. More than one (perhaps all) of the above answers is correct.

C

8C. Which of the following is an example of a regressive tax? A. The U.S. Income Tax. B. The Russian Income Tax. C. The U.S. Social Security Payroll Tax. D. None of the above answers are correct (since regressive taxes do not exist in the real world).

C

9D. The arguments made by John Maynard Keynes suggest that during an economic downturn, the government should A. have the government seize ownership of and directly control the "Commanding Heights" of our economy. B. deploy the military in order to conquer and colonize other countries with large amounts of natural resources (e.g., Middle Eastern countries with tremendous oil reserves). C. run a budgetary deficit, in order to stimulate the economy by replacing missing private spending with government spending. D. run a budgetary surplus, so that we do not accumulate a tremendous amount of debt that will ultimately burden our children and grandchildren.

C

Answer Questions 24 through 26 based upon the graph below. This graph illustrates the Lorenz Curve in "Country X," along with two different Tax Concentration Curves in "Country X" - one for "Tax Code A" (its current tax policy) and one for "Tax Code B" (a proposed different tax policy). The value of: "Area (i)" is equal to .15; "Area (ii)" is equal to .07; "Area (iii)" is equal to .10; and "Area (iv)" is equal to .18. 24C. The value of the Gini Coefficient in "Country X" is ______. A. .15 Fraction of Total Population 0 0 iii 1 1 i iv Lorenz Curve Tax Concentration Curve under Tax Code A Fraction of Total Income, Fraction of Total Taxes Tax Concentration Curve under Tax Code B ii A. .15 B. .17 C. .30 D. .35

C

For Questions 13 through 15, consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. 13A. The efficient level of output for this good is _____ units. A. 2,720 B. more than 2,720 but fewer than 4,640 units C. 4,640 D. 9,120

C

For Questions 9 through 11, consider a good with Marginal Private Benefits, Marginal Private Costs, Marginal Social Benefits, and Marginal Social Costs as illustrated below. 10A. If this good were traded in a free market (without any government intervention), _________, although the Social Welfare Maximizing level of trade is _________. A. 6,800 units would be traded; 5,900 units. B. 5,900 units would be traded; 4,100 units. C. 4,100 units would be traded; 5,900 units. D. 0 units would be traded; 6,800 units.

C

For Questions 9 through 11, consider a good with Marginal Private Benefits, Marginal Private Costs, Marginal Social Benefits, and Marginal Social Costs as illustrated below. 11A. At the free market outcome (without any government intervention) there would be a Deadweight-Loss equal to A. "area (c)." B. "area (e)." C. "areas (a)+(b)." D. "areas (a)+(b)+(c)."

C

For Questions 9 through 11, consider a good with Marginal Private Benefits, Marginal Private Costs, Marginal Social Benefits, and Marginal Social Costs as illustrated below. 9A. Based upon this graph, it appears as if A. the government is imposing a substantial per unit tax on this good. B. this good is clearly produced by a monopolist. C. production/consumption of this good generates a positive externality. D. production/consumption of this good generates a negative externality. $ 0 quantity 0 (Marginal Social Costs) = (Marginal Private Costs) Marginal Social Benefits Marginal Private Benefits 13.30 4,100 6,800 11.00 15.80 a b c e 5,900 21.85 d

C

For questions 12 through 15, consider a market with Supply and Demand as illustrated below. 12B. Imposing a per unit tax of $2.60 on buyers in this market would generate tax revenue of A. less than $26,000. B. exactly $26,000. C. more than $26,000 but less than $39,000. D. exactly $39,000.

C

For questions 12 through 15, consider a market with Supply and Demand as illustrated below. 14B. In comparison to the "free market outcome," imposing a per unit tax of $1.40 on sellers in this market would generate a Deadweight-Loss A. larger than "areas (e)+(f)." B. exactly equal to "areas (e)+(f)." C. smaller than "areas (e)+(f)." D. exactly equal to "area (g)."

C

For questions 17 through 19 consider the following scenario. "Company Z" wants to construct a new manufacturing facility near an existing residential neighborhood. If they construct and operate the facility, they can do so at one of three different sizes: "small plant," "medium plant," or "large plant." However, their economic activity would impose external costs from pollution on the nearby residents. The resulting profit (for "Company Z") and external costs (to residents of the adjacent neighborhood) of each possible choice are specified in the table below 18A. The socially efficient outcome is for "Company Z" to construct and operate A. no plant. B. a small plant. C. a medium plant. D. a large plant.

C

For questions 20 through 23, consider a situation in which representatives from five legislative districts need to consider two proposals. The surplus that would be realized by constituents in each legislative district for each project is given by the table below. 20B. The socially best (i.e., efficient outcome) is for A. both Proposal I and Proposal II to be rejected. B. both Proposal I and Proposal II to be approved. C. Proposal I to be approved but Proposal II to be rejected. D. Proposal II to be approved but Proposal I to be rejected.

C

For questions 20 through 23, consider a situation in which representatives from five legislative districts need to consider two proposals. The surplus that would be realized by constituents in each legislative district for each project is given by the table below. 21B. Suppose no vote trading occurs. In this case, A. Proposal I would be approved but Proposal II would be rejected. B. Proposal II would be approved but Proposal I would be rejected. C. both Proposal I and Proposal II would be rejected. D. both Proposal I and Proposal II would be approved.

C

10C. In 1960, 12% of all U.S. households had air conditioning. In contrast, by 1997, _____ of U.S. households below the poverty line had air conditioning. A. 0% B. 12% C. 19% D. 70%

D

12C. The Labor Theory of Value, which states that the value of a commodity depends upon only the amount of labor required to produce the commodity, is most closely associated with the ideas of A. John Rawls. B. Jeremy Bentham and John Stuart Mill. C. Robert Nozick. D. Karl Marx.

D

17C. ____________________ states that the fairest distribution of income and consumption is the one realized when the government establishes and enforces a legal code which respects all voluntary economic interactions between individuals in a society. A. Labor Theory of Value B. Rawlsian Justice C. Utilitarian Justice D. Libertarian Justice

D

17D. Peru experienced an inflation rate of ___________ in 1990. A. -24.5% B. 17.2% C. 512% D. 7,482%

D

18C. As of 2015, the poverty threshold in the U.S. for a family of four consisting of two adults and two children was A. 14.8%. B. $693.50 per year. C. $14,500 per year. D. $24,036 per year.

D

19C. The U.S. Federal Income Tax A. was first established in 1913 (and authorized by the passage of the 16th Amendment to the U.S. Constitution). B. is a Progressive Tax. C. was abolished by President Barack Obama during his first year in office. D. More than one (perhaps all) of the above answers is correct.

D

1B. If a per unit tax is placed on sellers of a product, the "price ultimately paid by buyers" ____________, while the "price ultimately received by sellers" ____________. A. increases; remains unchanged. B. remains unchanged; decreases. C. increases; increases. D. increases; decreases.

D

1C. Charles' income is higher than Debbie's income. Two of the notable differences between their jobs are that Charles must work outside year round (even when it is very hot in the summer and very cold in the winter) and Charles runs a greater risk of being injured on the job. These observations would suggest that the difference in incomes between the two individuals is A. a consequence of Debbie being paid a wage rate below the minimum wage. B. due to gender discrimination. C. an indication of the Labor Theory of Value. D. a compensating differential.

D

21D. Consider the following two statements: (1) "Fiscal Policy can never have any stimulative impact on the macroeconomy" and (2) "Inflation is caused primarily by too much growth in the money supply." Most economist would A. agree with both statements. B. disagree with both statements. C. agree with Statement (1) but not Statement (2). D. agree with Statement (2) but not Statement (1).

D

23A. Which of the following policies could likely reduce "Deadweight-Loss" in the presence of a negative externality, such as pollution? A. Establish minimum compliance standards for manufacturers in the industry (allowing them to generate only a certain amount of the negative externality). B. Do nothing (i.e., just let the market allocate the good as is currently the case, with no deliberate government action whatsoever). C. Offer subsidies to manufacturers for reducing the amount of the negative externality that they generate. D. More than one (perhaps all) of the above answers is correct

D

25A. A firm operating in a "Perfectly Competitive Market" has "No Market Power," which implies that the firm A. would lose all its customers if it attempted to increase price above the prevailing market price. B. must decrease its price in order to increase the quantity of output sold. C. faces a "horizontal demand curve" for its output. D. More than one (perhaps all) of the above answers is correct.

D

2B. Which of the following is NOT one of the seven sources of government failure discussed in lecture? A. Corruption. B. Regulatory Capture. C. Logrolling. D. Externalities.

D

3A. Which of the following is a common source of "Market Failure"? A. Pricing by firms with market power. B. Market provision of private goods. C. Market provision of a good which generates an externality. D. More than one (perhaps all) of the above answers are correct.

D

4A. Focusing on government spending as a percentage of GDP in the U.S., we observed that: (i) between 1820 and 1917 this figure was never larger than 9.76% and (ii) before 2008 this value was above 38.67% in only three single years (1943, 1944, and 1945). In every single year since 2008, government spending in the U.S. as a percentage of GDP has been A. below 9.76%. B. between 10% and 20%. C. between 20% and 30%. D. above 38.67%.

D

5D. ___________________ can potentially be used by the government in order to stabilize the performance of the macroeconomy (i.e., to minimize fluctuations in the rate of economic growth) over time. A. Neither Monetary Policy nor Fiscal Policy B. Monetary Policy, but not Fiscal Policy C. Fiscal Policy, but not Monetary Policy D. Both Fiscal Policy and Monetary Policy

D

7D. "The General Theory of Employment, Interest and Money" was written by A. Milton Friedman B. Anna Schwartz C. Margaret Thatcher D. John Maynard Keynes

D

8B. The "Incidence of a Tax" refers to A. which level of government is imposing the tax. B. the frequency with which an individual has to pay the tax. C. which individual is legally responsible for writing a check to pay the tax. D. who bears the burden of the tax in terms of decreased welfare.

D

9C. Based upon the World Bank's poverty threshold of income of $1.90 per day, between 1981 and 2015 the global poverty rate A. increased drastically from 12.7% up to 56.9%. B. increased moderately from 27.6% up to 34.8%. C. decreased slightly from 62.5% down to 59.1%. D. decreased drastically from 44.3% down to 9.6%.

D

Answer Questions 24 through 26 based upon the graph below. This graph illustrates the Lorenz Curve in "Country X," along with two different Tax Concentration Curves in "Country X" - one for "Tax Code A" (its current tax policy) and one for "Tax Code B" (a proposed different tax policy). The value of: "Area (i)" is equal to .15; "Area (ii)" is equal to .07; "Area (iii)" is equal to .10; and "Area (iv)" is equal to .18. 26C. Under "Tax Code A" the value of the Stroup Coefficient would be _____. A. approximately .2857 B. .34 C. approximately .3571 D. approximately .4857

D

For Questions 13 through 15, consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. 14A. To maximize profit, this monopolist would A. sell 9,120 units of output, each at a price of $17.10. B. sell 4,640 units of output, each at a price of $8.40. C. sell 2,720 units of output, each at a price of $6.00. D. None of the above answers are correct.

D

For Questions 13 through 15, consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. 15A. When this monopolist chooses the price and quantity which maximizes profit, A. Total Consumers' Surplus is equal to zero. B. Producer's Surplus (i.e., "Monopoly Surplus") is equal to "areas (a)+(b)+(d)+(e)+(g)." C. Deadweight-Loss is equal to "areas (c)+(f)." D. More than one (perhaps all) of the above answers is correct.

D

For questions 16 through 19, consider a situation in which three different candidates (Donald, Hillary, and Gary - denoted D, H, and G) are seeking an office. The person to fill the position will be decided by a vote. Voter preferences are summarized by the table below. 19B. Consider the outcomes which would occur in two candidate head-to-head elections, it would appear as if voters A. prefer Donald over Gary. B. prefer Gary over Hillary. C. prefer Hillary over Donald. D. More than one (perhaps all) of the above answers is correct.

D

For questions 17 through 19 consider the following scenario. "Company Z" wants to construct a new manufacturing facility near an existing residential neighborhood. If they construct and operate the facility, they can do so at one of three different sizes: "small plant," "medium plant," or "large plant." However, their economic activity would impose external costs from pollution on the nearby residents. The resulting profit (for "Company Z") and external costs (to residents of the adjacent neighborhood) of each possible choice are specified in the table below 17A. If "Company Z" was able to choose its plant size without having to account for the external cost to nearby residents whatsoever, they would choose A. no plant. B. small plant. C. medium plant. D. large plant.

D

For questions 17 through 19 consider the following scenario. "Company Z" wants to construct a new manufacturing facility near an existing residential neighborhood. If they construct and operate the facility, they can do so at one of three different sizes: "small plant," "medium plant," or "large plant." However, their economic activity would impose external costs from pollution on the nearby residents. The resulting profit (for "Company Z") and external costs (to residents of the adjacent neighborhood) of each possible choice are specified in the table below 19A. Suppose that property rights can be clearly defined, individuals must pay compensation if they infringe upon the property rights of others, and the impacted parties can negotiate with one another. We would expect the ultimate outcome to be _______________ if the homeowners are given the right to a pollution free environment and _______________ if "Company Z" is given the right to pollute the environment. A. no plant; large plant. B. large plant; no plant. C. small plant; small plant. D. medium plant; medium plant.

D