Econ 103 -
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is: A $10. B $7.50. C $17.50. D $0.
A
The price elasticity of demand along a demand curve with a constant slope: A decreases in absolute value as quantity demanded rises. B is greater than the slope. C is equal to the slope. D is less than the slope.
A
The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal? A) Total expenditures will fall. B) Total expenditures will rise. C) Total expenditures will remain unchanged. D) The information is insufficient to answer the question.
A
The price of notebooks is $5, and at that price consumers demand 12 notebooks. If the price rises to $7, consumers will decrease consumption to 4 notebooks. Using the midpoint formula, what is the price elasticity of demand for notebooks? A 3 B 0.17 C 6 D 0.33
A
Since 1967 the percentage of the population living below the poverty line has: A) steadily increased. B) fluctuated, but not in any consistent direction. C) not fluctuated. D) steadily decreased.
B
Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be: A price-elastic. B price-inelastic. C inferior. D perfectly price-elastic.
B
(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $0.75 and $0.50? A) 0.43 B) 0.52 C) 0.33 D) 0.25
C
A quota is: A) a price control. B) a means to combat black markets. C) a quantity restriction. D) a consumer surplus
C
In 2012, health care expenditures in the United States accounted for _____ of GDP. A) 40% to 50% B) approximately 1% C) over 80% D) 15% to 20%
D
A high-income household is taxed a certain amount of money. A low-income household receives financial assistance in the same amount from government. The value of the marginal dollar of the financial assistance to the family and the taxes paid by the high-income family are: 1. different, since the marginal dollar is worth more to the low-income family. 2. the same, since it is the same amount of money. 3. different, since the high-income family's lost income will keep them from buying necessities. 4. unimportant in determining the impact of this plan on the welfare state.
1
If a nation's Gini coefficient is rising over time, it is an indicator of: 1. an increase in income inequality. 2. an increase in the poverty rate. 3. a decrease in the poverty rate. 4. a decrease in income inequality.
1
In 2012, health care expenditures in the United States were approximately _____ per person. $9,000 $500 $1,000 $12,000
1
In the United States since World War II, the distribution of income has: 1. stayed about the same. 2. changed first toward equality and then, after 1968, toward greater inequality. 3. become more unequal. 4. become more nearly equal.
2
The notch problem occurs when a poor family that has been receiving aid: 1. finds that it no longer needs aid but is unable to refuse it. 2. has an increase in earnings that reduces means-tested aid from programs, hence reduces their combined incomes. 3. is unable to receive more aid when its earnings fall even lower. 4. faces lower marginal tax rates on additional earnings.
2
In the United States and other wealthy countries, a large part of the welfare state is devoted to payments for: 1. Temporary Aid to Needy Families. 2. unemployment insurance. 3. health care. 4. food stamps.
3
Much of the rise in income inequality in the past 20 years in the United States comes from: 1. the use of median income levels instead of mean income levels. 2. declining government controls on wage supports. 3. a rising gap among the incomes of highly educated workers. 4. a predictable rising gap between the incomes of highly educated and less well educated workers.
3
When a welfare program is provided to those whose income falls below some minimum, it is said to be: 1. an in-kind benefit. 2. a monetary benefit. 3. means-tested. 4. a negative income tax.
3
Which of the following countries has a health care system that directly employs health care workers and runs hospitals and clinics that are free to the public? 1. France 2. United States 3. Great Britain 4. Canada
3
Economists believe that looking at the distribution of income by quintiles at one moment overstates the true inequality of income because: 1. it ignores the effect of transfer payments. 2. families near the bottom of the distribution in any given year are often having an unusually good year, while those at the top are often having an unusually bad one. 3. it ignores the effect of taxes. 4. families near the bottom of the distribution in any given year may be having an unusually bad year, while those at the top may be having an unusually good one.
4. families near the bottom of the distribution in any given year may be having an unusually bad year, while those at the top may be having an unusually good one.
(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government wants to limit total pollution to 2,200 tons, it could impose an emissions tax of _____ on both firms. A) $300 B) $100 C) $400 D) $200
A
(Figure: Market I) Look at the figure Market I. A price floor at $15 would result in deadweight loss of: A) $20. B) $40.50. C) $10. D) $9.
A
(Table: Market for Butter) Look at the table Market for Butter. If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be: A 9.0 million pounds. B 10.5 million pounds. C 1.5 million pounds. D 10.0 million pounds.
A
18. (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The Demand for Shirts. At a price of $40, total revenue is: A) $8,000. B) $4,000. C) $40. D) $200.
A
A binding rent-control price ceiling results in all of the following EXCEPT: A. inefficiently high quality of the good being sold. B. wasted resources of consumers caused by time spent searching for the good. C. inefficiently low quantity of the good exchanged. D. inefficient allocation of the good to consumers.
A
A good is subject to a network externality when: A an increase in the number of other people using the good increases its value to an individual. B a good yields negative externalities. C the value of the good to an individual is less when a large number of other people also use the good. D the value of the good is determined only by marginal private benefits.
A
A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is: A highly inelastic. B 0. C highly elastic. D 1.
A
A men's tie store sold an average of 30 ties per day at $5 per tie. The same store sold 60 of the same ties per day at $3 per tie. In this case, the price elasticity of demand (by the midpoint method) is: A) greater than 1 but less than 3. B) greater than zero but less than 1. C) greater than 3. D) equal to 1.
A
An external benefit is a: A) benefit that individuals or firms confer on others without receiving compensation. B) benefit that accrues to foreign (external) firms as a result of the actions of domestic firms. C) negative externality. D) benefit that accrues to domestic firms as a result of the actions of foreign (external) firms.
A
An industry with production that generates external costs produces a quantity of output that is: A) larger than the socially optimal quantity. B) socially optimal if a specific subsidy is given to buyers. C) smaller than the socially optimal quantity. D) socially optimal
A
Community rating is a regulation that requires: A) insurance companies to offer the same policies for the same premium to everyone, regardless of medical history. B) insurance companies to charge higher premiums to the sickest people in the community. C) cities to give ratings to movies shown in local theaters. D) insurance companies to charge higher premiums to healthy people.
A
Figure: Efficiency and Pollution Reference: Ref 16-9 (Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be: A too little pollution, because its marginal social benefit would exceed its marginal social cost. B too much pollution, because any pollution is too much from an economist's perspective. C too much pollution, because its marginal social cost would exceed its marginal social benefit. D a socially optimal quantity of pollution.
A
If the government sets out to help low-income people by establishing a maximum amount that can be paid for rent: A) a price ceiling has been set, and a shortage of rental units may occur. B) the quality of rental units will be inefficiently high. C) a price floor has been set, and a shortage of rental units may occur. D) in the long run more rental units will appear.
A
Since the price of walnuts increases as the demand for cashews increases, we can assume that these two goods are: A substitutes. B unrelated. C inferior. D superior.
A
Suppose the federal government determines the total level of municipal sewage that can be discharged by cities along a river. If the cities are able to buy and sell rights to the total discharge level among themselves, then the government's environmental policy includes: A) tradable pollution permits. B) emissions taxes. C) command and control. D) regulations.
A
The efficient rate of emissions occurs when: A the change in social benefits and the change in social costs due to an additional unit of emissions are equal. B there is absolutely no damage done to a pristine environment. C government forbids all pollution no matter what the cost. D the marginal social benefits of pollution exceed the marginal social costs of pollution.
A
The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If it imposes the price ceiling above the equilibrium price: A) neither producers nor consumers will change their behavior. B) consumers will purchase less of the good after the price ceiling is imposed. C) consumers will respond to the higher price and therefore wish to purchase less of the good than at the equilibrium price. D) producers will respond to the higher price and therefore offer fewer units for sale.
A
The negative income tax: A) is a program in which low-income working families receive income supplements rather than having to pay taxes. B) is the minimum tax that must be paid by a business even if it has a negative income (or a loss). C) is a system in which low incomes are taxed at a higher rate than high incomes. D) describes a badly designed tax system.
A
The pair of items that is most likely to have a negative cross-price elasticity of demand is: A) hot dogs and mustard. B) ketchup and coffee. C) aspirin and hamburgers. D) margarine and butter.
A
When innovations by one firm are quickly emulated and improved on by rival firms in the same industry or in other industries, this is: A) technology spillover. B) industrial espionage. C) technology takeover. D) illegal under most patents
A
When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be: A) price-elastic. B) price-inelastic. C) perfectly price-inelastic. D) price un
A
Which of the following programs is NOT an antipoverty program? A) Social Security B) Medicaid C) Temporary Assistance for Needy Families D) the Earned Income Tax Credit
A
(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the equilibrium quantity is: A) Q3. B) Q2. C) Q4. D) Q1.
B
(Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks. At a price ceiling of $40, the market outcome would be a _____ of _____ textbooks. A surplus; 30 B shortage; 30 C surplus; 10 D shortage; 10
B
(Figure: The Quantity of Pollution) Look at the table The Quantity of Pollution. If the amount of pollution emitted is 150: this economy is producing at the socially optimal level of pollution. the production of pollution is not socially optimal. the marginal social benefit is greater than the marginal social cost of pollution. this economy would benefit by increasing production of this good.
B
(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25? A 1.00 B 1.22 C 1.75 D 1.50
B
(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be: A) 6 cans. B) 10 cans. C) 4 cans. D) 8 cans
B
3. The licenses that can be bought and sold by polluters and that enable the holder to pollute up to a specified amount during a given period are called: A) environmental standards. B) tradable emissions permits. C) emissions taxes. D) Pigouvian taxes.
B
A _____ program is one for which the recipient qualifies on the basis of _____. A) means-tested; age B) means-tested; income C) social insurance; need D) social insurance; income
B
A maximum price set below the equilibrium price is a: A) price floor. B) price ceiling. C) supply price. D) demand price.
B
An externality is said to exist when: A) individual actions are affected by government policies (such as taxes) that are externally imposed on the market. B) individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account. C) individuals impose costs or benefits on others, and the market provides incentives to take these costs and benefits into account. D) individual actions are affected by external forces like the loss of U.S. jobs because of competition from abroad.
B
Compared to other countries of comparable wealth, the United States has: A) low levels of poverty only when relative measures of poverty are used. B) unusually high poverty rates. C) similar levels of poverty. D) relatively low levels of poverty.
B
Decreases in input costs and a longer time since a price change will tend to: A) increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time. B) increase the price elasticity of supply. C) decrease price elasticity of supply. D) have no impact on the price elasticity of supply
B
Eric's income increased from $40,000 to $50,000 per year. Eric's consumption of tickets to pro football games increased from two to four per year. By the midpoint formula, his income elasticity of demand for pro football game tickets is equal to _____, and football game tickets are _____ goods. A) -3; inferior B) +3; normal C) +0.67; normal D) -0.33; inferior
B
External benefits are associated with the production of batteries. Without government regulation, the market will: A price batteries at less than the marginal social cost. B price batteries at less than the marginal social benefit. C produce too many batteries. D price batteries above the marginal social cost.
B
Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States: A) have led to a global shortage of agricultural products. B) lead to agricultural surpluses and lower prices for farmers in developing countries. C) have led to an increase in the demand for agricultural products from the developing world. D) raise the world price of agricultural products.
B
Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States: A raise the world price of agricultural products. B lead to agricultural surpluses and lower prices for farmers in developing countries. C have led to a global shortage of agricultural products. D have led to an increase in the demand for agricultural products from the developing world.
B
Figure: Rent Controls Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent0: A) the shortage of rental units is the distance Q1 - Q3. B) some renters will be willing to pay a price as high as Rent4 for Q0 units. C) there will be a surplus of rental units. D) no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so.
B
Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is: A) the level that reduces the marginal social costs of pollution to zero. B) the level at which the marginal social cost is equal to the marginal social benefit. C) the level that minimizes the average total cost of producing the product that generates the pollution. D) zero.
B
Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is: A the level that minimizes the average total cost of producing the product that generates the pollution. B the level at which the marginal social cost is equal to the marginal social benefit. C the level that reduces the marginal social costs of pollution to zero. D zero.
B
If a change in price causes total revenue to change in the same direction, we can conclude that the demand is: A zero elastic. B price inelastic. C price elastic. D price unit-elastic.
B
If a nation's Gini coefficient is rising over time, it is an indicator of: A) a decrease in the poverty rate. B) an increase in income inequality. C) a decrease in income inequality. D) an increase in the poverty rate.
B
If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be _____ the number of people who are willing to work. A) equal to B) less than C) less than, greater than, or equal to D) greater than
B
If the number of available tradable emissions permits is decreased, the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases
B
In the United States in the first two decades following World War II: A) there was no way to determine income distribution. B) income distribution became more nearly equal. C) income distribution in the United States became less equal. D) income equality measures stayed the same.
B
Network externalities are often: A less likely to occur in the communications or technology industries than in other industries. B a reason for natural monopolies. C not likely to move toward market domination. D separate from positive feedback.
B
Quantity controls set below the equilibrium quantity cause all of the following EXCEPT: A) quota rents. B) the supply price of the quantity transacted exceeding the demand price of the quantity transacted. C) incentives for illegal activities. D) missed opportunities in the form of mutually beneficial transactions that don't occur
B
Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. If a price ceiling of $10 is imposed in this market: A)excess supply equal to 25 units will result. B. the quantity demanded will be greater than the quantity supplied. C. an equilibrium quantity will result. D. the quantity supplied will be greater than the quantity demanded.
B
Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will: A) improve equality between rich and poor, since the poor can now afford gasoline. B) cause gasoline shortages even in an oil-rich country. C) improve efficiency, since the low prices will force producers to find cheaper production methods. D) result in gasoline surpluses even in an oil-rich country
B
Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will: A) increase the supply of corn. B) cause a surplus of corn. C) cause a shortage of corn. D) have no effect on the price of corn.
B
The most likely reason that the government would implement a _____ is because it feels that the price is too low for _____. A) price ceiling; producers B) price floor; producers C) price floor; consumers D) price ceiling; consumers
B
The notch problem occurs when a poor family that has been receiving aid: A) faces lower marginal tax rates on additional earnings. B) has an increase in earnings that reduces means-tested aid from programs, hence reduces their combined incomes. C) finds that it no longer needs aid but is unable to refuse it. D) is unable to receive more aid when its earnings fall even lower.
B
The price elasticity of demand along a demand curve with a constant slope: A) is less than the slope. B) decreases in absolute value as quantity demanded rises. C) is greater than the slope. D) is equal to the slope.
B
The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged? A Total revenue will fall. B Total revenue will rise. C Total revenue will remain unchanged. D The information is insufficient to answer the question.
B
The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal? A) Quantity demanded will decrease, but total expenditures will rise. B) Quantity demanded will not change much, but total expenditures will rise. C) Quantity demanded will stay the same, but total expenditures will fall. D) Total expenditures will remain unchanged.
B
The principal government agency in the United States responsible for enforcing national environmental policies is the: A) Department of the Interior. B) Environmental Protection Agency. C) Department of Justice. D) Department of Agriculture.
B
Which of the following is a likely outcome of price controls and quota limits? A) prices higher than the market equilibrium price B) illegal activity as people invent ways to get around the market constraint C) shortages and inefficiency caused by buyers searching for units of the good D) shortages and units of output that must be disposed of
B
(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, too much pollution is found when the price is _____ and the quantity is _____. A) $25; 20 B) $5; 30 C) $5; 40 D) $5; 15
C
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. What area represents consumer surplus if there is a binding price floor at P1? A) a + b B) a + b + d C) a D) a + b + c
C
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. The efficient quantity of pollution is _____ tons. A 0 B 2 C 4 D 8
C
(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 1 acre is dedicated to the park, the park is: A too large. B the efficient size. C too small. D the socially optimum size.
C
(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda supplied will be: A) 9 cans. B) 10 cans. C) 8 cans. D) 7 cans.
C
A good is likely to have an inelastic demand curve if: A the good accounts for a large share of consumer income. B the good is a luxury. C the good has few available substitutes. D the consumer has significant time to respond to the price change.
C
A price floor is likely to cause deadweight loss because: A. buyers incur additional search costs looking for the scarce good. B. a black market emerges and the good sells at prices above the price floor. C. the quantity of the good is less than the equilibrium quantity. D. some buyers who want to buy at the controlled price are unable to find a seller willing to sell at that price.
C
According to the Coase theorem, when negative externalities are present, a market will: A reach an efficient solution only if the government intervenes in the market. B always reach an efficient solution. C reach an efficient solution if transaction costs are low and property rights are well-defined. D reach an efficient solution only if the negative externalities are offset by positive externalities.
C
Compared to a generation ago, benefits from public aid programs, adjusted for inflation, are: A) more. B) about the same. C) less. D) zero.
C
For a good to be considered normal, the _____ elasticity of demand must be _____. A) cross-price; less than 0 B) cross-price; equal to 0 C) income; greater than 0 D) income; between 1 and 0
C
For a normal demand curve, the price elasticity of demand will be: A) usually equal to 1. B) always positive. C) always negative. D) always greater than 1
C
For the same amount of pollution emitted, an emissions tax is said to be more efficient than an environmental standard because all polluters: A pay the same total tax bill for their pollution. B reduce pollution emissions to zero. C emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax. D emit the same amount of pollution, regardless of the marginal benefit of polluting.
C
If drivers decide to make phone calls without considering the costs imposed on others, the: A marginal social cost curve will lie below the marginal cost of production curve. B marginal social benefit curve will lie below the marginal social cost curve. C number of phone calls made while driving will be more than the socially optimal quantity. D number of phone calls made while driving will be fewer than the socially optimal quantity.
C
If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: A approximately 1.33. B 1. C 0.75. D approximately 0.33.
C
If two goods are complements, their cross-price elasticity of demand is: A) greater than 0. B) positive but almost equal to 0. C) less than 0. D) equal to 0.
C
If you know the cross-price elasticity between two goods is positive, then you know the two goods are: A) complements. B) inferior goods. C) substitutes. D) normal goods.
C
John Rawls believed that: A) government has no right to force people with high incomes to support others with lower incomes. B) government has a small role in achieving an economically fair society. C) we should do unto others as we would like them to do unto us if we were in the same place. D) Robert Nozick's views of economic fairness are similar to his own view.
C
Other things being equal, the price elasticity of demand for a product will be lower: A) in the long run than in the short run. B) if many substitutes are available. C) if there are few or no substitutes available. D) if it is a large part of the consumer's budget.
C
Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen? A) The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. B) Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price. C) More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. D) More people will be able to see the doctor, since the price is lower.
C
Reference: Ref 16-2 (Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 5 tons of pollution is produced: A the efficient amount of pollution is produced. B the socially optimum amount of pollution is produced. C too much pollution is produced. D not enough pollution is produced.
C
Some nations, including Canada, have adopted a health care system in which the government pays the medical bills. This is known as a(n) _____ system. A) means-tested B) employment-based C) single-payer D) private health insurance
C
Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500 but government officials have set the tax at $500. At the equilibrium with the $500 tax: A) the marginal social benefit of pollution will be more than $500. B) the marginal social benefit of pollution will be less than $500. C) there will be too much pollution. D) the marginal social cost of pollution will be less than $500.
C
Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be: A an excess supply of doctor visits. B an increase in the equilibrium number of doctor visits. C an excess demand for doctor visits. D no change in the number of doctor visits.
C
Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are: A) complements. B) normal. C) substitutes. D) inferior.
C
Suppose the U.S. government imposes a binding quota on the number of Japanese-made cars allowed into the United States. Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption, we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____. A) decrease; decrease B) decrease; increase C) increase; increase D) increase; decrease
C
Suppose the price of university sweatshirts increases from $10 to $20 and the quantity supplied increases from 20 to 30. The price elasticity of supply, using the midpoint formula, is: A 1.50. B 0.66. C 0.60. D 1.66.
C
The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price: A) it will not be binding. B) consumers will be able to purchase more of the good after the price ceiling is imposed. C) consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price. D) producers will respond to the lower price and offer more units for sale
C
The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation: A firms in the market produce too much pollution. B society's well-being can be improved if the quantity of pollution decreases. C firms in the market produce the socially optimal level of pollution. D firms in the market produce too little pollution.
C
The persistent unwanted surplus that results from a price floor causes inefficiencies that include all of the following EXCEPT: A the temptation to break the law by selling below the legal price. B wasted resources. C inefficiently low quality. D inefficient allocation of sales among sellers.
C
The quota rent is: A) the rent received by landlords who own rent-controlled apartments. B) the minimum rent that the owner of a building must receive before he or she is willing to rent out the building. C) the difference between the demand price and the supply price at the quota limit. D) the opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota.
C
There is considerable _____ among the quintiles of the distribution of income, with many families moving from _____ quintiles and others moving from _____ quintiles. A) immobility; lower to even lower; higher to even higher B) stability; lower to higher; higher to higher C) mobility; higher to lower; lower to higher D) immobility; lower to higher; higher to lower
C
When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling: A) there is a decrease in quantity demanded. B) it is inefficient. C) the transaction takes place on a black market. D) there is an increase in quantity demanded.
C
When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is: A) elastic. B) unknown. C) inelastic. D) unit-elastic.
C
Which of the following countries has a health care system that directly employs health care workers and runs hospitals and clinics that are free to the public? A) France B) United States C) Great Britain D) Canada
C
Which of the following is a quantity control? A the minimum wage B the Medicare reimbursement schedule for physicians C limits on the number of red snappers that can be caught in the Gulf of Mexico D unemployment insurance
C
Which of the following is an environmental policy based on tradable emission permits? paying companies $1 for each 10% reduction in emissions a charge to companies of $1 for every 100 units of pollutants emitted allowing companies to buy and sell the right to a certain level of emissions ignoring pollution and letting private markets operate without government interference
C
With tradable emissions permits, the price of the permit is determined by: A) environmental protection organizations. B) the World Trade Organization. C) the supply of and demand for permits. D) the government.
C
Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment. This is: A a tradable emissions permit. B an emissions tax. C an environmental standard. D the Coase theorem.
C
_____ programs are designed to provide benefits to people whose income falls below some minimum. A) Nominal income B) Absolute income C) Means-tested D) Relative income
C
(Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if there are external costs, a tax imposed on sellers will: A increase the equilibrium quantity. B decrease the equilibrium price. C have no effect on the equilibrium price. D decrease the equilibrium quantity.
D
(Figure: Price Control) Look at the figure Price Control. One effective price ceiling would be the price indicated at point _____, and there would be a _____ equal to the difference between points _____. A) d; surplus; e and h B) b; surplus; f and e C) b; shortage; f and e D) d; shortage; i and h
D
(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21 is _____, since the price elasticity is _____. A price-elastic; a negative number. B price unit-elastic; equal to 1. C price-elastic; less than 1. D price-inelastic; less than 1.
D
(Figure: The Socially Optimal Quantity of Pollution) In the figure The Socially Optimal Quantity of Pollution, without government intervention: A) firms will continue to pollute until the marginal social benefit is $200. B) the optimal quantity of pollution will occur. C) The outcome cannot be determined without more information. D) firms will continue to pollute until the marginal social benefit is zero
D
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the efficient quantity of pollution the marginal social cost of pollution is _____ the marginal social benefit of pollution. A) unrelated to B) less than C) greater than D) equal to
D
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. The efficient quantity of pollution is _____ tons. A) 8 B) 0 C) 2 D) 4
D
(Table: Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. In response to popular anger over the high price of fried Twinkies and the extreme wealth of fried Twinkie producers, the government imposes a price ceiling of $1.20 per fried Twinkie. From this table, the price ceiling causes a _____ fried Twinkies. A) shortage of 5,000 B) surplus of 8,000 C) surplus of 3,000 D) shortage of 3,000
D
(Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides. If a government quota limit at 9 million rides is imposed, the quota rent that will accrue to the owner of a taxi medallion will be _____ per ride, but there will be a total missed opportunity (inefficiency) to consumers and producers of _____ million rides. A $2; 2 B $3; 3 C $4; 4 D $1; 1
D
A high-income household is taxed a certain amount of money. A low-income household receives financial assistance in the same amount from government. The value of the marginal dollar of the financial assistance to the family and the taxes paid by the high-income family are: A) unimportant in determining the impact of this plan on the welfare state. B) different, since the high-income family's lost income will keep them from buying necessities. C) the same, since it is the same amount of money. D) different, since the marginal dollar is worth more to the low-income family
D
A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is: A greater than zero but less than 1. B greater than 3. C greater than 1 but less than 3. D equal to 1.
D
A price ceiling will have NO effect if: A the equilibrium price is above the price ceiling. B it is set below the equilibrium price. C it creates a shortage. D it is set above the equilibrium price.
D
A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. 1. (Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. How many hours of lawn upkeep will occur in this community, and what will be the marginal private benefit of such upkeep? A) 100 hours; $50 B) 50 hours; $50 C) 45 hours; $20 D) 50 hours; $25
D
All of the following are characteristics of a good with elastic demand EXCEPT: A) luxury. B) specific brands. C) a large number of substitutes. D) a short time to adjust to price changes.
D
Both emissions taxes and tradable emissions permits: are usually less effective than environmental standards. work only if they are coupled with environmental standards. encourage more pollution. are efficient cost-minimizing methods of pollution reduction.
D
For the same amount of pollution emitted, an emissions tax is said to be more efficient than an environmental standard because all polluters: A) pay the same total tax bill for their pollution. B) reduce pollution emissions to zero. C) emit the same amount of pollution, regardless of the marginal benefit of polluting. D) emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax
D
Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. According to this finding, the price elasticity of demand for gas is: A 5. B 0.5. C 2. D 0.2.
D
Government intervention in the form of binding price floors or binding price ceilings will: A move the market toward its equilibrium quantity more quickly. B always enhance the efficiency of the market. C often be seen as necessary to decrease the activity of black markets. D result in either surpluses or shortages.
D
If a quota is set above the equilibrium quantity, there will be: A a supply price for the quantity transacted that will exceed the demand price of the quantity transacted. B missed opportunities in the form of mutually beneficial transactions that don't occur. C incentives for illegal activities. D no effect.
D
If the price elasticity of supply is: A) less than 1, then the supply is very responsive to price changes. B) zero, then price is unit-elastic. C) less than 1, then the supply is price-elastic. D) less than 1, then the supply is price-inelastic.
D
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (by the midpoint method) is: A) 2. B) 1. C) 0. D) 0.5.
D
If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: A complementary goods. B normal goods. C inferior goods. D substitute goods.
D
If total revenue goes down when the price falls, demand is said to: A) be price-elastic. B) have positive price elasticity. C) be price unit-elastic. D) be price-inelastic.
D
In 2012, the largest share of health care costs was paid for by: A) private insurers. B) private individuals. C) charities. D) the government.
D
In the United States, if someone does not have health insurance, it is likely that this person: A) will not have to worry, since government assistance is available without a means test. B) is very ill. C) is college educated. D) is a low-income worker whose employer does not provide coverage and who cannot afford private coverage.
D
Paolo owns a pizza shop. The price of pizza recently increased from $3 to $5 a slice. Paolo responded by increasing the quantity of slices he supplied from 100 to 150 slices per day. By the midpoint method, Paolo's price elasticity of supply is: A) 2.5. B) 0.75. C) 1.25. D) 0.8.
D
People may be uninsured for all of the following reasons EXCEPT that: A) they are unemployed and can't afford to purchase insurance. B) they are relatively healthy and choose to save their money rather than buy insurance. C) their employer does not provide health insurance. D) they are too old to qualify for health insurance.
D
Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the overall demand for cheeseburgers is: A) perfectly price inelastic. B) price unit-elastic. C) price elastic. D) price inelastic.
D
The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deal with a surplus: the European Union pays farm exporters to sell products for a profit overseas. the U.S. government holds auctions to sell the surplus to the highest bidder. the U.S. government typically pays farmers to produce as much as possible. the U.S. government in some cases has destroyed the surplus production.
D
The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will: A increase by more than 5.7%. B decrease by less than 5.7%. C decrease by more than 5.7%. D increase by about 2.9%.
D
The marginal social benefit of pollution: A) is equal to the marginal social cost of pollution, since benefits to producers are equal to costs to consumers. B) is easy to estimate, since polluters are required to file this information in their tax returns. C) is zero, since pollution is not beneficial. D) can be measured as the additional gain to society from one additional unit of pollution.
D
The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound: A) quantity demanded will decrease. B) there will be a shortage of apples. C) quantity supplied will increase. D) the price floor will not affect the market price or output.
D
The period during the 1930s and 1940s when income inequality fell sharply is called the: A) new Gilded Age. B) U.S. welfare state. C) Gini coefficient. D) Great Compression.
D
The price elasticity of demand can be found by: A measuring absolute changes in price and quantity demanded. B examining only the slope of the demand curve. C knowing that when price changes, quantity demanded goes in the opposite direction. D comparing the percentage change in quantity demanded to the percentage change in price
D
The total amount of the good that can be transacted under a quantity control is called the: A) supply price. B) ceiling price. C) demand price. D) quota limit.
D
There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for: A the two to be equally price-elastic. B medical exams to be more price-elastic. C Bayer aspirin to be more price-inelastic. D Bayer aspirin to be more price-elastic.
D
Typically the government limits the quantity of a good that can be bought and sold by: A) setting a price floor below the equilibrium price. B) maintaining the equilibrium price regardless of changes in demand and supply. C) setting a price ceiling above the equilibrium price. D) licensing the suppliers.
D
When the government attempts to reduce the noise from airplanes by restricting the noise level from a jet engine to less than 50 decibels, it is using a(n): A) Pigouvian tax. B) tradable emissions permit. C) emissions tax. D) environmental standard.
D
Which factor is important in determining the price elasticity of supply? A) the intensity of the need of consumers B) the number of alternative uses of the good C) the number of close substitutes D) the time the producer has to adjust inputs and outputs
D
Which is NOT an inefficiency caused by price floors? A) wasted resources B) illegal activity C) inefficient allocation of sales among sellers D) inefficiently low quality
D
