Econ 2 test

Which statement describes a poverty line based on absolute poverty?

Income is below 5$ per day per person in the household

Diminishing returns to an input occur when:

O at least one input is fixed.

Consider the figure Producer Surplus in the Market for Baseballs. At a price of P1, the producer surplus equals the area:

P1K0

Which statement is normative?

Scientists should not make normative statements.

Which statement makes use of positive analysis?

The federal government spends $500 billion on education per year.

Which of these will NOT happen when the wages of pharmacists fall?

The supply curve for pharmacists will shift to the left.

On camping trips, Katie is much faster than her husband, Brett, at putting up a tent and starting a fire. Who should do each task if they want to maximize their time sitting around the campfire?

They should first each focus on that task in which they have a comparative advantage. When one finishes the assigned task, they can help the other.

Alena manages a small theme park. She hires one more custodian at $450 per week, making her park cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.

Many government programs associated with the welfare state are believed to cause deadweight loss, since they:

affect incentives to work and save

Which graph shows the income effect dominating labor supply decisions at high but not low wages?

graph D

Price is functioning as a message when it:

is a line of communication between buyers and sellers in a market.

During an economic downturn, a state government debates what type of economic stimulus--a tax cut, would produce the most efficient outcome, that is, the outcome with the:

largest economic surplus.

As a rule, a profit-maximizing dance studio owner employs labor up to the point at which the marginal revenue product of the __________ unit of labor is __________ that factor's price (wage).

last; equal to

Social Security is a(n) _____ that is _____.

monetary transfer; not means tested

The less work people do, all other things equal, the:

more leisure they have.

As long as people have different ___________, everyone has a comparative advantage in something.

opportunity costs

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs.

Myrda works as an audio technician on Broadway, and frequently experiences short-term u working, she saves a good portion of her income, upon which she relies when she is unem consistent with the:

permanent income hypothesis

Consider these claims concerning the Affordable Care Act (a.k.a. Obamacare) in 2009-10: (i) In the late 2000s, the number of uninsured Americans hit a record high of 60 million. (i) Health care reform of some kind was needed to address the widespread lack of access to medical care. (ili) Among the options available, the Affordable Care Act provided the best fit to the mix of public and private institutions that make up the American healthcare system. (i) reflects analysis; (i) reflects analysis; and (iii) reflects analysis.

positive; normative; normative

Which is NOT a rationale for the creation of the social safety net?

providing universal healthcare.

Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external costs:

resources will be over allocated to the production of the good.

On hot summer days, parking lots at Disneyland are usually full by early morning, even though one must pay to park there Parking at such lots is ________ in consumption and _________

rival; excludable.

Minglewood Hall, a music venue in Memphis, Tennessee, often hosts loud concerts that play late into the night. Minglewood provides an annual allotment of free concert tickets to residents who live in the houses directly behind the venue. Which solution to the externality problem does Minglewood use?

side payment

The graph shows the marginal social benefit, marginal private benefit, and marginal private curves in the taco market. The socially optimal quantity is________ and the price is $ ___________.

six, 9

The tech startup where you worked went out of business. You were worried about depletin avoided that outcome thanks to:

social insurance

When a country's production mix becomes more specialized due to increased international trade based on comparative advantage:

some industries in the country will shrink and possibly disappear.

which income redistribution would increase total well-being the most?

someone in the 95th percentile to someone in the 10th percentile.

Medicaid is funded by:

state and federal government

Which of these government regulations is LEAST likely to lead to market failure?

subsidies for vaccinations

The _______ measures how people respond to a change in relative prices when the wage rises.

substitution effect

The efficient quantity prevails in a market when:

the market yields the largest possible economic surplus

The official poverty line depends on _____ and is adjusted every year to reflect changes in the cost of living.

the size and composition of a family.

Economists generally believe that a person should specialize in the production of a good or service if

they can produce the product while forgoing fewer alternative products than any other person.

During the summer, you work with a service that stocks vacation homes on a lake to save the owner's time. After your boss cuts your hourly wage by 10%, you service more homes, working more hours. This means that:

you are on the downward-sloping portion of your individual labor supply curve.

The Market for Power Tools. In the table, the total product of labor is shown for the hourly production of power tools. Assume that the market for power tools is perfectly competitive. If the price of a power tool is $2, and the wage rate is $90 per hour, the profit-maximizing quantity of labor is ___________ workers.

zero

You're an analyst for Royal Caribbean, a primary cruise line servicing the Caribbean Sea. In 2021, the price of a seven-day Caribbean cruise was $1,500 per ticket. A year later, as demand increased as COVID cases fell, the price per person rose to $2,000 per ticket. The accompanying table provides information on the supply of cruise travel. Cruise fare (price per ticket) Quantity supplied (number of tickets) $0 0 $500 750 $1.000 1.500 $1.500 2.250 $2.000 3.000 $2.500 3.750 If the marginal cost of providing a ticket on a cruise for one traveler is $1,200, what was the change in producer surplus from 2021 to 2022?

1.7 million

Use the graph of a demand curve for jugs of laundry detergent to answer the question. Price $20 $6 Demand 50 Quantity What is the total consumer surplus if 50 jugs are sold at a price of $6?

350 dollars

You and your colleague are sales representatives. The table displays the number of minutes it takes you to perform your primary tasks. You Place a phone call 7, Process an application 11 Your colleague Place a phone call 3, Process an application 13 Prior to specialization, in an hour, you place five phone calls and process two applications. Your colleague places six phone calls and processes two applications. After specialization, the gains from trade are ___________ phone call(s) and _____________ application(s).

9:5?

The marginal revenue product is calculated as:

MPL × MR

(Figure: MSC and MPC Curves) The graph shows marginal social cost and marginal private cost curves. What is the marginal external cost?

$2

Social insurance programs do NOT:

Use a means test to qualify people for benefits.

An externality is NOT:

a price change.

The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

8

You hope to find a job, which enables you to earn a high income, but you recognize that ot higher living standard because they have more:

wealth

The table shows data on how long it takes Joachim and Zane to clean the bathrooms and wash the windows at a home. Who has a comparative advantage in washing windows? Hours it takes to: Joachim 4 Clean the bathrooms, Wash the windows 10 Zane 3 Clean the bathrooms, Wash the windows 6

Zane, because he has a lower opportunity cost

A firm's demand curve for labor will shift because of:

a change in the demand for a firm's product.

Which gift is most like an income transfer rather than an in-kind transfer?

a gift card branded through one of the main credit card companies

What relationship exists between income and well-being in the well-being curve found in the figure?

a positive relationship with decreasing marginal gains in well-being as income rises.

Much of the rise in income inequality in recent years in the United States comes from:

a rising gap between the incomes of highly educated and less educated workers.

When wages _________ if the substitution effect dominates, the quantity of labor supplied will _______.

increase; increase

During the coronavirus pandemic, global supply chain issues caused the supply of new cars to shift left. Which role did price play in the new car market? Price was a(n):

message to potential buyers that the marginal cost of manufacturing new cars is rising.

When economic efficiency increases, the ________ , and the benefits ___________ be spread across all people.

total gains exceed the costs; may or may not

The efficiency problem that results from market power is that the market:

underproduces.

The graph shows the marginal social benefit and demand curves in the shampoo market. What is the marginal external benefit?

$2

When a manager uses comparative advantage to assign tasks in a workplace, then each:

task is assigned to the worker with the lowest opportunity cost for performing the task.

Actual poverty is less than the official poverty rate primarily because:

tax credits and non cash benefits are not included when calculating incomes.

You are the manager at Pure Sweat Studio, a membership-based sauna club, assigning closing duties to your team members. In 12 minutes, Sadiquah can fold all of the clean towels needed for a sauna room for the next day's use. She can clean a sauna room in 9 minutes. Landon can fold the towels in 10 minutes or clean a room in 15 minutes. Sadiquah's opportunity cost of folding towels is ___________ sauna rooms.

1.33

The table presents recent data from the World Bank. Based on the data in the table, which statement is correct? Distribution of Income and Average Sri Lanka and Mongolia

Average income in the bottom quintile is lower in Sri Lanka than in Mongolia

Consider the figure Equilibrium in the Market for Mechanical Pencils. At the equilibrium price, the producer surplus is equal to area: Consider the figure Equilibrium in the Market for Mechanical Pencils. At the equilibrium price, the producer surplus is equal to area:

EHF?

You pay a plumber to install a new dishwasher in your home. Which statement is FALSE?

Only the plumber experiences gains from trade because they received money.

Why does Apple design the iPhone in California but assemble the iPhone in China?

The United States has a comparative advantage in iPhone design.

Suppose that the government decreases income tax rates, which has the effect of increasing wages. How will this decision affect the amount of labor supplied by parents, assuming that leisure is a normal good?

We don't know what will happen to the quantity of labor supplied, since we don't know whether the income effect or substitution effect will dominate.

Which statement BEST describes a negative externality?

Your neighbor has an ornamental pond that breeds mosquitoes.

Which benefit could a company gain from using internal markets?

better allocation of its resources and more accurate predictions

Focusing on differences in the amount people actually spend on goods and services as a m being rather than comparing their current incomes leads to a focus on _____ in discussion inequality across households.

consumption

Avery, Amanda, Lucan, Henry, and Imelda are used booksellers, each of whom has a rare print of The Soothsayer's Gambit, the classic mystery novel by Joan Reeves. The booksellers vary widely in their valuations of their copies of the book and thus in what price they would need to part with it. When the market price of the book falls from $45 to $35, the producer surplus ________ leaving the total producer surplus at __________

deceases by 40, to 60 dollars

You recently renovated a large historic building in the heart of your city to convert it into a boutique hotel, of which you're now the owner and operator. After a few months, you've noticed that the quantity of hotel bookings vary. Sometimes more rooms are booked on weekends, but sometimes certain events through the week result in a greater quantity of rooms booked. You now want to forecast when to expect the most bookings, but you don't know which events will bring the most people to the hotel. The MOST accurate forecast would likely result if you:

design an internal prediction market for employees to indicate their expectations.

When the price of the last unit sold equals its marginal cost, a seller will:

earn producer surplus on all units sold except the last one?

When goods are allocated in a way that creates the largest economic surplus:

efficient allocation has been achieved.

In the labor market for computer programmers, the labor demand curve represents:

employers looking to hire programmers.

The socially optimal outcome occurs where the __________, benefit equals the ________ cost.

marginal social; marginal social

Wikipedia is a widely used, free online encyclopedia, funded entirely by donations, rather than by selling advertising or user data. Wikipedia is a:

public good

The table provides data on how long it takes Marla and Jason to cook lasagna and chicken curry. Marla's opportunity cost of making lasagna is ______________ and and Jason's opportunity cost is__________ Hours it takes to cook: Marla 4 hours Lasagna, 3 hours chicken curry Jason 3 hours Lasagna, 1 hour chicken curry

1.33 chicken curries; three chicken curries

(Figure: Major U.S. Redistribution Programs) Use Figure: Major U.S. Redistribution Prog programs available to individuals. The second row includes Social Security and Medicare and thus specifies programs _____.

that are non-means tested

A familiar example of a negative externality is loud music in a busy park on a weekend. In principle, it should be possible to solve this externality by permitting park visitors to negotiate rights to play music in particular locations or at specific times. The most likely reason these negotiations do NOT occur is that:

the bargaining costs of identifying and establishing communications between all affected parties would be high.

After a year delivering pizzas, you get a raise, and you cut back on your hours. For you:

the income effect is stronger than the substitution effect.

The marginal social cost of a unit of pollution is?

the marginal private cost plus marginal external cost from one extra unit of pollution.

Thomas works 55 hours per week as a legal-aid lawyer for the city of Chicago, and his wage is $35 per hour. If his wage increases to $70 per hour:

the substitution effect implies that he will work more.

Harrison is willing to buy the last ticket to the Billy Elliot play for $15, while Stefania is willing to pay $25. Harrison is first in line and buys a ticket for $15. He then resells his ticket to Stefania for $20. By reselling the ticket instead of going to the play himself, Harrison caused:

the sum of the consumer and producer surplus to increase.

Use Figure: Public Goods and Common Resources. The figure lists the type of goods that are available for consumption. Panel D depicts a good that is both nonrival in consumption and nonexcludable. Such a good would be considered a:

public good

Cornell can type reports faster and more accurately than Alice, so Cornell has a(n) ______ in typing reports

absolute advantage

Both emissions taxes and tradable emissions permits:

are efficient methods of pollution reduction

When trade is based on comparative advantage:

both trading partners end up better off

Ariana bought a new pair of shoes at Nordstrom. When she walked out of the store, she thought, "I got such a great deal; I would have paid $40 more for these shoes!" This BEST illustrates the concept of:

consumer surplus

Along a supply curve, a rise in the price of a good will:

increase producer surplus

To obtain a license to work as a barber, hairstylist, or cosmetologist, one must graduate from a state-approved barber or cosmetology program and pass a state exam, limiting the number of people who can practice these professions. In this scenario, market failure would arise from:

market power

According to separate analyses by the Organization for Economic Cooperation and Development (OECD) and the World Population Review, respectively, the United States ranks fifth among OECD countries in productivity, and twenty-seventh in social mobility. While one observer might commend the United States in terms of ______ that is, economic ____________ another might criticize it in terms of ___________, that is, its relative.

outcome; efficiency; process; inequality of opportunity

Georgia-Pacific, one of the world's largest manufacturers and distributors of paper products, operates multiple paper mills throughout the United States. The process of converting wood pulp into paper releases air pollutants. However, if new technology enabled zero-emission paper production, the marginal:

private cost would equal the marginal social cost.

You decide to start a house-painting business next summer. When you hire employees, you are involved in a(n) __________ market, and when you and your employees paint the houses, you are involved in a(n) __________ market.

factor; output

Chantelle grows tomatoes and sells them at the farmer's market. Because the price of tomatoes rises, she is encouraged to grow and sell more. This is an example of price functioning as a(n):

incentive.

You're performing a competitive analysis for Dove, a leading personal care brand in the United States. Your findings indicate a trend toward consumer preference for deodorants made with more naturally derived ingredients. Because of the high price competitors are receiving for natural deodorants, Dove follows your recommendation and enters the natural deodorant market by launching the Dove Care by Plants line. For Dove, the high price acted as a(n):

incentive.

You apply for a job, using a 3-D printer to make coffee mugs, that pays $15 an hour. The mugs sell for $4 each. Part of the hiring process is to demonstrate how good you are at making the mugs. You make an average of five acceptable mugs per hour. Will you get the job?

Yes, since your marginal revenue product is at least as large as your marginal cost.

Since the advent of the digital age, the demand for in-person telephone operators has fallen dramatically. Which factor would account for this development?

an increase in the number of automated answering services

External benefits are generated by garden supplies that are used to beautify gardens and yards in neighborhoods. In equilibrium, the market will:

price garden supplies at less than the marginal social benefit.

Permanent income is a person's:

average income over their lifetime

Which is NOT an example of a rule enacted to prevent negative externalities?

County governments fund public elementary schools through tax revenue.

Which statement illustrates an environmental policy that uses cap and trade?

allowing drivers to buy and sell rights to emit specified levels of vehicle emissions