M4

b. A regressive tax is one in which

the average tax rate decreases as income increases.

a. A progressive tax is one in which

the average tax rate increases as income increases.

c. A proportional tax is one in which

the average tax rate is constant as income increases.

Suppose that the projected lifetime earnings gains from migration exceed the costs of moving. If a person considers the present value of their lifetime earnings gains, this person would find

the discounted present value of their lifetime earnings gains would be lower than their lifetime earnings gains

The city of Joslyn has three sources of revenue: borrowing, proprietary income from running the local electric power utility, and taxes. Last year, its total revenue was $150 million. If it received $10 million from running the electric power utility and borrowed $40 million, how much did it collect in taxes? Assume Joslyn's total revenue is $150 million.

$100 million

Differences in productivity are usually the major force behind differences in wages and unit labor costs. Suppose that a single unskilled worker at a pottery factory in Mexico can produce 1 mug per hour. By comparison, suppose that a single unskilled worker at a pottery factory in the United States can produce 14 mugs per hour because more and better machinery generates higher labor productivity. The Mexican mugs and the American mugs are identical in quality and durability and sell for the same price. Assume a U.S. minimum wage of $7.25 per hour and a Mexican minimum wage of $0.644 per hour.

.64 .52 6.61 .13 no the united states the united states

Differences in productivity are usually the major force behind differences in wages and unit labor costs. Suppose that a single unskilled worker at a pottery factory in Mexico can produce 1 mug per hour. By comparison, suppose that a single unskilled worker at a pottery factory in the United States can produce 15 mugs per hour because more and better machinery generates higher labor productivity. The Mexican mugs and the American mugs are identical in quality and durability and sell for the same price. Assume the federal minimum wage in the United States is $7.25 per hour, and the minimum wage in Mexico is $0.875 per hour (U.S. dollar equivalent).

.88 .48 6.38 .39 no the united states the united states

Suppose that a city's energy demand is 30 megawatts during off-peak times and 40 megawatts at its peak. The city has been purchasing electricity from an outside company, but has decided to build its own power plants to satisfy all of its energy demand. The city can choose to build one or more of each type of plant to generate the needed electricity. There are three types of power plants: coal, natural gas, and hydroelectric. Each plant faces the following costs, as shown in the table.

1 coal plant and 1 hydro plant

Suppose that a city's energy demand is 80 megawatts during off-peak times and 100 megawatts at its peak. The city has been purchasing electricity from an outside company, but has decided to build its own power plants to satisfy all of its energy demand. The city can choose to build one or more of each type of plant to generate the needed electricity. There are three types of power plants: coal, natural gas, and hydroelectric. Each plant faces the following costs, as shown in the table.

1 coal plant and 1 hydro plant

Carrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The six makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 14 percent, 16 percent, 20 percent, and 13 percent.

1,706 364 yes 0

Carrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The six makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 13 percent, 17 percent, 20 percent, and 13 percent.

1,712 338 yes 0

A coal-fired power plant can produce electricity at a variable cost of $0.05 per kilowatt-hour when running at its full capacity of 30 megawatts per hour, $0.16 per kilowatt-hour when running at 20 megawatts per hour, and $0.24 per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of $0.12 per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $50 million, but it costs only $10 million to build a gas-fired plant.

1. 2 coal-fired plants and 4 gas-fired plants 140 0.07 0.08

Which of the following factors has contributed the most to increased income inequality since 1980?

1. An increase in the demand for high-skill and well-educated workers relative to lesser-skilled workers.

How would you expect antitrust authorities to react to: a. A proposed merger of Ford and General Motors.

1. They would block this horizontal merger because it violates Section 7 of the Clayton Act. 1. They would charge these firms with price-fixing, which violates Section 1 of the Sherman Act. 1. They would allow this vertical merger, unless both firms had very large market shares and the resultant merger would substantially lessen competition. 3. They would allow this conglomerate merger 1. They would not interfere with this price discrimination

Assume that two nations, Mocka and Raino, are both experiencing full employment. The current wage rate in Mocka is $26, while the current wage rate in Raino is $18. Use the table below to answer the questions that follow.

1. Two workers will move from Raino to Mocka 22 1. 70 to 78

a. The decision to migrate is

1. an investment decision based on differences in earnings. 2. the cost of getting to the country. 4. falls with distance and age 2. reduced benefits because of a decrease in the wage rate, but lower socialization costs.

a. Insurance rates for teenage males are higher than those for teenage females. This is an example of statistical discrimination because

1. people are judged on the basis of the average characteristics of the group to which they belong. 3. competition will reduce discrimination against workers in the long run.

Consider the statement: "There need be no trade-off between equality and efficiency. An 'efficient' economy that yields an income distribution that many regard as unfair may cause those with meager incomes to become discouraged and stop trying. So efficiency may be undermined. A fairer distribution of rewards may generate a higher average productive effort on the part of the population, thereby enhancing efficiency. If people think they are playing a fair economic game and this belief causes them to try harder, an economy with an equitable income distribution may be efficient as well." This statement assumes that

1. there is equal access to education and no job discrimination.

There is evidence that, all other things being equal, with a particular skill level leads to about a 4 percent decline in wages for workers with that skill level. In addition, this 10-to-4 ratio appears to hold true whether the increase in labor supply is caused by domestic changes in labor supply or by an influx of immigrant workers.

1.2 2.4

There is evidence that, all other things being equal, with a particular skill level leads to about a 4 percent decline in wages for workers with that skill level. In addition, this 10-to-4 ratio appears to hold true whether the increase in labor supply is caused by domestic changes in labor supply or by an influx of immigrant workers. Instructions: Round your answers to 1 decimal place. a. Suppose that 84,000 computer programmers work in Silicon Valley. If the number of computer programmers in Silicon Valley increases by 3,360 because of a change in U.S. immigration laws, by how many percentage points would you expect the wage of computer programmers to fall in Silicon Valley?

1.6 4.4

Suppose that you are given $50,000 to split between two people, Jane and Fred. The income and marginal utility for each of them is shown in the following table.

11000 39000

The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month.

1700 100 5.9 110 11,000 6,000

The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month. a. Suppose that for any accounting firm that hires either Ted or Jared, all the other costs of performing an audit (besides paying either Ted or Jared) come to $1,000 per audit. If the going rate that must be paid to hire an accountant is $9,000 per month, how much will it cost an accounting firm to produce one audit if it hires either Ted or Jared to do the work?

1900 100 5.3 110 11000 4000

a. A "brain drain" as it relates to international migration is when

2. highly educated workers in poor countries migrate to wealthier countries to increase the return on their human capital investment. 3. it could discourage investments in education

Consider the following statements: a. "Illegal immigrants take only jobs that no American wants." This statement is

2. misleading, because illegal immigrants may lower wages by increasing the supply of unskilled workers. 3. misleading, because if we deport 100,000 illegal immigrants, the supply of unskilled labor will decrease, wages will rise, and the quantity of labor demanded will fall.

a. The rulings in the Standard Oil and U.S. Steel cases indicate that

2. monopoly violations must involve intent through abusive and anticompetitive actions. 4. the size of the relevant market 3. differed in the remedy: dissolution of Standard Oil and required behavior changes for Microsoft.

For each of the events described below, identify the impact on immigration. a. The economy weakens.

3. The marginal benefit falls, and the optimal level of immigration occurs at point A 1. The marginal benefit rises, and the optimal level of immigration occurs at point C 4. The marginal cost rises, and the optimal level of immigration occurs at point B

Assume that two nations, Mocka and Raino, are both experiencing full employment. The current wage rate in Mocka is $20, and the current wage rate in Raino is $12. Use the table below to answer the questions that follow.

3. Two workers will move from Raino to Mocka 16 2. 62 to 70

Consider the differences between inheriting property and inheriting a high IQ. Income inequality is likely to be affected by

3. both types of inheritance, but property probably gives people a better advantage.

Comment on or explain: a. Endowing everyone with equal income will make for very unequal enjoyment and satisfaction. This statement is true if

3. everyone has identical diminishing-marginal-utility-of-money schedules 3. they exhibit a preference for present consumption over future consumption. 3. conservative view. 4. each dollar has a vote in the marketplace, and each person has a vote at the ballot box 1. higher marginal taxes may reduce the efforts of those at the top to work harder and produce more

The lifetime distribution of income is more equal than the distribution in any specific year because

3. the disparity of incomes in a single year reflects the income distribution at a point in time, but the income status of an individual varies throughout his or her lifetime.

The primary reason people immigrate to the United States is:

3. to improve earnings and living standards.

In a given year, many unskilled workers in the United States earned the federal minimum wage of $7.25 per hour. By contrast, average earnings in that same year were about $26 per hour, and certain highly skilled professionals, such as doctors and lawyers, earned $130 or more per hour.

3.59 17.93 5,200 290 65 1.63 260 6.50

In 2018, many unskilled workers in the United States earned the federal minimum wage of $7.25 per hour. By contrast, average earnings in 2018 were about $27 per hour, and certain highly skilled professionals, such as doctors and lawyers, earned $100 or more per hour.

3.72 13.79 4,000 290 50 1.25 200 5

Use the diagrams and the following assumptions to answer the questions below. (1) The demand for labor in Alta and Bono are shown by the curves DA and DB, respectively. (2) Alta's native labor force is 70,000 workers, while Bono's native labor force is 30,000 workers. (3) The wage rate in Alta is $20, and the wage rate in Bono is $40. (4) Full employment exists in both countries.

30; alta; bono 30;30 increase by 400,000 increased by 300,000

In 2019, Forbes magazine listed Jeff Bezos, the founder of Amazon, as the richest person in the United States. His personal wealth was estimated to be $131 billion. Given that there were about 328 million people living in the United States that year, how much could each person have received if Bezos's wealth had been divided equally among the population of the United States? (Hint: A billion is a 1 followed by nine zeros while a million is a 1 followed by six zeros.)

399.39

a. Which of the following statements regarding income distribution is true?

4. If income was distributed purely on the basis of need, there would be a disincentive to engage in production. 4. Conservatives favor equality of opportunity, whereas liberals argue that income redistribution is essential to achieve equality of economic opportunity 1. Income equity refers to how fairly income is distributed, while income equality measures the extent to which income shares for every quintile are the same 2. those who produce more deserve to be rewarded for their efforts

a. The essential difference between social insurance and public assistance programs is that social insurance programs provide

4. aid to those who are retired or suffering from temporary distress, whereas public assistance programs provide benefits for those who are unable to earn income 3. it is targeted at low-income working families

Consider the effects on the output and income gains from immigration shown by the simple immigration model based on the following scenarios. a. If there is unemployment in the originating nation,

4. output may not fall after migration because some of these workers may have been already idle. 2. income in the immigrants' home country may not fall 3. changes in output in the home country may not be severe

In September 2018, The Wall Street Journal (WSJ) reported that a growing shortage of labor in Eastern European countries such as Hungary was driving up wages and reducing business income. The reason for the shortages was a large migration of Eastern European workers to Western European countries. According to the simple immigration model, the supply of workers will

4. rise in Western European countries and fall in Eastern European countries until the wage rates become more equal.

a. Many state and local governments are greatly concerned about the federal government's allegedly lax enforcement of the immigration laws and congressional proposals to grant legal status (amnesty) to illegal immigrants in the United States. This is because

4. the fiscal impact on local and state governments could average as much as $19,500 per household per year. 2. exacerbate the flow of future border crossings

Migration between North Korea and South Korea has been prohibited since the end of the Korean War in 1953. South Korea is now much richer than North Korea and has a much higher marginal product of labor and a much higher wage rate than North Korea. If workers could migrate from North Korea to South Korea, we would expect:

4. total combined output in the two countries to rise.

Mexico has labor laws that specify a daily (rather than hourly) minimum wage. In 2018, the daily minimum wage in Mexico was about 103 pesos per day, and the exchange rate between Mexican pesos and U.S. dollars was about 20 pesos per dollar.

5.15 .64 11.3 the United States

n 2017, an estimated 7.7 million Mexican-born immigrants were employed in the United States. a. If 60 percent of the Mexican-born immigrants remitted money to family members in Mexico in 2017, and if they each sent $100 per month, how much money did they remit in total in 2017?

5.544 23.1 446.94

In a given year, an estimated 7.8 million Mexican-born immigrants were employed in the United States. a. If 65 percent of the Mexican-born immigrants remitted money to family members in Mexico in the same year, and if they each sent $100 per month, how much money did they remit in total for the year?

6.084 22.5 335.78

Mexico has labor laws that specify a daily (rather than hourly) minimum wage. Suppose that the daily minimum wage in Mexico was about 70 pesos per day, and the exchange rate between Mexican pesos and U.S. dollars was about 10 pesos per dollar.

7 .88 8.3 the United States

Suppose you earn $40,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 10 percent, ranges from $0 to $20,000. The second tax bracket, which taxes at 25 percent, ranges from $20,001 to $80,000. How much will you pay in total taxes?

7,000

Suppose you earn $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 5 percent, ranges from $0 to $30,000. The second tax bracket, which taxes at 20 percent, ranges from $30,001 to $120,000. How much will you pay in total taxes?

7,500

Suppose that you are given $20,000 to split between two people, Jane and Fred. The income and marginal utility for each of them is shown in the following table.

7000 13000

For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on “taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $70,000 last year in wages, earned $10,000 from investments, and received a gift of $5,000 from your grandmother. Also assume that you are a single parent with one small child living with you.

85,000 71,900 64,200 45,850 5,113.88 12 3,113.88 6.8 3.7

a. Which of the following statements is true?

Exhaustive expenditures use resources, whereas nonexhaustive expenditures change the ownership of financial resources

Which of the following markets is most likely to be a natural monopoly?

Mass-transportation service

a. Does a progressive tax system by itself guarantee that resources will be redistributed from the rich to the poor?

No, not if the tax revenue is returned to the rich.

Suppose that you hear two people arguing about energy. One says that we are running out of energy. The other counters that we are running out of cheap energy. Based on your economic study, which of the following is correct?

There will always be sources of energy available, but some forms will be more expensive than those we have now.

In which case did the court establish the so-called rule of reason?

US steel case

Suppose a tax is such that an individual with an income of $10,000 pays $2,000 of tax, a person with an income of $20,000 pays $6,000 of tax, a person with an income of $30,000 pays $10,000 of tax, and so forth.

a. What is each person's average tax rate? b. Is this tax regressive, proportional, or progressive? - progressive

Suppose a tax is such that an individual with an income of $10,000 pays $2,000 of tax, a person with an income of $20,000 pays $3,000 of tax, a person with an income of $30,000 pays $4,000 of tax, and so forth

a. What is each person's average tax rate? b. Is this tax regressive, proportional, or progressive? - regressive

a. If the current market price rises, all else equal, current extraction will

a. increase b. decrease c. assure that resources are extracted when their economic value is greatest

Identify whether each of the following taxes is progressive or regressive.

a. progressive b, c, d. regressive

Resource consumption per person in the United States is either flat or falling, depending on the resource. Yet living standards are rising because of technological improvements that allow more output to be produced for every unit of input used in production. a. This fact implies that society is

a. unlikely to run out of resources.Not attempted b. we could maintain or improve our living standards because of technological advances.

a. According to Thomas Malthus's theory of human reproduction,

as living standards rise above subsistence levels, the population will grow

Given the inelasticity of cigarette demand, an excise tax on cigarettes will fall on

consumers, and the efficiency loss will be relatively small.

Layla earns wages of $29,500 per year. She qualifies for about $7,500 in housing credits, which raises her overall income to $37,000. Housing credits are withdrawn for anyone earning more than $30,000 per year.

decrease by 5500 6000 higher

i. The portion of the payroll tax levied on employers is

difficult to determine without knowing the relative labor supply and demand elasticities.

True or False. Because older adults have more human capital, they are more likely to migrate to another country than younger adults.

false

True or False. Research indicates that immigration causes large decreases in the average American wage.

false

True or False. The MB = MC level of immigration is likely to be achieved if we simply let in every person who wishes to immigrate to the United States.

false

True or false. If women are crowded into elementary education and away from fire fighting, wages in fire fighting will tend to be lower than if women weren't crowded into elementary education.

false

Which of the following statements are true? Which are false? a. More immigrants arrive to the United States each year illegally than legally.

false false false false

Each year, the number of legal immigrants to the United States is __________ the number of illegal immigrants.

greater than

Answer the following questions. a. Suppose initially that immigrant labor and native-born labor are complementary resources. If immigrant labor and native-born labor are complementary and there is substantial immigration of new workers, the demand for native-born workers will

increase decrease

In the taste-for-discrimination model, an increase in employer prejudice against African American workers would cause the discrimination coefficient to _____________ and the demand curve for African American labor to shift _____________.

increase; left

Eric and Kyle are fishermen with different equipment and, as a result, different costs for catching fish. Eric's costs for catching fish are $1,000 per ton for the first 5 tons and then $2,500 per ton for any additional tons. Kyle can harvest fish at a cost of $3,000 per ton for the first 15 tons and then $1,400 for any additional tons.

kyle 66,000 2,200 5 25 64,000 2,133.33 22,500 23,750 500

Use the accompanying tables for Neon and Zeon to answer the questions that follow. Assume that the wage rate shown equals hourly output and income. Also assume that the accumulated output and income are the sum of the marginal revenue products (MRPs) of each worker.

neon 40 55 3 4. Any more movement would give them a lower wage than they can earn in their home country. 13 13 85 28 18 neon zeon fall and rise

After mining 9,273 tons of coal, Blue Sky Mining's managers note that the marginal cost of mining the next ton of coal would be $40 per ton. They also calculate that the user cost of mining that next ton of coal would be $35. If the market price of coal is $72, should Blue Sky mine an additional ton of coal?

no

b. Malthus's theory works best for

nonhuman life forms, because they lack any ability to reason

The efficiency loss of imposing an excise tax is due to:

producing and consuming fewer units

Suppose that the United States has a Gini ratio of 0.41 while Sweden has a Gini ratio of 0.31. Which country has a more equal distribution of income?

sweden

Suppose that the last dollar that Victoria receives as income brings her a marginal utility of 10 utils while the last dollar that Fredrick receives as income brings him a marginal utility of 15 utils. If our goal is to maximize the combined total utility of Victoria and Fredrick, we should:

redistribute income from Victoria to Fredrick

a. The poverty rate could fall while the number of people in poverty rises if

the number of persons in total increases more than the number of persons in poverty children african americans hispanics

Which of the following markets is most likely to be a natural monopoly?

water service

a. A firm charged with violating the Clayton Act, Section 7, might try arguing that the products sold by the merged firms are in separate markets because

2. this would reduce the likelihood that competition would be affected 4. a violation of Section 2 requires behavior that indicates intent to monopolize

Kara and Kyle are competing sockeye salmon fishers. They have been allocated ITQs (individual transferable quotas) that limit their total catch to 2,000 tons of sockeye salmon per fisher. Kara's costs for catching salmon are $8 per ton, and Kyle's costs are $12 per ton.

20,000 7 3 28,000

An industry consists of fifty firms, each with a market share of 2 percent. Assume there is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. a. If twenty of these firms seek to merge, the Herfindahl index would change from

200 to 1,720 4. be challenged, because of the substantial change in the Herfindahl index only

Suppose there are five firms in an industry and the firms have been found guilty of violating antitrust laws. As a result, the government has ordered the five firms to split into ten smaller firms that will share the market equally.

2000 to 1000

Suppose that the current (first) generation consists of 1 million people, half of whom are women. Assume the total fertility rate is 1.3 and the only way people die is of old age.

274,625 35% 72.53% 3. A fertility rate of 1 would cut each successive generation in half, so a fertility rate of 1.3 should lead to a relatively large decline in population.

The table shows the quantity of gold bars (in thousands) and the extraction cost per gold bar (in dollars) for the Acme Company. Use these data to answer the questions below. a. If the user cost is $15,000 and the current price of a gold bar is $50,000, how many bars (in thousands) should Acme Company extract and sell this year in order to maximize profits?

3,000 2,000

A coal-fired power plant can produce electricity at a variable cost of 4 cents per kilowatt-hour when running at its full capacity of 30 megawatts per hour, 16 cents per kilowatt-hour when running at 20 megawatts per hour, and 24 cents per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of 12 cents per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $50 million, but it costs only $10 million to build a gas-fired plant.

3. 2 coal-fired plants and 4 gas-fired plants 140 million 6 7

Which of the following would cause the present optimal extraction level of a nonrenewable resource to rise?

3. A decrease in the user cost of the resource.

An administration that believes competitive forces will resolve any monopoly problems believes in the process of

3. creative destruction, and will likely take a laissez-faire perspective to resolving monopoly problems.

The socially optimal price Pr, found where D and MC intersect, will result in an efficient allocation of resources. But the socially optimal price may entail losses for the monopoly. The fair-return price Pf will allow the monopolist to break even but will not fully correct the underallocation of resources. Consider the figure above. Assume that a marginal-cost pricing policy does not entail public subsidies. a. The socially optimal (marginal-cost) pricing is subject to

3. fewer regulatory problems, but it gives firms an incentive to artificially inflate marginal-cost estimates. 3. allocative efficiency can be achieved, but there is no incentive to seek cost reductions.

a. Industrial regulation is concerned with

3. prices, output, and profits in specific industries, whereas social regulation deals with the broader impact of business on consumers, workers, and third parties 3. increased worker and product safety. 4. administrative and compliance costs

Kara and Kyle are competing sockeye salmon fishers. They have been allocated ITQs (individual transferable quotas) that limit their total catch to 2,000 tons of sockeye salmon per fisher. Kara's costs of catching salmon are $10 per ton, and Kyle's costs are $14 per ton.

32,000 10 6 40,000

LAST WORD The figure in the Last Word section shows that a 10-fold increase in a country's GDP per person is associated with about a 20-point increase in EPI. However, GDP per person was $53,342 in the United States in 2018 but $35,271 in New Zealand; yet New Zealand had an EPI score of 75.96, while the United States had an EPI score of only 71.19.

4. No, because there are many other factors that may influence environmental quality

ADVANCED ANALYSIS User cost is equal to the present value of future profits in the model presented in the figure below.

4. fall, increasing the optimal quantity of current extraction 1. extract now and have current profits to invest rather than waiting to extract in the future.

It would cost the town of Irondale $50 million to build a gas-powered generator that could produce a maximum of 5 megawatts of electricity at 15 cents per hour. Another alternative is for Irondale to build a $100 million coal-fired generator that could produce a maximum of 15 megawatts of electricity at 5 cents per hour. Irondale should:

4. obtain more information before deciding what to do

When confronted with a natural monopoly that restricts output and charges monopoly prices, the two methods that governments have for promoting better outcomes are:

4. public ownership and public regulation

Ingvar and Olaf are the only two fishermen in their area. Each has been assigned an ITQ that allows him to catch 20 tons of salmon. Ingvar's MC of catching salmon is $6 per ton while Olaf's MC of catching salmon is $7 per ton. If the price of salmon is $10 per ton, then to maximize efficiency, the two fishers should trade ITQs until Ingvar is in charge of catching _____ tons while Olaf catches _____ tons.

40; 0

Suppose that the current (first) generation consists of 2 million people, half of whom are women. Assume the total fertility rate is 1.2 and the only way people die is of old age.

432,000 40.00% 78.40% 1. A fertility rate of 1 would cut each successive generation in half, so a fertility rate of 1.2 should lead to a relatively large decline in population.

Suppose that Sea Shell Oil Company (SS) is pumping oil at a field off the coast of Nigeria. At this site, it has an extraction cost of $30 per barrel for the first 5 million barrels it pumps each year and then $60 per barrel for all subsequent barrels that it pumps each year, up to the site's maximum capacity of 90 million barrels per year.

5 425 75 90 7.8 1.5 0 0 0

c. Which of the following statements is true?

Redistribution of income by government—transfer payments—would be impossible with the benefits-received principle.

True or False. The incidence of property taxes that are levied on rented houses and apartments is high—meaning that those property taxes are paid almost entirely by the landlords.

false

True or False: Economists believe that social regulation is an exception to the MB = MC rule because social regulation should in every case extend as far as possible in order to ensure safe products, less pollution, and improved working conditions.

false

True or False: Under the "rule of reason" established by the Supreme Court in the U.S. Steel case, a monopoly seller should be found guilty of violating antitrust laws even if it is charging low prices to consumers and acting the same way a competitive firm would act.

false

Recall the model of nonrenewable resource extraction presented in the figure below.

increase future profits, increasing the user cost for present extraction, which decreases current extraction. it will be more profitable to extract in the present, and current extraction will increase. more now if extraction is more profitable and more later if the profitability of future extraction improves.

b. Is the tax system in the United States progressive, regressive, or proportional?

progressive

Identify whether each of the following taxes is progressive or regressive and indicate in each case where you think the tax incidence lies. d. The federal personal income tax is

progressive, and the incident is on the taxpayer.

h. The federal corporate income tax is

proportional, if the incidence is on shareholders.

The nation of Upstandia uses kroner for money, and its tax code is such that a person making 100,000 kroner per year pays 40,000 kroner per year in income taxes; a person making 200,000 kroner per year pays 70,000 kroner per year in income taxes; and a person making 300,000 kroner per year pays 90,000 kroner per year in income taxes. Upstandia's income tax system is:

regressive

Suppose that Carson earns $100,000 per year. Now suppose that he must pay income taxes according to the tax schedule shown below.

regressive 15,600 10% 16%

f. A federal excise tax on automobile tires is

regressive, and the incident is on the consumer

g. A municipal property tax on real estate is

regressive, and the incident is on the consumer if the property is used in business.

e. A 4 percent state general sales tax is

regressive, and the incident is on the consumer.

In which case was the company found guilty of monopolizing through a series of abusive and anticompetitive actions?

standard oil case

d. Other things equal,

the greater the elasticities of demand and supply, the greater the efficiency loss of a particular tax

b. According to the ability-to-pay principle of taxation,

the higher one's income, the higher the tax, and the higher the percentage of one's income paid in tax

a. There will be a greater incidence of an excise tax on consumers

the less elastic the demand.

b. There will be a greater incidence of an excise tax on consumers

the more elastic the supply.

A community has a nighttime energy demand of 50 megawatts but a peak daytime demand of 75 megawatts. It has the chance to build a 90-megawatt coal-fired plant that could easily supply all of its energy needs even at peak daytime demand. Before deciding whether it should proceed, the community should consider

the relatively higher fixed costs of a coal-fired plant versus the operating costs of the alternatives

a. According to the benefits-received principle of taxation,

those who make use of government services should pay for them

c. The efficiency loss of a tax is the net benefit society gives up because

too little of the product is produced.

A proposed merger of firms that will simultaneously lessen competition and reduce unit costs through economies of scale should be allowed if

2. the price reductions associated with the decrease in unit costs outweigh the increase in price associated with the reduced level of competition in the industry.

a. Which of the following statements is true?

1. The Sherman Act prohibits conspiracies to restrain trade 1. The Department of Justice, the Federal Trade Commission, and state attorney generals. 2. Private firms can bring antitrust suits against other firms under antitrust laws

Various cultures have come up with their own methods to limit catch size and prevent fishery collapse. In old Hawaii, certain fishing grounds near shore could be used only by certain individuals. And among lobstermen in Maine today, strict territorial rights are handed out so that only certain people can harvest lobsters in certain waters.

1. at a sustainable rate 1. are more difficult and costly the further the fishing moves from shore

a. What types of industries should be subjected to industrial regulation?

1. natural monopolies 4. Industrial regulation can create disincentives to minimize costs and diminish the competitiveness of the industry.

a. The Gini ratio is

1. the area between the diagonal line and the Lorenz curve divided by the total area below the diagonal line. 2. a perfectly unequal income distribution will have a Gini ratio of 1 4. more equal 1. bow further away from the diagonal line

Consider the statement: "The social desirability of any particular firm should be judged not on the basis of its market share but on the basis of its conduct and performance." This statement ignores the likelihood that

1. well-behaved monopolies may still be inefficient.

Suppose that Sea Shell Oil Company (SS) is pumping oil at a field off the coast of Nigeria. At this site, it has an extraction cost of $30 per barrel for the first 10 million barrels it pumps each year and then $60 per barrel for all subsequent barrels that it pumps each year, up to the site's maximum capacity of 90 million barrels per year.

10 600 100 90 5.7 1.2 0 0 0

An industry consists of ten firms, each with a market share of 10 percent. Assume there is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. a. If five of these firms seek to merge, the Herfindahl index would change from

1000 to 3000 2. be challenged, because of the value of the new Herfindahl index and the substantial change in the index.

The table shows the quantity of gold bars (in thousands) and the extraction cost per gold bar (in dollars) for the Acme Company. Use these data to answer the questions below.

2,000 1,000

Which of the following would cause the present optimal extraction level of a nonrenewable resource to fall?

2. A reduction in the price of the resource.

Both antitrust policy and industrial regulation deal with monopoly. a. Which of the following statements is true regarding the two approaches?

2. One approach is to maintain competition using antitrust laws. The other approach is government regulation of the firm, which is used in cases of natural monopoly. 3. analyzing the structure and other characteristics of the industry.

In the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink market, proposed to acquire the Seven-Up Company. Shortly thereafter, the Coca-Cola Company, with 39 percent of the market, indicated it wanted to acquire the Dr. Pepper Company. Seven-Up and Dr. Pepper each controlled about 7 percent of the market. The government's decision to block these mergers was

2. appropriate, because the proposed merged companies would have resulted in a Herfindahl index well over the guidelines used by the federal government for horizontal mergers

Aquaculture is the growing of fish, shrimp, and other seafood in enclosed cages or ponds. The cages and ponds not only keep the seafood from swimming away but also provide aquaculturists with strong property rights over their animals. These property rights provide

2. more incentive to care for the fish and to lower production costs than would occur with open-water fishing.

ADVANCED ANALYSIS Suppose that a government wants to reduce its economy's dependence on coal and decides as a result to tax coal-mining companies $1 per ton for every ton of coal that they mine.

2. reduce current extraction. 3. increase future extraction costs, lower future profits, and reduce the user cost 1. shift the EC curve and the TC curve up by the amount of the tax, but the decrease in user cost (UC) will shift it back down by less than the tax. 4. less current extraction than a permanent environmental tax.

The long-run downward trend in commodity prices is consistent with the idea that:

2. resource supplies have increased faster than resource demands

The optimal amount of product safety in automobiles may be less than the amount that would totally eliminate the risk of accidents and deaths if

2. the average cost of providing the extra units of safety is less than the expected average benefit received from the extra safety.

Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be __________, and his average tax rate for his entire income will be __________.

50 percent; less than 50 percent

Suppose there are two firms in an industry and both firms have been found guilty of violating antitrust laws. As a result, the government has ordered the two firms to split into eight smaller, competing firms that will share the market equally.

5000 to 1250

Suppose that there are only three types of fruit sold in the United States. Annual sales are 1 million tons of blueberries, 5 million tons of strawberries, and 10 million tons of bananas. Suppose that of those total amounts, the Sunny Valley Fruit Company sells 900,000 tons of blueberries, 900,000 tons of strawberries, and 7.9 million tons of bananas.

90 yes 30 no 61 yes

Suppose that there are only three types of fruit sold in the United States. Annual sales are 1,200,000 tons of blueberries, 5,400,000 tons of strawberries, and 11,000,000 tons of bananas. Suppose that of those total amounts, the Sunny Valley Fruit Company sells 1,100,000 tons of blueberries, 900,000 tons of strawberries, and 8,500,000 tons of bananas.

91.67 yes 30.30 no 59.66 likely

Demographers have been surprised that total fertility rates have fallen below 2.0, especially because most people in most countries tell pollsters that they would like to have at least two children. What economic factors may be motivating women in so many countries to average fewer than two children per lifetime?

Greater participation by women in the paid labor force

c. Does the tax-spending system in the United States redistribute resources from higher-income earners to lower-income earners?

Yes, because the tax-spending system in the United States is progressive.

Is it possible for a country with a regressive tax system to have a tax-spending system that transfers resources from the rich to the poor?

Yes, if the poor get more in spending than they pay in taxes.

b. An example of a government transfer payment is

a subsidy to a large corporation.

Use the circular flow diagram above to identify the portions of the circular flow that impact the allocation of resources and the distribution of income based on the following government actions.

a. 1, 3, 4, 5, 6, 11, 12 b. 1, 5, 6, 11 c. 7, 9, 8, 12 d. 1, 2, 3, 4, 11, 12

Suppose in Fiscalville there is no tax on the first $10,000 of income, but there is a 20 percent tax on earnings between $10,000 and $20,000 and a 30 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 40 percent.

a. 13,000 b. 40% c. 26% d. yes

For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on "taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $60,000 last year in wages, earned $10,000 from investments, and received a $5,000 gift from your grandmother. Also assume that you are a single parent with one small child living with you.

a. 75,000 b. 61,900 c. 55200 d. 36850 e. 4033.88; 12% f. 2033.88; 5.5%; 2.7%

Suppose in Fiscalville there is a 5 percent tax on the first $10,000 of income, but there is a 15 percent tax on earnings between $10,000 and $20,000 and a 25 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 35 percent.

a. 8,000 b. 35% c. 20% d. yes