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2013 Ch 17-19 9 10 sample questions

Multiple ChoiceIdentify the choice that best completes the statement or answers the question.

____ 1. When studying pollution and the environment, economistsa. have no role to play.b. concentrate on the physical aspects of the environment.c. emphasize costs and benefits.d. attempt to reduce pollution at all costs.e. think pollution is good if it occurs when production takes place.

____ 2. When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism, the destruction of the trails is an example ofa. an external cost.b. a private cost.c. a government cost.d. an external benefit.e. None of the above answers is correct.

____ 3. If the marginal external cost of building a children's playground equals zero, then the marginali. private cost equals the marginal social cost.ii. social cost equals zero.iii. private cost equals zero.

a. i only.b. ii only.c. iii only.d. ii and iii.e. i and ii.

____ 4. Which of the following is true?a. MSC = MC + Marginal external cost.b. MC = Marginal external cost – MSC.c. MC = Marginal external benefit + MSC.d. MSC = Marginal external cost + marginal external benefit.e. MSC = Marginal external cost – marginal external benefit.

____ 5. The marginal social cost, MSC, of producing a good or service equalsa. MC + MB.b. MB + marginal external cost.c. MB + marginal external benefit.d. MC + marginal external cost.e. MC + marginal external cost - marginal external benefit.

____ 6. The marginal cost incurred by the entire society to produce a good or service is the marginala. external cost.b. private cost.c. social cost.d. social benefit.e. private benefit.

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____ 7. The marginal external cost and marginal private costa. are all borne by the seller.b. are opportunity costs.c. when added, equal the sum of the marginal private benefit plus the marginal social

benefit at equilibrium.d. are regulated by the government.e. must always be equal in equilibrium.

____ 8. If the production of a good causes an external cost, then the efficient quantity isa. the quantity at which the marginal benefit equals marginal cost.b. less than the quantity at which the marginal benefit equals the marginal cost.c. more than the quantity at which the marginal benefit equals the marginal cost.d. the quantity at which the marginal private benefit is greater than the marginal social

benefit.e. None of the above answers is correct.

____ 9. If a good has an external cost, thea. competitive market outcome is efficient.b. marginal private cost reflects the external cost.c. competitive market outcome is inefficient.d. marginal social benefit is equal to the marginal social cost when the market is in

equilibrium.e. external benefit must equal the external cost.

____ 10. The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. Suppose the marginal private cost of the 5th concert is $10,000. Then, for the 5th concert, the marginala. external cost equals $30,000.b. social cost equals $30,000.c. external cost equals the marginal private cost.d. external cost equals $40,000.e. external cost equals $10,000.

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____ 11. Legally established titles to the ownership, use, and disposal of factors of production are referred to asa. property rights.b. Coase rights.c. pollution rights.d. emission rights.e. price-setting rights.

____ 12. When transactions costs are low and the problem of external costs is resolved through private negations, the theorem that applies is known as thea. property rights theorem.b. emission rights theorem.c. pollution rights theorem.d. Coase theorem.e. private-market efficient theorem.

____ 13. The Coase Theorem suggests thata. if property rights exist and are enforced, private transactions are efficient.b. the Coase solution will work only for large groups.c. if transaction costs are high, negotiations between parties involved likely will succeed in

eliminating the externality.d. in the case of an external cost such as pollution, private transactions are efficient only if

the property right is given to the victim of the external cost.e. in the case of an external cost such as pollution, private transactions are efficient only if

the property right is given to the firm producing the external cost.____ 14. If a producer must pay his pollution costs because property rights have been assigned, then

a. pollution will be completely eliminated.b. the supply curve will shift rightward as the new costs are added.c. the supply curve will shift leftward as the new costs are added.d. consumers will now consume more of the good because the external costs are reduced.e. there is no longer any marginal benefit from the good or service being produced.

____ 15. If your neighbor leaves junk cars in his yard, creating an eyesore for you, according to the Coase theorema. you and your neighbor can come to a mutually agreeable solution, provided the

transaction costs are high.b. you and your neighbor will have to go to court to solve the problem.c. a private solution to the externality can come about, provided the transaction costs are

low.d. private solutions to externalities are not possible.e. there is no externality only if you have been assigned the property right to the yard.

____ 16. Transactions costs are thea. costs of using the Coase theorem.b. opportunity costs of conducting a transaction.c. external marginal costs of the externality.d. reason why taxes cannot alter the inefficiency resulting from an external cost.e. external costs when a firm pollutes.

____ 17. Three methods the government can use to cope with external costs area. taxes, subsidies, and outright bans.b. taxes, regulations, and subsidies.c. marketable permits, subsidies, and taxes.d. emission charges, marketable permits, and taxes.e. vouchers, subsidies, and taxes.

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____ 18. Government taxation of an industry that creates pollutioni. decreases the pollution.ii. increases the price of the product produced by the firms.iii. decreases the quantity of the good produced.

a. i only.b. ii only.c. ii and iii.d. i and iii.e. i, ii, and iii.

____ 19. Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. In the absence of any government regulation, how many tons of leather will be produced?a. 0 tonsb. 200 tonsc. 300 tonsd. more than 300 tonse. None of the above answers is correct.

____ 20. Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government regulates the market so that it achieves efficiency, how many tons of leather will be produced?a. 0 tonsb. 200 tonsc. 300 tonsd. more than 300 tonse. more than 0 tons and less than 200 tons

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____ 21. The government can aid in reducing pollution by using marketable permits, which means thata. polluters are taxed on the amount of pollution they discharge.b. emission charges are established by the EPA.c. each polluter is assigned a pollution limit and is given tradable permits that allow this

amount of pollution.d. only some producers pollute and the others go out of business.e. each polluter is assigned the property right to its pollution.

____ 22. Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution. If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, thena. Firm B sells its permits to Firm A for a price above $6,000.b. Firm A sells its permits to Firm B for a price below $6,000.c. Firm A sells its permits to Firm B for a price above $6,000.d. Firm B sells its permits to Firm A for a price below $6,000.e. neither Firm A nor Firm B sell permits because neither have extra permits.

____ 23. A tax on a polluting industrya. is not desirable because it reduces efficiency.b. leads to less output in this industry.c. causes more resources to be used in the polluting industry.d. shifts the marginal (private) benefit curve leftward.e. shifts the marginal (private) benefit curve rightward.

____ 24. The figure above illustrates the gasoline market. There is no external benefit from gasoline. If this market is left unregulated and no tax is imposed, the equilibrium quantity of gasoline isa. 0 gallons.b. 5 million gallons.c. 10 million gallons.d. 20 million gallons.e. 15 million gallons.

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____ 25. The figure above shows the market for the chemical hydrogen sulfide, the production of which creates an external cost. The government imposes the tax shown in the figure. How much tax revenue does the government collect?a. $640 millionb. $320 millionc. $240 milliond. More than $640 millione. Zero because the government has taxed the firms out of business.

____ 26. The figure above shows a tax imposed on a good with an external cost. The area of the rectangle abcd equalsa. the MSB.b. the total tax revenue collected by the government.c. the amount of pollution tax per ton.d. the MC.e. the deadweight loss.

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____ 27. The additional benefit that Marvin gets from being vaccinated against the flu is known as thea. external benefit.b. marginal private benefit.c. private cost.d. social cost.e. marginal social benefit.

____ 28. The benefit that Joan gets from eating cherries is an example ofa. when the external benefit equals the private benefit.b. a private benefit.c. an external benefit.d. an external cost.e. the marginal social cost of eating cherries.

____ 29. The sum of the marginal private benefit and the marginal external benefit derived from eco-tourism in British Columbia is called thea. total private benefit.b. net gain.c. total external benefit.d. marginal social benefit.e. total Coase benefit.

____ 30. The figure above shows the market for college education. The efficient quantity of education isa. 0 students.b. 4 million students.c. 6 million students.d. more than 6 million students.e. more than 4 million students and less than 6 million students.

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____ 31. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the equilibrium price of private education isa. $12,000.b. $16,000.c. $20,000.d. $4,000.e. $6,000.

____ 32. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the deadweight loss equalsa. 0.b. $800,000.c. $1,600,000.d. more than $1,600,000.e. more than $800,000 and less than $1,600,000.

____ 33. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the marginal social benefit of private elementary education equaled the marginal social cost, the deadweight loss in Chicago's private education market would equala. 0.b. $800,000.c. $1,600,000.d. more than $1,600,000.e. more than $800,000 and less than $1,600,000.

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____ 34. A government subsidya. is a policy that can be used to help eliminate the deadweight loss from an external cost.b. can help achieve an efficient amount of output when the good has an external benefit.c. increases consumers' marginal benefit from the good.d. Both answers A and C are correct.e. Both answers B and C are correct.

____ 35. A government subsidy paid to a firmi. increases the demand for the good.ii. has no effect on the supply of the good.iii. leads to an increase in the equilibrium quantity.

a. i only.b. i and ii.c. ii only.d. iii only.e. i and iii.

____ 36. The figure above shows the market for education, a good possessing an external benefit. In order to attain the efficient number of students, a government subsidy must equal ____ per student.a. $2,000b. $8,000c. $6,000d. $10,000e. $16,000

____ 37. An example of a program that uses vouchers isa. the federal food stamp program.b. the establishment of public universities.c. the program that grants tax breaks for firms undertaking abatement of pollution.d. the patent system.e. All of the above answers are correct.

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____ 38. The use of vouchers for educationa. decreases the demand for education and increases the equilibrium quantity.b. increases the demand for education and increases the equilibrium quantity.c. increases the deadweight loss for those who can't afford schooling.d. decreases the quantity provided to the efficient level.e. decreases the demand for education and decreases the equilibrium quantity.

____ 39. The figure above shows an education market in which the government is providing households with vouchers. What is the dollar value of a voucher in this market?a. $4,000b. $8,000c. $12,000d. $16,000e. None of the above answers is correct.

____ 40. The figure above shows an education market in which the government is providing households with vouchers. In total, how much do the schools receive for a student?a. $4,000b. $8,000c. $12,000d. $16,000e. $20,000

____ 41. A patent is defined as aa. token from the government that allows consumption of a good or service.b. provision of a good or service by a public entity.c. payment made by the government to a private producer.d. government-sanctioned right to produce a good or service.e. voucher given to a producer.

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____ 42. Which theorem is the government applying when it grants patents and copyrights to creators for their intellectual property?a. the Coase theoremb. the public subsidy theoremc. the voucher theoremd. the public provision theoreme. the patent theorem

____ 43. Patents and copyrightsa. encourage invention at no cost to the market.b. discourage invention and innovation.c. encourage invention and innovation at the cost of monopoly.d. can be used to correct an external cost.e. can be used to help decrease the deadweight loss from monopoly.

____ 44. In a market with an external cost, government actiona. cannot decrease the amount of the deadweight loss from the external cost.b. can sometimes help to achieve an efficient outcome.c. cannot alter firms' cost curves.d. Both answers A and C are correct.e. Both answers B and C are correct.

____ 45. The benefit of patents is that they ____ while the cost of patents is that patents ____.a. create a monopoly; enforce property rightsb. enforce property rights; assign property rights but fail to enforce themc. assign property rights; create excessive competitiond. encourage innovation; assign property rightse. encourage innovation; create a monopoly

____ 46. Which of the following goods is nonexcludable?a. a lighthouseb. pay-per-view televisionc. a restaurant meald. a college educatione. a cow grazing in a pasture

____ 47. The fact that technology prevents Sam in Nevada from using the email account of Samantha in Virginia is an example ofa. a good that is nonexcludable.b. a good that is excludable.c. a public good.d. the free-rider problem.e. the tragedy of the commons.

____ 48. One person's rental of the movie Batman Begins prevents someone else from renting. This is an example ofa. a public good.b. the rival nature of consumption.c. the nonrival nature of consumption.d. nonexcludable goods.e. a common resource.

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____ 49. A basketball game aired as a pay-per-view show by your local cable network and to which you can invite your friends to watch is a ____ good.a. rivalb. nonrivalc. nonexcludabled. rival and nonexcludablee. quasi public/quasi private

____ 50. A good that is ____ and ____ is a ____.a. rival; excludable; private goodb. rival; excludable; public goodc. nonrival; excludable; public goodd. rival; nonexcludable; private goode. nonrival; nonexcludable; private good

____ 51. Which of the following is the best example of a private good?a. a can of Mountain Dewb. a missile defense systemc. a library in St. Louisd. a sidewalk in Fargoe. a cod fish swimming in the middle of the ocean

____ 52. If a good or resource is rival, it could be aa. public good.b. private good.c. common resource.d. Both answers B and C are correct.e. Both answers A and C are correct.

____ 53. An example of a common resource is aa. bridge.b. non-crowded movie theater.c. tuna in the ocean.d. national defense.e. All of the above answers are correct.

____ 54. The free-rider problemi. means that people can consume a good without paying for it.ii. means that people pay too much for a good in order to consume it.iii. applies to a public good.

a. i onlyb. iii only.c. i and iid. ii and iiie. i and iii

____ 55. Because national defense is potentially subject to free riding, a private sector market for national defense would lead toa. the efficient amount of national defense if there is free riding.b. more than the efficient amount being produced if there is free riding.c. less than the efficient amount being produced if there is free riding.d. less than the efficient amount being produced if there is not free riding.e. None of the above answers is correct.

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____ 56. A library is a public good. The marginal cost curve for libraries in Lafayette, Californiaa. has a negative slope.b. is definitely a horizontal line.c. has a positive slope.d. is a vertical line.e. is identical to the marginal benefit curve because libraries are nonrival.

____ 57. To determine the efficient quantity of a public good to supply,a. the private firms that will produce the good each produce the exact same quantity.b. marginal benefit and marginal cost are equated, the same as is done to determine the

efficient quantity of a private good.c. total benefit is equated to total cost, the same as is done to determine the efficient

quantity of a private good.d. politicians use the principle of maximum differentiation.e. marginal benefit must exceed marginal cost by as much as possible.

____ 58. To achieve the efficient level of national defense,a. the government could provide national defense because it is a public good.b. private firms can provide national defense because it is a private good.c. the government can provide national defense because it is a private good.d. the government can provide national defense because it is a common resource.e. None of the above answers is correct.

____ 59. Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Determine the marginal benefit to society of the second missile gunboat.a. $16 millionb. $8 millionc. $12 milliond. $10 millione. $4 million

____ 60. Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Determine the marginal benefit to society of the fourth missile gunboat.a. $8 millionb. $4 millionc. $2 milliond. $1 millione. $40 million

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____ 61. Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Suppose the marginal cost of a missile gunboat is $8 million. What is the efficient quantity of missile gunboats?a. 1 boatb. 2 boatsc. 3 boatsd. 4 boatse. More information about whether the services provided by missile gunboats are rival or

not is needed.

____ 62. The figure above shows the marginal cost and marginal benefit of police protection in the city of Hugo, Oklahoma. Police protection is a public good. If the city of Hugo hires 25 officers, thena. marginal cost will exceed marginal benefit, which means that the efficient number of

officers is more than 25.b. marginal cost will exceed marginal benefit, which means that the efficient number of

officers is less than 25.c. marginal benefit will exceed marginal cost, which means that Hugo should reduce the

number of officers they hire.d. marginal benefit equals marginal cost.e. None of the above answers is correct.

____ 63. The figure above shows the marginal cost and marginal benefit of police protection in the city of Hugo, Oklahoma. Police protection is a public good. If the city of Hugo hires 5 officers, marginala. cost exceeds marginal benefit, so therefore fewer officers should be hired.b. benefit exceeds marginal cost, so therefore more officers should be hired.c. benefit equals marginal cost.d. benefit exceeds marginal cost, so therefore no more officers should be hired.e. benefit exceeds marginal cost but not by as much as possible, so 5 officers is not the

efficient number to be hired.

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____ 64. If we look at U.S. defense spending, we see that since 1963a. the United States has maintained a steady dollar amount that has become a larger

percentage of total income.b. as a percentage of total income, U.S. defense spending has increased.c. as a percentage of total income, U.S. defense spending has decreased.d. as a percentage of total income, U.S. defense spending has not changed.e. the percentage of total income spent on defense has ranged between 35 percent and 25

percent.____ 65. The tendency of political parties to propose identical policies which appeal to the maximum number of voters

is referred to as the principle ofa. maximum differentiation.b. minimum differentiation.c. minimum marginal utility.d. maximum returns.e. agreement.

____ 66. In politics, the principle of minimum differentiation is the tendency towarda. identical policies to appeal to a minimum number of people.b. different policies to appeal to a maximum number of people.c. identical policies to appeal to a maximum number of people.d. different policies to appeal to a minimum number of people.e. a minimum number of policies in order to appeal to a maximum number of people

____ 67. Suppose Burger King builds a new store across the street from a McDonald's. This is an example ofa. the free-rider problem.b. the principle of minimum differentiation.c. the public provision of a good.d. a public good.e. rational ignorance on the part of Burger King.

____ 68. Rational ignorance is the decision NOT toa. vote in elections.b. acquire information because the marginal benefit of doing so exceeds the marginal cost.c. acquire information because the marginal cost of doing so exceeds the expected marginal

benefit.d. acquire information because the marginal cost of doing so equals the expected marginal

benefit.e. follow the principle of minimum differentiation.

____ 69. Very few voters know the enormous cost of providing price supports to farmers. As a result, these voters most likely exhibita. the public provision of a good.b. the principle of minimum differentiation.c. rational ignorance.d. the tragedy of the commons.e. None of the above answers is correct.

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____ 70. In which of the following cases does the tragedy of the commons occur?i. cattle grazing on private ranchesii. catching lobsters off the coast of Floridaiii. raising salmon on salmon farmsiv. using legal services provided by the courts

a. i onlyb. ii onlyc. ii and iiid. i and ive. i and iii

____ 71. The tragedy of the commons arises because ____ exceeds ____ when the resource is used.a. marginal social benefit; marginal private benefitb. marginal private benefit; marginal social benefitc. marginal private benefit; marginal costd. marginal cost; marginal private benefite. marginal private cost; marginal social cost

____ 72. To achieve the efficient amount of use of a common resource, the use should be such that ____ equals ____.a. marginal social cost; marginal private costb. marginal cost; marginal social benefitc. marginal private benefit; marginal costd. marginal cost; marginal benefite. marginal social benefit; marginal private cost

____ 73. One way to overcome the tragedy of the commons is toa. assign property rights so that someone owns the resource.b. take away property rights so that no one owns the resource.c. leave the market alone because the market will reach an equilibrium in which the

efficient amount of the resource is used.d. educate people in order to overcome the problem of rational ignorance.e. None of the above answers is correct.

____ 74. When a quota is used to remedy the tragedy of the commons, thena. the quota is set so that use of the resource is where marginal private benefit equals

marginal cost.b. the quota is set so that use of the resource is where marginal private benefit equals

marginal social benefit.c. the market equilibrium, but not the efficient outcome, is achieved.d. all users of the resource have an incentive to cheat on the quota.e. all previous users of the resource have the incentive to avoid use of the resource.

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____ 75. The above figure shows the sustainable catch of cod, a common resource. The efficient outcome is the catch made by ____.a. 200 or fewer boatsb. 300 boatsc. 400 boatsd. between 400 boats and 500 boatse. more than 500 boats

____ 76. A natural monopoly, such as the Internet, isa. nonrival and excludable.b. rival and excludable.c. nonrival and nonexcludable.d. rival and nonexcludable.e. None of the above answers are correct.

____ 77. The free-rider problem appliesa. to rival and excludable goods.b. to common resources.c. to nonrival and nonexcludable goods.d. when marginal social benefit exceeds marginal private benefit.e. when marginal social cost equals marginal private cost.

____ 78. To construct the marginal social benefit curve for a common resource,a. vertically sum the individual marginal social benefit curves.b. vertically sum the marginal private benefit curves.c. horizontally sum the individual marginal benefit curves.d. vertically sum the marginal private cost curves.e. None of the above answers is correct.

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____ 79. When a government agency removes the restrictions on prices, product standards and types, and the conditions under which firms can enter an industry, it is referred to asa. regulation.b. deregulation.c. anti-trust.d. underallocation.e. post-regulation.

____ 80. The purpose of the first federal regulatory agency in the United States was toa. assure food safety.b. assure airplane safety.c. control prices and routes of railroads.d. measure the efficacy of new drugs.e. assure the safety of atomic energy plants.

____ 81. By the 1970s approximately what percentage of the economy was subject to some form of regulation?a. 10 percentb. 25 percentc. 3 percentd. 17 percente. 67 percent

____ 82. Regulations over economic activity peaked during what time period?a. the 1990sb. the 1930sc. the 1970sd. the 1940se. the 1900s

____ 83. The recent U.S .regulatory history from the 1970s onward can best be described asa. heavy regulation in the 1970s with deregulation afterward.b. heavy regulation in the 1970s with deregulation in the 1980s and re-regulation in the

1990s and 2000s.c. deregulation in the 1970s with re-regulation afterward.d. deregulation in the 1970s with re-regulation in the 1980s and deregulation in the 1990s

and 2000s.e. continued increases in heavy regulation.

____ 84. The public interest theory of regulation is thata. regulators help producers maximize economic profit.b. regulation seeks to increase the government's revenue.c. regulation causes producers to produce at a point where they are earning normal profits.d. regulation seeks an efficient use of resources.e. regulation focuses on the consumers' interests and ignores producers' interests.

____ 85. The public interest theory of regulation asserts that the purpose of regulating a natural monopoly is toi. minimize the deadweight loss created by a monopoly.ii. maximize economic profit.iii. minimize consumer surplus.

a. i only.b. ii and iii.c. iii only.d. i and ii.e. ii only.

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____ 86. The capture theory of regulation is that regulationsa. help producers to maximize economic profits.b. mean producers suffer losses.c. result in diseconomies of scale.d. benefit society, not producers.e. benefit the regulators, not the producers or the consumers.

____ 87. The capture theory of regulation is defined asa. the use of regulations to assure the efficient use of resources.b. the constant reapplication of regulation on the cable TV industry.c. the use of regulation to assist producers to maximize profits.d. the removal of regulations on business activities.e. regulation that focuses on consumers' interests and ignores producers' interests.

____ 88. If the capture theory of regulation is correct, thena. a marginal cost pricing rule is used to ensure maximum profits.b. an average cost pricing rule is used to ensure an efficient output.c. the regulators let the firm produce where marginal cost equals marginal revenue to ensure

maximum profits.d. subsidies are used to allow marginal cost pricing without an economic loss.e. regulation seeks an efficient use of resources.

____ 89. A natural monopoly is one that arises froma. patent law.b. economies of scale.c. copyright law.d. any government-imposed barrier to entry.e. mergers.

____ 90. Which of the following is an example of a natural monopoly?a. the Pittsburgh Penguins hockey team, a National Hockey League teamb. General Motors, the large automobile producing companyc. Florida Power and Light, an electric utility in Floridad. Sony, the Japanese producer of the Playstation IIIe. JCPenney, the large department store chain

____ 91. With a natural monopolya. no regulation is necessary because it is a natural monopoly.b. regulation takes the form of forcing competition from new firms.c. regulation takes the form of forcing the company out of business.d. regulation can take the form of average cost pricing to allow coverage of costs.e. regulation takes the form of breaking the company into several competing firms.

____ 92. A firm that is a natural monopolya. can supply the entire market at a lower cost than two or more firms.b. has very small fixed costs and very large marginal costs.c. is infrequently regulated because having one firm serve the market is economically

sound.d. cannot make an economic profit if it is not regulated because it must serve a very large

customer base.e. produces the efficient quantity of output when it is not regulated.

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____ 93. For a regulated natural monopoly, the marginal cost pricing rule is a rule that sets price ____ marginal cost and achieves an ____ amount of output.a. equal to; efficientb. above; inefficientc. below; efficientd. equal to; inefficiente. above; efficient

____ 94. Regulated natural monopolies can obey a marginal cost pricing rule and still earn a normal profit by engaging ina. least cost pricing and average cost pricing.b. price discrimination and two-part tariff pricing.c. zero profit pricing.d. profit-maximizing pricing.e. None of the above answers is correct because a natural monopoly regulated using a

marginal cost pricing rule always incurs an economic loss.____ 95. An average cost pricing rule is a rule that sets price ____ average total cost to enable a regulated firm to cover

its costs.a. slightly aboveb. far abovec. belowd. equal toe. None of the above answers is correct because an average cost pricing rule does not have

any relationship between the price and the average total cost.____ 96. With an average cost pricing rule, the total output of a natural monopoly is ____ the total output that occurs

with a marginal cost pricing rule.a. greater thanb. less thanc. equal tod. greater than in the long run and less than in the short run thane. not comparable to

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____ 97. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, what is the price of cable television in Oakland?a. $40b. $30c. $20d. $10e. $0

____ 98. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. Compared to a marginal cost pricing rule, under an average cost pricing rule, TWC ____ output by ____ households.a. increases; 20,000b. decreases; 10,000c. increases; 30,000d. decreases; 50,000e. decreases; 40,000

____ 99. A regulation that sets the price at a level that enables a regulated firm to earn a specified target percent return on its capital is calleda. consumer surplus regulation.b. producer surplus regulation.c. capital regulation.d. rate of return regulation.e. rate of profit regulation.

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____ 100. A natural monopolya. faces more competition after regulation.b. might exaggerate its costs if it is regulated using rate of return regulation.c. might falsely minimize its costs if it is regulated using rate of return regulation.d. might falsely minimize its costs if it is regulated using a marginal cost pricing rule.e. is allowed to maximize its profit under a marginal cost pricing rule.

____ 101. Price cap regulationa. does not provide incentives to firms to minimize their costs because firms cannot change

prices.b. sets the maximum price these firms can charge.c. gives firms the incentive to exaggerate their costs.d. Both answers A and C are correct.e. Both answers A and B are correct.

____ 102. Under earnings-sharing regulation, if a firm's profits ____ above a certain level, they must be shared with the firm's ____.a. rise; customersb. fall; customersc. rise; suppliersd. fall; supplierse. rise; competitors

____ 103. A cartel is a collusive agreement among a number of firms that is designed toa. expand output and lower prices but not to a predatory level.b. restrict output and lower prices to a predatory level.c. restrict output and raise prices.d. expand output and raise prices.e. expand output and lower prices to a predatory level.

____ 104. Regulation over the taxicab industry in New York City is designed to maintain a safe fleet of cabs and a high-quality pool of drivers by limiting the number of cabs. Ignoring the presence of illegal cabs, the consequences of this regulation have been to ____ cab fares and ____ the number of cabs rides per day.a. raise; increaseb. raise; decreasec. lower; increased. lower; decreasee. raise; not change

Name: ________________________ ID: A

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____ 105. Suppose the government decides to re-regulate the airline market. The above figure represents a possible situation at the Ronald Reagan International Airport in Washington, D.C. Under public interest regulation, how many flights leave this airport each day?a. 0b. 400c. 600d. 1,000e. 800

____ 106. Antitrust law is defined, in part, as law thata. forces customers to trust companies' intentions.b. forces perfectly competitive firms to produce an adequate quantity of output.c. prohibits certain kinds of market behavior.d. regulates firms that work in the medical industry where trust is essential.e. limits the amount of output that firms can produce.

____ 107. The focus of antitrust legislation is toa. encourage cartels to form because they are easier to regulate.b. maintain competition.c. force society to act in the best interest of producers.d. limit the power of regulatory bodies.e. ensure that producers earn enough profit to stay in business so that consumers are not

harmed by too many businesses closing.____ 108. Section 1 of the Sherman Antitrust Act declares what to be illegal?

a. every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations

b. mergers of a horizontal naturec. any attempt to monopolize an industryd. sharing of technology among competing firms or mergers where the effect is to lessen

competitione. exiting an industry if the remaining firm or firms have a market share that is too large.

Name: ________________________ ID: A

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____ 109. As a result of a wave of mergers in the early part of the twentieth century, which act was passed?a. the Anti-Merger Act of 1900b. the Sherman Actc. the Clayton Actd. the Horizontal Merger Act of 1919e. the Pro-Competition Act of 1912

____ 110. In the United States, antitrust lawsa. do not allow one person to be a director of two competing firms if it lessens competition.b. break up a company if it is too large because "size itself is an offense."c. do not always prosecute firms if they have fixed their prices.d. regard excess competition as a felony under Section 3 of the Sherman Act.e. place a maximum limit of 125 firms that are allowed to compete in any market.

____ 111. If a firm, Best Computer Buys, requires its customers to buy software exclusively from it when the customers purchase a computer, the company's policy is calleda. an exclusive deal.b. a territorial confinement.c. a tying arrangement.d. pricing discrimination.e. predatory pricing.

____ 112. The government believes that which entry barrier has allowed Microsoft to gain monopoly power?a. ownership of the entire supply of a resourceb. patentsc. trademarksd. economies of scale and network economiese. territorial confinement

____ 113. When an oligopoly reduces its price with the intent of driving away its competitors, it is said to be engaging ina. pricing differential.b. predatory pricing.c. price fixing.d. a price-tying agreement.e. price discrimination.

____ 114. Which of the following indices does the Department of Justice use to determine whether or not to examine a merger?a. the Clayton Index of market concentrationb. the producer concentration indexc. the Herfindahl-Hirschman indexd. the Sherman antitrust indexe. the index of prices

Name: ________________________ ID: A

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____ 115. Suppose there are 6 firms in an industry with the following market shares. If the two smallest firms want to merge, how will the Department of Justice reply?Firm 1: 30Firm 2: 25Firm 3: 25Firm 4: 10Firm 5: 7Firm 6: 3

a. The firms will be allowed to merge and compete with the larger firms.b. The firms will be challenged because the merger will raise the HHI by more than 50

points.c. The firms will not be allowed to merge.d. The firms will be challenged because the merger will raise the HHI by more than 100

points.e. The firms will be challenged because the merger will raise the HHI by more than 250

points.____ 116. The assumption that regulation relentlessly seeks out deadweight loss and seeks to eliminate it is called the

a. public interest theory of regulation.b. capture theory of regulation.c. Coase theory of regulation.d. socially optimal theory of regulation.e. predatory theory of regulation.

____ 117. ____ regulation of a natural monopoly results in an efficient level of output.a. Efficient resale price maintenanceb. Marginal cost pricingc. Average cost pricingd. Predatory pricinge. Tying

____ 118. ____ regulation of a natural monopoly results in an efficient level of output.a. Producer interestb. Predatory pricingc. Public interestd. Rate of returne. Sherman rate cap

Name: ________________________ ID: A

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____ 119. The figure above shows a natural monopoly that the government must regulate. If the government uses ____, the firm produces ____ units per week.a. the HHI; 50b. an average cost pricing rule; 30c. rate of return regulation; 40d. the Sherman Act; 30e. a marginal cost pricing rule; 20

____ 120. The figure above shows a natural monopoly that the government must regulate. Which of the following pairs most likely results in similar outcomes?a. resale price maintenance and rate of return regulationb. marginal cost pricing and a two-part tariffc. average cost pricing and rate of return regulationd. predatory pricing and price capse. marginal cost pricing and price cap regulation

____ 121. Tying arrangements area. illegal if they substantially lessen competition.b. used by regulators to force a monopoly to produce an efficient amount of production.c. used by regulators to force a monopoly to charge an efficient price.d. illegal according to the Sherman Act.e. necessary in order for a firm to price discriminate.

____ 122. Entrepreneurship differs from the other factors of production because ita. is not real.b. is the most important.c. has only existed since the new economy of the 1990s.d. is not traded in a factor market.e. is not paid.

Name: ________________________ ID: A

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____ 123. People's education and skills area. called entrepreneurship.b. not tradable.c. called human capital.d. part of financial capital.e. called entrepreneurial capital.

____ 124. Which of the following is NOT classified as physical capital?a. a grain warehouseb. a dump truckc. metal ored. a computer used by an airlinee. a car owned and rented by Enterprise Rentals

____ 125. Financial capital is defined asa. machinery used to produce goods and services.b. specific machinery used to make money.c. funds used to buy and operate capital such as machinery.d. the funds produced by the work of capital.e. the skills and talents possessed by people.

____ 126. Stocks and bonds area. traded in financial markets.b. types of entrepreneurship.c. the same as physical capital.d. traded in commodity markets.e. traded in physical capital markets.

____ 127. The demand for a factor of production is called a derived demand because it is derived froma. the demand for goods and services produced by the factor of production.b. a table of specific prices and quantities.c. the ideas of an entrepreneur.d. a financial market.e. the supply of the factor of production.

____ 128. Derived demand means that the demand for a factor of production is derived from thea. supply of that factor of production.b. price of that factor of production.c. demand for the goods and services the factor of production is used to produce.d. costs of production.e. government, which forces large firms to hire at least some minimum number of different

resources.____ 129. The demand for a resource is derived from the

a. price of the resource.b. supply of the resource.c. supply of substitute resources.d. demand for the good or service that the resource is used to produce.e. supply of complement resources.

____ 130. In the labor market,a. households demand labor.b. firms demand labor.c. firms supply labor.d. wage are determined only by firms alone.e. None of the above answers is correct.

Name: ________________________ ID: A

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____ 131. Which of the following represents a derived demand? Demand fora. a taco by Sam when she is hungry.b. golf balls by Jose who is planning on going golfing with his boss.c. a grocery clerk by the local Safeway.d. an automobile by Jack who wants a car to get to school.e. new clothing by Shiniq who is starting a new job.

____ 132. If UPS hires another worker, UPS will be able to deliver an additional 20 packages an hour. The price of each package is $5. The value of this worker's marginal product is equal toa. $5.b. $100.c. $4.d. 20 packages.e. $20.

____ 133. Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires three trainers, the value of the marginal product of the third trainer equalsa. 2 clients.b. $82.c. 9 clients.d. $369.e. $123.

____ 134. When hiring labor, to maximize profit a firm hires labora. until the value of the marginal product equals the wage rate.b. if the workers are not unionized.c. regardless of cost, because the firm definitely needs labor.d. until the value of the marginal product is greater than the wage rate.e. until the value of the marginal product equals the marginal revenue from hiring the

worker.____ 135. The rule for employing a profit-maximizing amount of labor is to continue to hire additional workers until the

additional worker's value of marginal product isa. less than the wage rate.b. equal to the wage rate.c. greater than 1.d. less than the price of the product.e. equal to the price of the product.

Name: ________________________ ID: A

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____ 136. Suppose the Miami Dolphins are considering adding another backup quarterback to their roster. If the salary the Dolphins would have to pay equals $500,000 and the value of the marginal product of the new quarterback equals $800,000, to maximize their profit the Dolphins shoulda. add the new quarterback.b. add two new quarterbacks.c. not add the new quarterback.d. not add the new quarterback and, in fact, get rid of at least one other backup quarterback.e. Not enough information is given to determine if the Dolphins should hire the

quarterback.____ 137. Suppose Mongo runs a glue factory in Knuckle, North Dakota. Mongo wants to fire his cousin Beevo for not

working very hard at making glue. If firing Beevo would save Mongo $6.11 per hour in wages and the value of Beevo's marginal product equals $7.29 per hour, to maximize his profit, Mongo shoulda. fire Beevo.b. keep Beevo employed.c. add another worker, Teevo, Beevo's sister, whose value of the marginal product would be

$4.83 per hour and whose wage would be $6.11 per hour.d. increase the wage he pays Beevo to $7.29 per hour.e. There is not enough information given to determine what Mongo should do.

____ 138. If the value of the marginal product of the 10th worker is $60, then thea. quantity of labor demanded when the wage rate is $60 will be 10 workers.b. wage rate of the 10th worker will be $6.c. firm will not hire the worker if the wage rate is less than $60.d. marginal cost of the 10th worker will be $6.e. quantity of labor demanded when the wage rate is $6 will be 10 workers.

____ 139. The demand curve for labor is the same as the firm'sa. marginal revenue curve.b. marginal cost curve.c. value of marginal product curve.d. wage rate curve.e. supply of output curve.

____ 140. The demand curve for a factor of production isa. the same as the factor's supply curve.b. upward sloping.c. the same as the factor's value of marginal product curve.d. vertical.e. None of the above answers is correct.

____ 141. A firm's demand for labor curve shifts when there is a change ini. the supply of labor.ii. populationiii. the equilibrium wage rate.

a. i only.b. ii onlyc. i and iii.d. i and ii.e. ii and iii.

Name: ________________________ ID: A

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____ 142. The above figure shows the demand for labor curve for workers at the local Pizza Hut. If the wage rate is $6 per hour, then thei. quantity of workers Pizza Hut demands is 10 workers.ii. Pizza Hut would have been willing to hire the 6th worker even if they had to pay $7 per

hour rather than $6 per hour.iii. value of the marginal product of the 10th worker is $6 per hour.

a. i only.b. ii only.c. iii only.d. i and iii.e. i, ii, and iii.

____ 143. If the price of movie tickets increases, there isa. an increase in the demand for actors and actresses.b. a decrease in the demand for actors and actresses.c. no change in the demand for actors and actresses.d. a decrease in the quantity of actors and actresses demanded.e. an increase in the supply of actors and actresses.

____ 144. As a result of the proliferation of ATM machines, the demand for bank tellers hasa. increased.b. decreased.c. not changed.d. become perfectly inelastic.e. become perfectly elastic.

____ 145. If we compare the price of a firm's output and its demand for labor, we see thata. as the price of its output rises, its demand for labor decreases.b. as the price of its output rises, its demand for labor increases.c. the two are not related.d. as the demand for labor increases, the price of its output falls.e. the price of the output must equal the wage rate in equilibrium.

Name: ________________________ ID: A

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____ 146. Because leisure time has value to many workers, as wages increase the labor supply curvea. has a positive slope.b. bends backwards and has a negative slope.c. becomes a horizontal line.d. becomes a vertical line.e. bends forward and has a positive slope.

____ 147. According to a recent prediction in The Wall Street Journal the adult population of Russia will decline dramatically over the next few decades. If this prediction is correct, the supply of labor in Russia willa. increase.b. not change.c. decrease.d. become less elastic.e. become more elastic.

____ 148. If the wage rate increases, thena. the quantity of labor supplied definitely decreases.b. there is a movement upward along the supply of labor curve.c. the supply of labor curve shifts rightward.d. the supply of labor curve shifts left ward.e. the quantity of labor supplied definitely increases.

____ 149. Suppose in Chicago, at the going wage rate of $8.00 an hour, the quantity of lifeguards demanded exceeds the quantity supplied by 13,000 lifeguards. As a result,a. there is a surplus of lifeguards in Chicago.b. there is a shortage of lifeguards in Chicago.c. the lifeguard labor market is in equilibrium in Chicago.d. wage rates will probably fall in this market.e. the demand for labor of lifeguards in Chicago will decrease.

____ 150. Suppose in Philadelphia the quantity of economists demanded is less than the quantity supplied by 2,000 economists. As a result,a. there is a shortage of economists in Philadelphia.b. salaries for economists fall.c. there is equilibrium in this market.d. the labor supply curve for economists in Philadelphia is vertical.e. the labor demand curve for economists in Philadelphia shifts rightward.

____ 151. A firm's demand for financial capital is derived from its demand fora. consumer goods and services.b. labor used to produce goods and services.c. physical capital used to produce goods and services.d. substitute resources.e. Both answers A and B are correct.

____ 152. Two main factors that change the demand for capital and shift the demand curve for capital area. population growth and technological change.b. population growth and the interest rate.c. the interest rate and technological change.d. the supply of capital and technological change.e. the interest rate and the supply of capital

Name: ________________________ ID: A

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____ 153. An increase in the interest rate ____ the quantity of financial capital demanded and ____ the quantity of financial capital supplied.a. increases; increasesb. increases; decreasesc. decreases; increasesd. decreases; decreasese. does not change; does not change

____ 154. If the interest rate increases, thena. the opportunity cost of current consumption is higher.b. the quantity of financial capital demanded increases.c. the quantity of financial capital supplied decreases.d. saving decreases.e. the demand for financial capital decreases.

____ 155. Suppose that people in Taiwan expect their incomes to increase in the future. As a result,a. the supply of financial capital increases.b. the demand for capital decreases.c. the demand for capital increases.d. the supply of financial capital decreases.e. neither the supply of financial capital nor the demand for financial capital change.

____ 156.

In the above figure, if the interest rate is above 6 percenta. there is a shortage of financial capital.b. there is a surplus of financial capital.c. the demand for financial capital increases.d. the supply of financial capital increases.e. the demand for financial capital increases and the supply of financial capital decreases..

____ 157. Looking at the returns on the stock market and bond market since 1964, we see that interest rates and stock returnsa. rarely change because there are few fluctuations in the supply and demand for capital.b. fluctuate because the supply of capital fluctuates a lot.c. fluctuate because both the supply of and demand for capital fluctuate a lot.d. fluctuate because the demand for capital fluctuates more than supply.e. differ because the interest rate fluctuates much more than do stock returns.

Name: ________________________ ID: A

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____ 158. One of the reasons why interest rates do not persistently increase or decrease over time is because the demand for capitala. and the supply of capital both tend to decrease over time.b. increases while the supply of capital decreases.c. and the supply of capital both increase by roughly the same amount over time.d. decreases while the supply of capital increases.e. and the supply of capital do not grow very much from year to year.

____ 159. Nonrenewable natural resourcesa. cannot be reused.b. include oil, land, and coal.c. can be used repeatedly.d. can be reproduced.e. have a vertical supply curve.

____ 160. Landa. is a nonrenewable resource.b. has an elastic supply but not perfectly elastic.c. is the only factor of production that is not traded in a market.d. has a perfectly inelastic supply.e. has a perfectly elastic supply.

____ 161. The price of a resource that is fixed in quantity, land for example,a. is determined by the demand for the resource.b. consists of only opportunity cost and has no economic rent.c. cannot change.d. is determined by supply.e. is precisely half opportunity cost and half economic rent.

____ 162. Which rule does the United Corporation use when maximizing profit?a. Issue stock up to point where its price equals the cost of issuing bonds.b. If the value of the marginal product of labor exceeds the wage rate, hire fewer workers.c. Hire labor up to point at which the value of marginal product equals the wage rate.d. Reduce the wage rate until it equals the marginal product.e. Hire labor up to point at which the value of marginal product equals the price of the good

or service the labor produces for United Corporation.____ 163. The demand curve for financial capital shifts rightward if

a. the price of bonds decreases.b. economic rent increases.c. the interest rate rises.d. the population increases.e. the interest rate falls.

____ 164. Which of the following curves is most inelastic?a. the supply of landb. the supply of labor for an individual workerc. the supply of labor for all workersd. the demand for capitale. the demand for labor

Name: ________________________ ID: A

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____ 165. An individual's labor supply curve is ____ because ____.a. backward bending; of large economic rentb. upward sloping; of large economic rentc. upward sloping; of lower opportunity cost at higher wagesd. backward bending; at high wages, workers choose to supply less labore. backward bending; at high wages, firms choose to employ less labor

____ 166. In the United States, the richest 20 percent of households receive approximately ____ percent of total income.a. 33b. 12c. 50d. 75e. 20

____ 167. The poorest 40 percent of households in the United States own about ____ percent of the nation's wealth.a. 0.2b. 10c. 18d. 26e. 35

____ 168. If all households in a nation receive the same income, the nation's Lorenz curve woulda. be horizontal.b. be vertical.c. be a 45° line.d. run along the horizontal axis until it reached 50 percent of households, and then run

vertically up to 100 percent of income.e. run along the horizontal axis until it reached 100 percent of households, and then run

vertically up to 100 percent of income.____ 169. If we compare the Lorenz curves for income distribution in all the world's nations to the line of equality, we

find that the Lorenz curves fora. some nations are above and for some nations are below the 45° line but for no nations are

on the 45° line.b. all nations are above the 45° line.c. all nations are below the 45° line.d. some nations are above, for some nations are below the 45° line, and for some nations are

on the 45° line.e. None of the above answers is correct.

Name: ________________________ ID: A

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____ 170. The above table shows the distribution of income in two countries, Alpha and Beta. Based on these distributions of income,a. Country Beta has more equal income distribution than does Country Alpha.b. both countries have equal distributions because 100 percent of the incomes are accounted

for.c. the Lorenz Curve for country Beta is closer to the line of equality.d. Country Alpha has a more equal distribution of income than does Country Beta.e. It is impossible to answer the question without more information.

____ 171. The above table shows the distribution of income in two countries, Alpha and Beta. In Country Alpha, the poorest 20 percent receive ____ percent of total income.a. 5b. 9c. 1d. 19e. 14

Name: ________________________ ID: A

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____ 172. In the figure above, the nation with the most equal distribution of income is nationa. A.b. B.c. C.d. The distribution of income is the same in all three nations because their Lorenz curves

can be plotted on the same diagrame. It is impossible to determine with the information given.

____ 173. In the figure above, the nation with the highest average income is nationa. A.b. B.c. C.d. The average income is the same in all three nations because their Lorenz curves can be

plotted on the same diagram.e. It is impossible to determine with the information given.

____ 174. Which of the following statements is correct?a. Wealth inequality in the United States is greater than income inequality.b. Income inequality in the United States is greater than wealth inequality.c. Income includes all the things owned by a household at a certain point in time.d. The top fifth of households have a greater share of the nation's income than the nation's

wealth.e. The fraction of wealth owned by the bottom 20 percent of households is larger than the

fraction income earned by the bottom 20 percent of households.____ 175. Looking at the income distribution in the United States since 1967, we see that

a. only the lowest 20 percent and highest 20 percent increased their shares of income.b. the lower 50 percent increased its share of income and the upper 50 percent stayed the

same.c. the highest 20 percent increased its share of income.d. all the 20 percent groups increased their shares of income.e. the lower 50 percent increased its share of income and the upper 50 percent decreased its

share of income.

Name: ________________________ ID: A

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____ 176. In the United States, since 1967 the share of income received by the richest 20 percent of households has ____ and the share received by the other 80 percent of households has ____.a. increased; increasedb. increased; decreasedc. decreased; increasedd. not changed; not changede. increased; not changed

____ 177. Which is the single most important factor in determining household income?a. raceb. family sizec. educationd. marital statuse. age of household

____ 178. The factor that leads to the largest difference in households' incomes isa. race.b. education.c. gender.d. size of household.e. location of household.

____ 179. The lowest-income household in the United States today is likely to be headed bya. a young black male.b. an elderly white female.c. an elderly black female.d. a young Hispanic male.e. a young Hispanic female.

____ 180. Poverty for a household is defined as the state ofa. feeling that you have less than your neighbor's food, shelter, and clothing.b. having an income that is below the median for food shelter and clothing.c. income below what is thought fair.d. income below what is thought necessary for food, shelter, and clothing.e. having an income that is below average.

____ 181. Poverty is ____ concept because ____.a. a relative; a very low income in the United States is a very high income in a less

developed countryb. an absolute; a very low income in the United States is a very high income in a less

developed countryc. a relative; Lorenz curves differ for different countriesd. an absolute; Lorenz curves differ for different countriese. an absolute; there are poor people in every nation

____ 182. In the United States in 2004, a family of four was considered to be living below the poverty line only if its household income was less than approximatelya. $400 per year.b. $4,000 per year.c. $11,789 per year.d. $19,150 per year.e. $28,800 per year.

Name: ________________________ ID: A

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____ 183. In the United States in 2004, the Census Bureau determined that approximately ____ million Americans lived in households that had incomes below the poverty line.a. 37b. 22c. 84d. 11e. 112

____ 184. In 2004, the number of people in the United States who lived in households with incomes below the poverty level was approximatelya. 50 million.b. 37 million.c. 11 million.d. 4 million.e. 62 million

____ 185. Looking at the U.S. poverty rate by race, we see thata. the poverty rates by race are now equal.b. whites have a higher poverty rate than do blacks.c. Hispanics and blacks have a higher poverty rate than whites.d. whites have a nearly zero poverty rate while Hispanics and blacks are near 20 percent.e. whites and blacks have higher poverty rates than do Hispanics.

____ 186. The demand for labori. depends on the availability of labor.ii. decreases when the supply of labor increases.iii. depends on the value of the marginal product of labor.

a. i only.b. i and ii.c. iii only.d. i and iii.e. i, ii, and iii.

____ 187. One reason why economists earn more than Taco Bell workers is because economists have a ____ value of marginal product when compared to Taco Bell workers.a. lowerb. higherc. similard. convexe. concave

____ 188. How does the supply curve of high-skilled workers compare to the supply curve of low-skilled workers?a. Because skills are costly to acquire, at a given wage rate the quantity supplied of

high-skilled workers is greater than that of low-skilled workers.b. Because skills are costly to acquire, at any given wage rate the quantity supplied of

high-skilled workers is less than that of low-skilled workers.c. Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of

high-skilled workers is less than that of low-skilled workers.d. Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of

high-skilled workers is greater than that of low-skilled workers.e. None of the above answers is correct.

Name: ________________________ ID: A

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____ 189. The ____ the value of marginal product of skill, the ____.a. smaller; larger is the wage differential between low-skilled workers and high-skilled

workersb. larger; more elastic the supply curve of laborc. larger; larger is the wage differential between low-skilled workers and high-skilled

workersd. smaller; less elastic the supply curve of labore. smaller; larger is the cost of acquiring the skill

____ 190. If buyers discriminate against women and minorities,i. the value of the marginal product of women and minorities is less than otherwise.ii. the wage rate paid to women and minorities is less than otherwise.iii. more women and minorities are hired than otherwise.

a. i only.b. ii only.c. ii and iii.d. i and ii.e. i, ii, and iii.

____ 191. Which of the following is correct? On the average, i. the wage differential between white males and white females has narrowed since 1985.ii. black females are paid more than black males.iii. the pay of black males and Hispanic males are essentially equal.

a. i only.b. ii only.c. ii and iii.d. i and iii.e. i, ii, and iii.

____ 192. The three main ways that governments in the United States redistribute income area. using the rule of law, subsidized services, and income taxes.b. private property rights, income taxes and the minimum wage.c. income taxes, income maintenance programs, and subsidized services.d. income taxes, rent control, and food stamps.e. sales taxes, food stamps, and subsidized services.

____ 193. A regressive income tax is a tax for which the average tax ratea. increases as income increases.b. becomes negative as income decreases.c. decreases as income increases.d. stays the same regardless of the income level.e. first increases and then decreases as income increases.

____ 194. A ____ has a constant tax rate regardless of the level of income.a. regressive taxb. progressive taxc. state taxd. proportional taxe. subsidy tax

Name: ________________________ ID: A

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____ 195. Which of the following statements is correct?a. Money income is market income plus benefits paid by the government.b. Market income is money income plus benefits paid by the government.c. In the United States, market income is distributed more equally than money income.d. In the United States, the distribution of market income is the same as the distribution of

money income.e. None of the above answers is correct.

____ 196. Looking at the results of government income redistribution programs, we find that the income received by thea. lowest 20 percent of households is almost unchanged because most don't work.b. highest 20 percent is left unaffected because they are able to shelter income from taxes.c. lowest 20 percent increases and the income received by the highest 20 percent decreases.d. lowest 20 percent increases somewhat but the income received by the next 20 percent

increases the most.e. lowest 20 percent decreases because of government taxes and the income received by the

highest 20 percent increases because of government subsidies.____ 197. One of the major sources of deadweight loss is the fact that taxing people's income from their work and

savings leads to ____ incentives to work and save, which in turn leads to a ____ output.a. lower; lowerb. higher; higherc. lower; higherd. higher; lowere. no change in; no change in

____ 198. A tax and redistribution scheme that provides every household with a guaranteed minimum annual income and taxes all market income at a fixed marginal rate is called ____ income tax.a. a negativeb. a progressivec. a regressived. a proportionale. an efficient

____ 199. Suppose a state charges an in-state student $2000 in tuition for a college education and charges an out-of -state student $10,000 in tuition. This differentiala. is a result of the state subsidizing education for its residents.b. explains the difference between the demand curve for high-skilled and low-skilled labor.c. explains the difference between the supply curve for high-skilled and low-skilled labor.d. can be corrected via a negative income tax.e. is an example of the positive theories of income redistribution.

____ 200. The difference between money income and market income is due toa. a negative income tax.b. the value of marginal product of skill.c. the fact that market income equals money income minus taxes imposed by the

government.d. nothing because there is no difference.e. the fact that money income equals market income plus money benefits paid by the

government.