EC201 Final Exam

Question 1 of 130

1

Which of the following statements is associated with normative analysis, rather than positive analysis?

Select one of the following:

A tariff will lead to an increase in the price paid by consumers in the importing country.
The elasticities of supply and demand in the tobacco market are such that consumers of tobacco products will bear most of the economic burden of tobacco taxes.
When a rent control is set below the equilibrium level of apartment rents, there will be a shortage in the rental housing market.
A cold winter will lead to increases in the price of home heating oil.
The tax system should be progressive.

Explanation

Question 2 of 130

1

Alan’s opportunity cost of producing good A is lower than Bob’s opportunity cost of producing good A. Bob’s opportunity cost of producing good B is lower than Alan’s opportunity cost of producing good B. This means that

Select one of the following:

Alan has comparative advantage in the production of good A.
Alan should specialize in the production of good A.
Alan should specialize in the production of good B.
Neither Alan nor Bob should specialize—each should produce both goods.
Alan has comparative advantage in the production of good A AND Alan should specialize in the production of good A.

Explanation

Question 3 of 130

1

Which of the following is an example of a condition for an optimal decision by some kind of economic agent?

Select one of the following:

For the consumer: Marginal utility is equal to price.
For the producer: Price is equal to average variable cost.
For the firm that is hiring workers: Marginal revenue product is equal to average revenue product.
All of the above.
(a) and (b) only.

Explanation

Question 4 of 130

1

Which of the following would push the production-possibilities frontier outward?

Select one of the following:

Technological improvements.
Increases in the size of the labor force.
Capital investments.
All of the above.
(a) and (b) only.

Explanation

Question 5 of 130

1

Which of the following is necessary for a firm to increase its profits by engaging in price discrimination?

Select one of the following:

The firm must be a perfect competitor.
The firm must face a demand curve that is unit elastic.
The firm must have some way of distinguishing among its customers, to tell which ones have demand that is more elastic and which ones have demand that is less elastic.
All of the above.
None of the above.

Explanation

Question 6 of 130

1

The supply curve for tarfsnods is perfectly inelastic. The demand curve shifts to the right. What will happen as a result?

Select one of the following:

Equilibrium price will rise; equilibrium quantity will rise.
Equilibrium price will rise; equilibrium quantity will stay the same.
Equilibrium price will stay the same; equilibrium quantity will rise.
Equilibrium price will fall; equilibrium quantity will stay the same.
Equilibrium price and quantity will both stay the same.

Explanation

Question 7 of 130

1

The income elasticity of demand for commodity J is 0.6. On the basis of this information, we would say that J is

Select one of the following:

elastic
inelastic
inferior
normal
(b) and (d)

Explanation

Question 8 of 130

1

Which of the following would be expected to shift the supply curve
for tomatoes to the left?

Select one of the following:

An increase in the prices of inputs used in production of tomatoes.
An increase in the price of tomatoes.
Flooding in tomato-growing regions, which leads to crop damage.
All of the above.
An increase in the prices of inputs used in production of tomatoes and Flooding in tomato-growing regions, which leads to crop damage.

Explanation

Question 9 of 130

1

Which of the following is an example of the “Tragedy of the Commons”?

Select one of the following:

A lot of hot air comes out of the House of Commons in London.
A monopoly will produce less than the socially optimal quantity.
When there is free access to a fishing ground, the stock of fish will be depleted.
In a monopsony labor market, workers will be paid less than their marginal revenue product.
A tax on an elastically demanded good will generate a large excess burden.

Explanation

Question 10 of 130

1

The elasticity of demand for thingamabobs is 1.0. The quantity demanded goes up from 30 per day to 50 per day. Assume that a change in price was the only reason for the change in quantity demanded. What must have happened to the price, in order to have caused quantity demanded to change in this way?

Select one of the following:

Price was unchanged.
Price went down by 25%.
Price went down by 40%.
Price went down by 50%.
Price went down by 100%.

Explanation

Question 11 of 130

1

The payroll tax is a flat rate of labor earnings, but only up to a ceiling, above which the rate drops substantially. Also, the payroll tax does not apply to capital income. As a result,
the payroll tax is

Select one of the following:

progressive at all income ranges.
regressive at all income ranges.
about proportional over much of the income range,
but regressive at high incomes.
progressive over much of the income range, but
about proportional at high incomes.
about proportional over much of the income range,
but progressive at high incomes.

Explanation

Question 12 of 130

1

The firms in a monopolistically competitive industry are
earning positive economic profits. What would we expect to
happen as a result?

Select one of the following:

New firms will enter the industry until zero economic profits are being earned.
The firms will continue to earn positive economic profits indefinitely, because of barriers to entry.
New firms will enter the industry until negative economic profits are being earned.
Firms will exit the industry until zero economic profits are being earned.
None of the above.

Explanation

Question 13 of 130

1

Because of good growing conditions, there is an increase in the supply of asparagus. What will happen to the equilibrium price and quantity of asparagus?

Select one of the following:

Equilibrium price will rise; equilibrium quantity will rise.
Equilibrium price will rise; equilibrium quantity will fall.
Equilibrium price will fall; equilibrium quantity will rise.
Equilibrium price will fall; equilibrium quantity will fall.
Not enough information has been given to answer the question.

Explanation

Question 14 of 130

1

Which of the following is/are a reason why the earnings of college-educated workers tend to be higher than the earnings of workers with less than a college education?

Select one of the following:

College-educated workers have higher marginal revenue product, so that the demand curve for their services is farther to the right than it would otherwise be.
A college education is costly to acquire, so that the supply curve of college-educated workers is farther to the left than it would otherwise be.
College-educated workers experience compensating wage-rate differentials, so that the demand curve for college-educated workers is farther to the right than it would otherwise be.
All of the above.
(a) and (b) only.

Explanation

Question 15 of 130

1

When the price of champagne goes up, the demand curve for zabaglione shifts to the left. This means that

Select one of the following:

champagne and zabaglione are substitutes.
champagne and zabaglione are complements.
the cross-price elasticity of demand for zabaglione with respect to the price of champagne is positive.
(a) and (c) are both correct.
None of the above is true.

Explanation

Question 16 of 130

1

An import quota is instituted. As a result, consumers in the importing country are harmed, because they consume a smaller quantity, and they pay a higher price for the units they do consume. What is our best measure of the dollar value of the harm done to consumers by the import quota?

Select one of the following:

The change in total expenditure.
The change in quantity.
The change in consumer surplus.
The change in price.
In order to answer the question, we would need information about the own-price elasticity of demand.

Explanation

Question 17 of 130

1

Which of the following is a graph of the relationship between the cumulative proportion of the population and the cumulative proportion of income?

Select one of the following:

A Pigou curve
A Lorenz curve
A Gini curve
A Smith curve
A Keynes curve

Explanation

Question 18 of 130

1

Investment projects tend to have a large portion of their costs early in the life of the project, with the revenues coming later. Because of this, and because of the need to discount future costs and revenues, we would be more likely to approve a project if

Select one of the following:

the interest rate is higher.
the interest rate is lower.
the project can be completed quickly, so the revenues can begin to be realized sooner rather than later.
none of the above.
(b) and (c).

Explanation

Question 19 of 130

1

The Gini coefficient for annual income is than the Gini coefficient for wealth, and the Gini coefficient for annual income is the Gini coefficient for lifetime income.

Select one of the following:

larger than, larger than.
smaller than, larger than.
larger than, smaller than.
smaller than, smaller than.
about the same as, identical to.

Explanation

Question 20 of 130

1

If a natural monopoly were to charge a price equal to marginal cost,

Select one of the following:

the firm would earn positive economic profits.
the firm would suffer economic losses.
the firm would earn zero economic profits.
the firm’s marginal cost would be greater than its average total cost.
the firm would turn into a giant banana slug.

Explanation

Question 21 of 130

1

The price of a cotton handkerchief increases from $1.80 to $2.20. As a result, the quantity demanded decreases from 1100 per day to 900 per day. What is the own-price elasticity of demand?

Select one of the following:

0.0
0.5
1.0
2.0
10.0

Explanation

Question 22 of 130

1

In the Empire of Lumpiness, every person pays $1000 per year of tax, regardless of his or her income. This tax system is

Select one of the following:

regressive.
proportional.
progressive.
perfectly elastic.
only comprehensible to Ginny Weasley.

Explanation

Question 23 of 130

1

Which of the following is believed to be the most important force leading to the recent trend in income inequality in the United States?

Select one of the following:

The strong performance of the New England Patriots.
The increase in transfer payments to poor people.
The increase in the real value of the minimum wage.
Increases in the demand for skilled workers.
Increases in the rate of return on capital investments.

Explanation

Question 24 of 130

1

The supply curve for good X is given by Qs = P. The demand curve is given by Qd = 20 - 3P. What is the equilibrium price of good X?

Select one of the following:

2
4
5
10
20

Explanation

Question 25 of 130

1

What will be the effect of a price ceiling that is enforced above the equilibrium price?

Select one of the following:

A surplus will occur.
A shortage will occur.
There will be no effect.
There will be shortages on alternate Tuesdays, and surpluses on Sunday mornings between the hours of 2 and 5.
All of the above.

Explanation

Question 26 of 130

1

In an attempt to raise its revenues, Emily’s Bar & Grill increases the price of its onion soup. What does this imply about Emily’s beliefs regarding the elasticity of demand for its onion soup?

Select one of the following:

Demand is inelastic.
Demand is unit elastic.
Demand is elastic.
All of the above.
None of the above.

Explanation

Question 27 of 130

1

Hezekiah is considering taking out a loan to make a new capital investment. The cost is $100. Exactly one year later, the project will generate revenue of $105, and the project will then self-destruct. The interest rate is 10%. Which of the following is true?

Select one of the following:

The project has positive net present discounted value (PDV); Hezekiah should do it.
The project has zero net PDV; Hezekiah should do it.
The project has negative net PDV; Hezekiah should not do it.
The project has positive net PDV; Hezekiah should not do it.
The project has negative net PDV; Hezekiah should do it.

Explanation

Question 28 of 130

1

Assume that the elasticity of labor supply is smaller than the elasticity of labor demand. A payroll tax is levied at exactly the same rate on employers and workers. Who will bear the economic burden of the tax?

Select one of the following:

Employers will bear most of the burden.
Workers will bear most of the burden.
The tax will be borne equally by employers and workers.
Not enough information has been given.
All of the above! Astonishingly, the tax will be borne mostly by employers, and it will be borne mostly by workers, and it will be evenly split between employers and workers, and we can't tell, all at the same time!

Explanation

Question 29 of 130

1

If there is a positive externality, a competitive private market will produce _ the socially optimal quantity. If there is a negative externality, a competitive private market will produce ___ the socially optimal quantity.

Select one of the following:

more than, more than.
more than, less than.
less than, more than.
less than, less than.
exactly, exactly.

Explanation

Question 30 of 130

1

If the equilibrium interest rate is 10% and a usury ceiling is enforced at 5%,

Select one of the following:

a shortage of credit will occur.
a surplus will occur in the credit market.
the quantity of credit demanded will be larger than it would have been at the equilibrium.
there will be no effect.
(a) and (c).

Explanation

Question 31 of 130

1

Which of the following policy issues would be classified as having to do with macroeconomics, rather than microeconomics?

Select one of the following:

The effect of tariffs on the volume of exports.
The effect of a minimum-wage law on the employment of low-skill workers.
The effect of the Federal Reserve’s monetary policy on the rate of inflation.
The effect of education on earnings.
The effect of a drought on the price of corn.

Explanation

Question 32 of 130

1

Which of the following is graphed as a horizontal line?

Select one of the following:

A perfectly inelastic demand curve.
An average-fixed-cost curve.
An average-total-cost curve for a natural monopoly.
A marginal-revenue curve for a monopoly.
A total-fixed-cost curve.

Explanation

Question 33 of 130

1

For any firm for which price is greater than average variable cost, the profit-maximizing quantity of output will be the precise quantity at which

Select one of the following:

marginal revenue equals marginal cost.
demand is inelastic.
price equals marginal cost.
marginal revenue is negative.
(a) and (b) are true.

Explanation

Question 34 of 130

1

A point that is below and to the left of the production-possibilities frontier is

Select one of the following:

associated with inefficient use of the available resources.
associated with efficient use of the available resources.
unattainable with the resources that are currently available.
All of the above.
None of the above.

Explanation

Question 35 of 130

1

Huge Corporation is a monopolist. Its marginal costs decrease (i.e., its entire marginal-cost curve shifts downward). How will the firm change its price and quantity as a result?

Select one of the following:

Huge will increase price and leave quantity of output unchanged.
Huge will increase price and increase quantity of output.
Huge will increase price and reduce quantity of output.
Huge will reduce price and increase quantity of output.
Huge will reduce price and decrease quantity of output.

Explanation

Question 36 of 130

1

In which of the following antitrust cases was a firm broken into more than one smaller firm?

Select one of the following:

Standard Oil
American Tobacco
ALCOA
All of the above
(a) and (b) only.

Explanation

Question 37 of 130

1

What is the marginal cost of the second unit (i.e., the marginal cost of going from Q=1 to Q=2)?

Select one of the following:

$1
$2
$3
$4
$5

Explanation

Question 38 of 130

1

What is the average total cost when Q=4?

Select one of the following:

$1
$2
$3
$4
$5

Explanation

Question 39 of 130

1

What type of firm could this be?

Select one of the following:

A perfectly competitive firm.
A monopoly firm.
A monopolistically competitive firm.
Any of the above.
(b) or (c).

Explanation

Question 40 of 130

1

What is the firm's profit-maximizing quantity of output?

Select one of the following:

0
1
2
3
4

Explanation

Question 41 of 130

1

Which of the following is/are consistent with the Law of Demand?

Select one of the following:

The price of A goes up. As a result, and the quantity demanded of A goes down.
A and B are complements. The price of A goes up. As a result, there is a decrease in the demand for B.
A and B are substitutes. The price of A goes up. As a result, there is an increase in the demand for B.
All of the above.
(a) and (b) only.

Explanation

Question 42 of 130

1

Two markets have exactly the same net-of-tax supply curve. They also have exactly the same equilibrium price and quantity when there is no tax. Then each of the markets is subjected to exactly the same tax. The only difference between the two markets is that the demand for good X is more elastic than the demand for good Y. On the basis of this information, what can we say?

Select one of the following:

The tax in market Y will generate more revenue.
The tax in market Y will generate more excess burden.
Both (a) and (b) are true.
Neither (a) nor (b) is true.
Lord Voldemort is the only one who knows the answer to this question, and we’re too afraid to ask him.

Explanation

Question 43 of 130

1

The benefit to the firm from hiring an extra unit of an input is called the marginal revenue product. Marginal revenue product is equal to

Select one of the following:

price divided by marginal product.
average product multiplied by marginal revenue.
marginal product multiplied by price.
marginal product multiplied by average revenue.
marginal product multiplied by marginal revenue.

Explanation

Question 44 of 130

1

Assume that the demand for low-skill labor is inelastic. The minimum-wage law succeeds in pushing the wage rate above its equilibrium level for a group of low-skill workers. As a result, what will occur?

Select one of the following:

The number of these workers who are hired will decrease.
There will be a labor shortage.
The total payments to the affected group of workers will increase.
The workers will go to the gym more often, and lift weights.
(a) and (c).

Explanation

Question 45 of 130

1

The evidence suggests that the elasticity of men's labor supply with respect to the net wage rate is ___, while the elasticity of women's labor supply with respect to the net wage rate is .

Select one of the following:

1.56, 3.12
positive, negative
strongly negative, positive
close to zero, positive
positive, close to zero

Explanation

Question 46 of 130

1

The deadweight loss from monopoly is represented graphically by the area of , and the excess burden of a tax is represented graphically by the area of _.

Select one of the following:

a rectangle, a rectangle
a trapezoid, a triangle
a triangle, a rectangle
a rectangle, a trapezoid
a triangle, a triangle

Explanation

Question 47 of 130

1

All else equal, an increase in the demand for highly skilled labor will lead to _ in the distribution of labor-market earnings, and an increase in the supply of highly skilled labor will lead to ____ in the distribution of labor-market earnings.

Select one of the following:

greater inequality, greater inequality
greater inequality, less inequality
less inequality, greater inequality
less inequality, less inequality
not enough information has been given to answer the question

Explanation

Question 48 of 130

1

In Miftez, there is no international trade, and the price of good R is $10 per kilogram. In the rest of the world, the price of good R is $20 per kilogram. This suggests that

Select one of the following:

Miftez would benefit by importing good R from other countries, without any tariffs, quotas, or other interferences.
Miftez would benefit by importing good R, but only if a tariff is levied on imports of good R.
Miftez would benefit by exporting good R to other countries
Miftez would not benefit by either importing or exporting good R.
Not enough information has been given to answer the question.

Explanation

Question 49 of 130

1

Which of the following statements is/are true, regarding the effect on labor supply, caused by an increase in the wage rate?

Select one of the following:

When the wage rate increases, the opportunity cost of leisure increases.
The increase in the wage rate will create a substitution effect, such that the individual will work less.
The increase in the wage rate will create an income effect, such that the individual will work more.
All of the above.
(b) and (c) only are true.

Explanation

Question 50 of 130

1

The market supply curve for beef jerky shifts to the right. At the same time, the market demand curve for beef jerky shifts to the left. As a result of these two changes, what will happen to the equilibrium price and quantity of beef jerky?

Select one of the following:

Price will rise; quantity will rise.
Price will rise; the effect on quantity can’t be determined without more information.
Price will fall; the effect on quantity can’t be determined without more information.
Quantity will rise; the effect on price can’t be determined without more information.
Quantity will fall; the effect on price can’t be determined without more information.

Explanation

Question 51 of 130

1

In your textbook, the Prisoners’ Dilemma is used to study

Select one of the following:

the deadweight loss of a sales tax.
monopsonistic exploitation of labor.
the effects of price ceilings.
how to saw through thick iron bars.
the interaction between firms in a duopoly.

Explanation

Question 52 of 130

1

Rubeus Hagrid has received a promise that he will be paid $1000, exactly five years from now. There is no uncertainty: he is absolutely certain that he will receive the $1000. The interest rate is 10%. What is the present discounted value of the payment?

Select one of the following:

$1000
$1000 / 1.1
$1000 / 1.5
$1000 / 5
$1000 / (1.1)^5

Explanation

Question 53 of 130

1

Consumer surplus is

Select one of the following:

the difference between the amount consumers are willing to pay and the amount they actually have to pay.
graphically represented by the area under the demand curve but above the supply curve.
something that occurs when a price floor is enforced above the equilibrium price.
All of the above.
(a) and (b) only.

Explanation

Question 54 of 130

1

Inequality between countries is

Select one of the following:

greater than the inequality within countries (that is, the Gini index for the world as a whole is larger than the Gini indexes for individual countries).
about the same as the inequality within countries (that is, the Gini index for the world as a whole is about the same as the Gini indexes for individual countries).
smaller than the inequality within countries (that is, the Gini index for the world as a whole is less than the Gini index for individual countries).
all of the above.
none of the above

Explanation

Question 55 of 130

1

The short-run supply curve for a perfectly competitive firm is

Select one of the following:

the marginal-revenue curve.
the average-fixed-cost curve.
the marginal-cost curve for prices equal to or greater than average total cost. If price is less than average total cost, the quantity supplied is zero.
the marginal-cost curve for prices equal to or greater than average variable cost. If price is less than average variable cost, the quantity supplied is zero.
none of the above. The perfectly competitive firm does not have a unique, well-defined supply curve.

Explanation

Question 56 of 130

1

Which of the following will occur as a result of a tariff?

Select one of the following:

The gross price paid by buyers in the importing country will increase.
The net price received by sellers in the exporting country will decrease.
The quantity of imports will be reduced.
All of the above.
(a) and (c) only.

Explanation

Question 57 of 130

1

The Lorenz Curve in country A is closer to the horizontal axis than the Lorenz Curve for country B. In other words, the Lorenz Curve for country A is always below the Lorenz Curve for country B. This means that

Select one of the following:

the Gini Ratio for country A is greater than the Gini Ratio for country B.
the Gini Ratio for country A is less than the Gini Ratio for country B.
the distribution of income is more equal in country A than in country B
(a) and (c).
none of the above.

Explanation

Question 58 of 130

1

Which of the following is a characteristic of a pure public good?

Select one of the following:

Nonrival consumption, i.e., many people can enjoy the good at the same time.
Nonexcludability, i.e., it is difficult or impossible to exclude those who don’t pay.
Inelastic demand.
All of the above.
(a) and (b) only.

Explanation

Question 59 of 130

1

Which of the following is widely considered to be a violation of horizontal equity?

Select one of the following:

The federal individual income tax is not neutral with respect to marital status, i.e., single persons sometimes experience a marriage penalty or marriage bonus.
The federal individual income tax has graduated marginal rates.
The federal individual income tax is associated with excess burden.
Sales taxes are regressive.
Telephone poles are vertical, not horizontal.

Explanation

Question 60 of 130

1

Tariffs, quotas, and VERs are all used to restrict imports. Which of the following statements is true regarding these policies that interfere with international trade?

Select one of the following:

All three are explicit restrictions on the quantity of imports.
A tariff is a price mechanism, whereas a quota or a VER is an explicit restriction on the quantity of imports.
All three are price mechanisms.
A tariff or a VER is a price mechanism, whereas a quota is an explicit restriction on the quantity of imports.
A VER raises revenue for the government of the importing country

Explanation

Question 61 of 130

1

In one day, Abner can fix 6 bicycles, or he can sharpen 6 axes. In one day, Zebediah can fix 12 bicycles, or he can sharpen 8 axes. Between these endpoints, each person has a straight-line production possibilities frontier. Which of the following statements is true?

Select one of the following:

The earth is flat.
Zebediah has comparative advantage in both activities.
Abner has comparative advantage in fixing bicycles.
Neither person has comparative advantage in either activity.
Zebediah has absolute advantage in both activities.

Explanation

Question 62 of 130

1

There is an increase in the demand for billiard balls (i.e., the demand curve for billiard balls shifts to the right). As a result,

Select one of the following:

the equilibrium price will increase; the equilibrium quantity will increase.
the equilibrium price will increase; the equilibrium quantity will decrease.
the equilibrium price will decrease; the equilibrium quantity will increase.
the equilibrium price will decrease; the equilibrium quantity will decrease.
nothing will happen.

Explanation

Question 63 of 130

1

Job A and Job B are identical in every way except one. The only difference between the two jobs is that the working conditions of Job A are pleasant, whereas the working conditions of Job B are unpleasant. As a result, the equilibrium wage rate for Job B will be higher than the equilibrium wage rate for Job A. Why does the wage difference occur?

Select one of the following:

The demand curve for A labor is to the right of the demand curve for B labor.
The demand curve for A labor is to the left of the demand curve for B labor.
The supply curve for A labor is to the right of the supply curve for B labor.
The supply curve for A labor is to the left of the supply curve for B labor.
A union has succeeded in pushing the B wage rate above its equilibrium level.

Explanation

Question 64 of 130

1

Which of the following is restricted by the antitrust laws?

Select one of the following:

Tariffs
Price Fixing
Import quotas
Environmental externalities
All of the above.

Explanation

Question 65 of 130

1

The income tax in Koblenzia has an exemption, such that those with low incomes pay no tax. It also has graduated marginal rates. For a taxpayer whose income is greater than the exemption level,

Select one of the following:

the average tax rate is greater than the marginal tax rate.
the marginal tax rate is greater than the average tax rate.
the marginal tax rate is equal to the average tax rate.
not enough information has been given to answer the question.
it’s time for a nap.

Explanation

Question 66 of 130

1

A price ceiling is imposed in the market for licorice. The price ceiling is below the equilibrium price, and this leads to shortages. We say that a shortage is larger if the difference between quantity demanded and quantity supplied is larger. All else equal, which of the following statements is/are true, regarding the relationship between the size of the shortage and the own-price elasticity of demand?

Select one of the following:

The shortage will be larger if the elasticity is larger.
The shortage will be larger if the elasticity is smaller.
The elasticity will have no effect on the size of the shortage.
If the elasticity is larger, the shortage will be larger on days of the week that begin with the letters T, W, or F, but smaller on days that begin with M or S.
Not enough information has been given to answer the question.

Explanation

Question 67 of 130

1

If an individual receives non-labor income, he/she will work less. This means that

Select one of the following:

leisure is a normal good.
the labor-supply curve is perfectly inelastic.
a minimum-wage law will increase the total payments to low-wage workers.
the union threat effect is very small.
no one knows anything about anything.

Explanation

Question 68 of 130

1

The payroll tax in the United States is a flat-rate tax on earnings in the labor market, up to a ceiling. Most Americans receive most of their income from labor-market earnings, and the ceiling is much higher than the average wage earner makes in a year. Thus the payroll tax is approximately proportional over most of the income range. However, above a certain amount (which was $106,800 in 2011), the marginal rate of payroll tax decreases dramatically. As a result, what can we say about the payroll tax for those who earn more than the ceiling?

Select one of the following:

It is progressive.
It is proportional
It is regressive
All of the above are correct!! The tax is progressive, and proportional, and regressive, all at the same time!!
Not enough information has been given to answer the question.

Explanation

Question 69 of 130

1

In the Republic of Fenwickia, every household has exactly the same income. The Gini Ratio for this country is

Select one of the following:

0
1
3.14159
100
e. Not enough information has been given to answer the question.

Explanation

Question 70 of 130

1

A demand curve is

Select one of the following:

a graph of the relationship between quantity demanded and price, holding constant all other possible influences on buyers.
Downward sloping as we move from left to right, if it obeys the Law of Demand.
A graph of the information contained in a demand schedule.
All of the above.
None of the above.

Explanation

Question 71 of 130

1

Which of the following is a normative statement?

Select one of the following:

When the demand curve shifts to the right, the equilibrium price rises and the equilibrium quantity also rises.
A monopoly will produce a lower quantity than an otherwise-comparable industry that is perfectly competitive.
The United States should increase the degree of progressivity of its tax system.
A price ceiling that is below the equilibrium price will lead to shortages.
All of the above.

Explanation

Question 72 of 130

1

There is an increase in the equilibrium price of gasoline, and an increase in the equilibrium quantity of gasoline. Which of the following would be consistent with these changes?

Select one of the following:

A rightward shift in the supply curve of gasoline.
A leftward shift in the supply curve of gasoline.
A rightward shift in the demand curve for gasoline.
A leftward shift in the demand curve for gasoline.
None of the above.

Explanation

Question 73 of 130

1

Which of these is the best definition of economics?

Select one of the following:

The study of shopping.
The study of how society chooses to use its scarce resources to produce, consume, and exchange goods and services.
The study of how to make money in the stock market.
The study of inflation and unemployment.
The study of hot dogs and mustard.

Explanation

Question 74 of 130

1

In the Duchy of Gutereise, the economy is on its production-possibilities frontier in 2011. Then, by one year later (in 2012), the economy produces more of every good than it had produced in 2011. How could this occur?

Select one of the following:

By reducing waste, so that the available resources are used more efficiently.
By moving downward and to the right along the existing production-possibilities frontier.
By moving upward and to the left along the existing production-possibilities frontier
By adopting new technologies and increasing the size of the labor force.
All of the above.

Explanation

Question 75 of 130

1

For the exact same flight, American Airlines charges lower prices for passengers who stay over a Saturday night, and higher prices for passengers who do not stay over a Saturday night. This is an example of

Select one of the following:

price discrimination.
monopsonistic exploitation.
collusive oligopoly.
rent seeking.
none of the above.

Explanation

Question 76 of 130

1

Assume that the elasticity of labor supply is smaller than the elasticity of labor demand. A payroll tax is levied on employers. Who will bear the largest share of the burden of the tax?

Select one of the following:

Employers.
Workers.
The tax will be borne equally by employers and workers.
Not enough information has been given.
All of the above! Astonishingly, the tax will be borne mostly by employers, and borne mostly by workers, and evenly split between employers and workers, and we can’t tell!

Explanation

Question 77 of 130

1

What kind of curve could this be?

Select one of the following:

An average-fixed-cost curve.
A perfectly elastic demand curve.
A perfectly inelastic demand curve
A marginal-revenue-product curve.
A total-fixed-cost curve.

Explanation

Question 78 of 130

1

Assume that the elasticity of demand for green and white ball-point pens is 1.2. Due to a rightward shift in the supply curve for pompons, the price decreases by 50%. What will happen to the quantity of pompoms demanded?

Select one of the following:

Quantity demanded will increase by 6%.
Quantity demanded will increase by 12%.
Quantity demanded will increase by 24%.
Quantity demanded will increase by 50%.
Quantity demanded will increase by 60%.

Explanation

Question 79 of 130

1

Consumer surplus is

Select one of the following:

the difference between the amount consumers are willing to pay and the amount they actually have to pay.
graphically represented by the area under the demand curve but above the price line.
used in calculating the deadweight loss of monopoly.
All of the above.
(a) and (b) only.

Explanation

Question 80 of 130

1

Malfoy Corporation is a monopolist. Its marginal costs decrease (i.e., its entire marginal-cost curve shifts downward). How will the firm change its price and quantity as a result?

Select one of the following:

Malfoy will reduce price and increase quantity of output.
Malfoy will reduce price and decrease quantity of output.
Malfoy will increase price and leave quantity of output unchanged.
Malfoy will increase price and increase quantity of output.
Malfoy will increase price and reduce quantity of output.

Explanation

Question 81 of 130

1

If the social marginal cost of production of good Z is greater than the
private marginal cost, we would say that good Z is characterized by

Select one of the following:

decreasing returns to scale.
leprosy, malocclusion, and poor gas mileage.
a negative externality.
opportunity cost.
positive economic profit.

Explanation

Question 82 of 130

1

If a Pigouvian tax is designed in the socially optimal way, it will

Select one of the following:

lead to equality between social marginal costs and private marginal costs.
solve the problem caused by an externality.
eliminate pollution.
All of the above.
(a) and (b) only.

Explanation

Question 83 of 130

1

For Hezekiah, total utility and marginal utility can be measured in dollars of willingness to pay. Hezekiah’s total-utility schedule for trips to the movie theater is given by:
Quantity Total Utility Marginal Utility
0 $0 --
1 8
2 15
3 21
4 26
5 30

The current market price of a movie ticket is $5. How many
movie tickets will Hezekiah buy?

Select one of the following:

1
2
3
4
5

Explanation

Question 84 of 130

1

The firms in a monopolistically competitive industry are
earning positive economic profits. What would we expect to
happen as a result?

Select one of the following:

New firms will enter the industry until zero economic profits are being earned.
The firms will continue to earn positive economic profits indefinitely, because of barriers to entry.
New firms will enter the industry until negative economic profits are being earned.
Firms will exit the industry until zero economic profits are being earned.
None of the above.

Explanation

Question 85 of 130

1

Because of an improvement in agricultural technology, there is an increase in the supply of peaches. In other words, there is a rightward shift in the supply curve for peaches. What will happen to the equilibrium price and quantity of peaches?

Select one of the following:

Equilibrium price will rise, equilibrium quantity will rise.
Equilibrium price will rise, equilibrium quantity will fall.
Equilibrium price will fall, equilibrium quantity will rise.
Equilibrium price will fall, equilibrium quantity will fall.
Not enough information has been given to answer the question.

Explanation

Question 86 of 130

1

What kind of firm could this be?

Select one of the following:

A monopoly.
A monopolistically competitive firm
An oligopoly firm.
Any of the above.
Not enough information has been given to answer the question.

Explanation

Question 87 of 130

1

What is average total cost when Q=4?

Select one of the following:

1
2
3
4
5

Explanation

Question 88 of 130

1

What is the marginal revenue of the fifth unit (i.e., the marginal revenue associated with going from Q=4 to Q=5)?

Select one of the following:

5
4
3
2
1

Explanation

Question 89 of 130

1

What is the firm's profit-maximizing quantity of output?

Select one of the following:

1
2
3
4
5

Explanation

Question 90 of 130

1

Which of the following would be an example of the “Tragedy of the Commons”?

Select one of the following:

A lot of hot air comes out of the House of Commons in London.
A monopoly will produce less than the socially optimal quantity.
When there is free access to a fishing ground, the stock of fish will be depleted.
In a monopsony labor market, workers will be paid less than their
marginal revenue product.
A tax on an elastically demanded good will generate a large excess burden.

Explanation

Question 91 of 130

1

Investment projects tend to have a large portion of their costs early in the life of the project, with the revenues coming later. Because of this, and because of the need to discount future costs and revenues,
we would be more likely to approve a project if

Select one of the following:

the interest rate is higher.
the interest rate is lower.
the project can be completed quickly, so the revenues can begin to be realized.
none of the above.
(b) and (c).

Explanation

Question 92 of 130

1

Which of the following is true regarding nonrival consumption?

Select one of the following:

Nonrival consumption is one of the characteristics of a public good.
Nonrival consumption means that one person can enjoy the good without diminishing anyone else’s enjoyment of the good.
Nonrival consumption is the reason why we add individual willingness-to-pay curves vertically, in constructing the social willingness-to-pay curve.
All of the above are true.
Only (a) and (b) are true.

Explanation

Question 93 of 130

1

Different people have different wage rates, for a variety of reasons. One type of wage-rate differential is a compensating wage-rate differential. Why do we observe compensating wage differentials for some occupations?

Select one of the following:

The workers in those occupations have very high levels of education.
The workers in those occupations are members of unions.
The workers in those occupations are helped by affirmative-action laws.
The workers in those occupations have unusually large amounts of experience.
The work in those occupations is dangerous or unpleasant.

Explanation

Question 94 of 130

1

Which of the following could lead to higher prices for the consumers in the importing country?

Select one of the following:

A tariff.
An import quota.
A voluntary export restraint.
All of the above.
None of the above.

Explanation

Question 95 of 130

1

Which of the following is a reason why we might prefer Pigouvian remedies (such as emissions charges) to regulations, as a method of reducing pollution?

Select one of the following:

Pigouvian remedies take into account the differences among firms in the costs of pollution reduction.
Pigouvian remedies are more effective in breaking up cartels.
Pigouvian remedies raise revenue for the government, which can be used to reduce the reliance on other, more distortionary taxes.
All of the above.
(a) and (c) only.

Explanation

Question 96 of 130

1

The price of good A increases. As a result, there is a decrease in the demand for good B. This means that

Select one of the following:

good A and good B are substitutes.
good A and good B are complements.
the demand for good A and the demand for good B are both elastic.
good A and good B are both normal goods.
None of the above

Explanation

Question 97 of 130

1

The price of geegaws falls from $18 to $14. As a result, the quantity demanded rises from 300 to 500. What is the elasticity of demand?

Select one of the following:

0.25
0.5
1.0
2.0
7.891234567890123456

Explanation

Question 98 of 130

1

A point that is below and to the left of the production-possibilities frontier is

Select one of the following:

associated with inefficient use of the available resources
associated with efficient use of the available resources.
unattainable with the resources that are currently available
All of the above.
None of the above.

Explanation

Question 99 of 130

1

When the price of champagne goes up, the demand curve for zabaglione shifts to the right. This means that

Select one of the following:

champagne and zabaglione are substitutes.
champagne and zabaglione are complements.
the cross-price elasticity of demand for zabaglione with respect to the price of champagne is positive.
(a) and (c) are both correct.
None of the above is true.

Explanation

Question 100 of 130

1

Two markets have exactly the same net-of-tax supply curve. They also have exactly the same equilibrium price and quantity when there is no tax. Then each of the markets is subjected to exactly the same tax. The only difference between the two markets is that the demand for good X is more elastic than the demand for good Y. On the basis of this information, what can we say?

Select one of the following:

The tax in market Y will generate more revenue.
The tax in market Y will generate more excess burden.
Both (a) and (b) are true.
Neither (a) nor (b) is true.
Louie the Icepick is the only one who knows the answer to this question, and we're too afraid to ask him.

Explanation

Question 101 of 130

1

If the net wage rate decreases, the income effect would move the individual toward work, and the substitution effect would move the individual toward __ work.

Select one of the following:

more, more
more, less
less, more
less, less
about the same amount of, about the same amount of

Explanation

Question 102 of 130

1

Which of the following is restricted by the antitrust laws?

Select one of the following:

Attempting to monopolize.
Price fixing.
Interlocking directorates.
Tie-in sales.
All of the above.

Explanation

Question 103 of 130

1

Which of the following would be expected to shift the supply curve
for tomatoes to the right?

Select one of the following:

A decrease in the prices of inputs used in production of tomatoes.
An increase in the price of tomatoes.
Discovery of a new technology that makes it possible to produce more tomatoes without using more inputs.
All of the above.
(a) and (c) only.

Explanation

Question 104 of 130

1

The supply of rabmots is given by Qs = 3P. The demand for rabmots is given by
Qd = 40 - P. What are the equilibrium price and quantity of rabmots?

Select one of the following:

P = $10, Q = 10
P = $16, Q = 24
P = $20, Q = 30.
P = $12, Q = 28.
P = $10, Q = 30.

Explanation

Question 105 of 130

1

In the Empire of Lumpiness, every person pays $1000 per year of tax, regardless of his or her income. This tax system is

Select one of the following:

regressive
proportional
progressive
perfectly elastic
only comprehensible to people with a Ph.D. in Sanskrit literature

Explanation

Question 106 of 130

1

Which of the following policy issues could be studied with the tools of microeconomics?

Select one of the following:

The effects of tariffs on the price of belts.
The effects of the payroll tax on the net-of-tax wages received by workers.
The effects of rent controls on the quantity of apartments
The effects of unions on the wages of non-union workers.
All of the above.

Explanation

Question 107 of 130

1

The demand for pedicures increases (i.e., the demand curve for pedicures shifts to the right). As a result, what will happen to the equilibrium price and quantity of pedicures?

Select one of the following:

Equilibrium price will increase, equilibrium quantity will increase.
Equilibrium price will increase, equilibrium quantity will decrease.
Equilibrium price will decrease, equilibrium quantity will increase.
Equilibrium price will decrease, equilibrium quantity will decrease.
Nothing will happen.

Explanation

Question 108 of 130

1

For any firm (regardless of market structure), if the price is greater than average variable cost, the profit-maximizing quantity of output will be the quantity at which

Select one of the following:

marginal revenue is equal to marginal cost.
demand is inelastic.
price is equal to marginal cost.
marginal revenue is negative
(a) and (c).

Explanation

Question 109 of 130

1

Perfect competition and monopolistic competition are similar in some ways, and different in other ways. Which of these is a way in which perfect competition and monopolistic competition are similar?

Select one of the following:

Firms in each of these market structures will charge P=MC.
In each of these market structures, the tendency will be toward zero economic profit.
For firms in each of these market structures, the firm’s demand curve is perfectly elastic.
All of the above.
(a) and (b) only.

Explanation

Question 110 of 130

1

All else equal, an increase in the demand for highly skilled labor will lead to _ in the distribution of labor-market earnings, and an increase in the supply of highly skilled labor will lead to ____ in the distribution of labor-market earnings.

Select one of the following:

greater inequality, greater inequality
greater inequality, less inequality
less inequality, greater inequality
less inequality, less inequality
not enough information has been given to answer the question

Explanation

Question 111 of 130

1

Mr. Hagrid has received a promise that he will be paid $1000, exactly five years from now. There is no uncertainty: he is absolutely certain that he will receive the $1000. The interest rate is 10%. What is the present discounted value of the payment?

Select one of the following:

$1000
$1000 / 1.1
$1000 / 1.5
$1000 / 5
$1000 / (1.1)^5

Explanation

Question 112 of 130

1

The Lorenz Curve in country A is closer to the horizontal axis than the Lorenz Curve for country B. In other words, the Lorenz Curve for country A is always below the Lorenz Curve for country B. This means that

Select one of the following:

the Gini Ratio for country A is greater than the Gini Ratio for country B.
the Gini Ratio for country A is less than the Gini Ratio for country B.
the distribution of income is more equal in country A than in country B.
(a) and (c).
none of the above.

Explanation

Question 113 of 130

1

The marginal revenue product of labor is

Select one of the following:

the change in the wage rate as a result of hiring one additional worker.
the quantity of output, divided by the number of workers.
the marginal product of labor, multiplied by the firm’s marginal revenue.
an upward-sloping curve.
All of the above.

Explanation

Question 114 of 130

1

Assume that the individual consumer takes the market price as given. Then, the individual demand curve is

Select one of the following:

the marginal-revenue curve.
the marginal-revenue-product curve.
the marginal-utility curve.
the average-variable-cost curve.
all of the above.

Explanation

Question 115 of 130

1

What will have happened if the Gini coefficient were to become smaller?

Select one of the following:

An increase in inequality.
A movement toward the minimum point of the average-total-cost curve.
An increase in incomes.
A decrease in inequality.
An increase in the odds of winning the lottery.

Explanation

Question 116 of 130

1

In the last quarter of the 20th century, there was a large increase in the demand for highly skilled labor (i.e., the demand curve for highly skilled labor shifted to the right). What happened as a result?

Select one of the following:

There was an increase in the gap between the wages of highly skilled workers and the wages of less skilled workers.
There was a decrease in the gap between the wages of highly skilled workers and the wages of less skilled workers.
There was an increase in compensating wage differentials.
There was an increase in the gender earnings gap.
(b), (c), and (d)

Explanation

Question 117 of 130

1

The income elasticity of demand for good Z is negative. This indicates that good Z is

Select one of the following:

a normal good.
an inferior good.
an input in the production of slide guitars.
inelastic.
a good with negative marginal revenue.

Explanation

Question 118 of 130

1

Assume that the United States enforces an import quota on imported cummerbunds. Which of the following groups would gain from the import quota?

Select one of the following:

Domestic consumers.
Foreign producers.
The holders of the license to import cummerbunds.
All of the above.
None of the above.

Explanation

Question 119 of 130

1

The elasticity of demand for volleyballs is 0.5. The price of a volleyball decreases by 10%. What will happen to the quantity demanded?

Select one of the following:

Quantity demanded will rise by 1%.
Quantity demanded will rise by 5%.
Quantity demanded will rise by 10%.
Quantity demanded will rise by 20%.
Quantity demanded will rise by 50%.

Explanation

Question 120 of 130

1

The opportunity cost of action A is

Select one of the following:

the value of what must be given up, in order to pursue A
measured by including only the explicit, out-of-pocket costs of A.
a once-in-a-lifetime opportunity.
something that comes knocking on your door.
all of the above.

Explanation

Question 121 of 130

1

The Law of Supply states that

Select one of the following:

the supply curve will shift to the right when there is a decrease in the price of one of the inputs.
the supply curve will shift to the right when there is an improvement in technology.
when the price increases, there will be an increase in the quantity supplied.
All of the above.
None of the above

Explanation

Question 122 of 130

1

Arthur Weasley invests money in a savings account. The interest rate is 8%. If the interest rate stays at 8%, and if Arthur never makes a withdrawal, about how long will it take for him to double his money?

Select one of the following:

8 years
9 years
10 years
12 years
72 years

Explanation

Question 123 of 130

1

In the diagram at right, the net-of-tax supply curve is at $5, and the gross-of-tax supply curve is at $8. The demand curve is the downward-sloping line with a horizontal intercept of 15. What is the deadweight loss of the tax?

Select one of the following:

$3
$5
$6
$10
$12

Explanation

Question 124 of 130

1

The equilibrium price of karakasevs is $10. The government enforces a price ceiling in the market for karakasevs, at a price of $20. What will happen as a result of the price-ceiling law?

Select one of the following:

The law will have no effect.
The law will lead to a surplus.
The law will lead to a shortage.
All of the above.
None of the above.

Explanation

Question 125 of 130

1

If a tax is progressive,

Select one of the following:

higher-income people pay no taxes.
higher-income people pay a higher percentage of their incomes in tax.
higher-income people pay less tax than lower-income people.
higher-income people pay a lower percentage of their incomes in tax.
all people pay the same percentage of their incomes in tax.

Explanation

Question 126 of 130

1

As quantity increases, average fixed cost

Select one of the following:

always decreases.
is a horizontal line.
always increases.
decreases at first, then reaches a minimum, and then increases.
caroms about wildly, in a completely chaotic way.

Explanation

Question 127 of 130

1

The supply curve for beef shifts to the right. Assuming that the demand for beef is inelastic, what will happen to the total revenue received by cattle ranchers?

Select one of the following:

Revenue will increase.
Revenue will decrease.
Revenue will remain constant.
We need more information to answer the question.
All of the above! Amazingly, revenue will increase, and decrease, and remain constant, and we need more information to answer the question, all at the same time.

Explanation

Question 128 of 130

1

Which of the following companies was broken up as a result of an antitrust action?

Select one of the following:

Standard Oil.
American Tobacco.
ALCOA.
AT&T.
All of the above.

Explanation

Question 129 of 130

1

Which of the following could lead to higher prices for the consumers in the importing country?

Select one of the following:

A tariff.
An import quota that is enforced at a level below the equilibrium quantity.
A voluntary export restraint that is enforced at a level below the equilibrium quantity.
All of the above.
None of the above.

Explanation

Question 130 of 130

1

Which of the following is/are a characteristic of a perfectly competitive industry, but not a characteristic of any other kind of industry? (That is, we are looking for characteristics that do not apply to either a monopoly or an oligopoly or a monopolistically competitive industry.)

Select one of the following:

a. Price is equal to marginal cost at the profit-maximizing quantity.
Firms take the market price as given.
As a result of entry and exit, the industry will tend toward zero economic profit.
All of the above.
(a) and (b) only.

	Created by Zachariah Mann over 9 years ago

Sample 2007 Final Exam for EC201 Fall Semester 2014 with Professor Ballard

EC201 Final Exam

Question 1 of 130

Which of the following statements is associated with normative analysis, rather than positive analysis?

Select one of the following:

Explanation

Question 2 of 130

Alan’s opportunity cost of producing good A is lower than Bob’s opportunity cost of producing good A. Bob’s opportunity cost of producing good B is lower than Alan’s opportunity cost of producing good B. This means that

Select one of the following:

Explanation

Question 3 of 130

Which of the following is an example of a condition for an optimal decision by some kind of economic agent?

Select one of the following:

Explanation

Question 4 of 130

Which of the following would push the production-possibilities frontier outward?

Select one of the following:

Explanation

Question 5 of 130

Which of the following is necessary for a firm to increase its profits by engaging in price discrimination?

Select one of the following:

Explanation

Question 6 of 130

The supply curve for tarfsnods is perfectly inelastic. The demand curve shifts to the right. What will happen as a result?

Select one of the following:

Explanation

Question 7 of 130

The income elasticity of demand for commodity J is 0.6. On the basis of this information, we would say that J is

Select one of the following:

Explanation

Question 8 of 130

Which of the following would be expected to shift the supply curve for tomatoes to the left?

Select one of the following:

Explanation

Question 9 of 130

Which of the following is an example of the “Tragedy of the Commons”?

Select one of the following:

Explanation

Question 10 of 130

Select one of the following:

Explanation

Question 11 of 130

The payroll tax is a flat rate of labor earnings, but only up to a ceiling, above which the rate drops substantially. Also, the payroll tax does not apply to capital income. As a result, the payroll tax is

Select one of the following:

Explanation

Question 12 of 130

The firms in a monopolistically competitive industry are earning positive economic profits. What would we expect to happen as a result?

Select one of the following:

Explanation

Question 13 of 130

Because of good growing conditions, there is an increase in the supply of asparagus. What will happen to the equilibrium price and quantity of asparagus?

Select one of the following:

Explanation

Question 14 of 130

Which of the following is/are a reason why the earnings of college-educated workers tend to be higher than the earnings of workers with less than a college education?

Select one of the following:

Explanation

Question 15 of 130

When the price of champagne goes up, the demand curve for zabaglione shifts to the left. This means that

Select one of the following:

Explanation

Question 16 of 130

An import quota is instituted. As a result, consumers in the importing country are harmed, because they consume a smaller quantity, and they pay a higher price for the units they do consume. What is our best measure of the dollar value of the harm done to consumers by the import quota?

Select one of the following:

Explanation

Question 17 of 130

Which of the following is a graph of the relationship between the cumulative proportion of the population and the cumulative proportion of income?

Select one of the following:

Explanation

Question 18 of 130

Investment projects tend to have a large portion of their costs early in the life of the project, with the revenues coming later. Because of this, and because of the need to discount future costs and revenues, we would be more likely to approve a project if

Select one of the following:

Explanation

Question 19 of 130

The Gini coefficient for annual income is than the Gini coefficient for wealth, and the Gini coefficient for annual income is the Gini coefficient for lifetime income.

Select one of the following:

Explanation

Question 20 of 130

If a natural monopoly were to charge a price equal to marginal cost,

Select one of the following:

Which of the following would be expected to shift the supply curve
for tomatoes to the left?

The payroll tax is a flat rate of labor earnings, but only up to a ceiling, above which the rate drops substantially. Also, the payroll tax does not apply to capital income. As a result,
the payroll tax is

The firms in a monopolistically competitive industry are
earning positive economic profits. What would we expect to
happen as a result?

If there is a positive externality, a competitive private market will produce _ the socially optimal quantity. If there is a negative externality, a competitive private market will produce ___ the socially optimal quantity.