ECON 1000 (Summer 2017 Section 01) Exam #3A

Transcription

1 ECON 1 (Summer 217 Section 1) Exam #3A Multiple Choice Questions: (3 points each) 1. I am taking of the exam. A. Version A 2. A government policy that attempts to Internalize an Externality can be generally described as A. a policy which completely bans an activity that generates an externality. B. a policy which transforms a negative externality into a positive externality. C. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality. D. a policy which mandates the exact level of an activity that decision makers must choose. 3. Based upon the World Bank s poverty threshold of income of $1.9 per day, between 1981 and 215 the number of people living in poverty A. decreased from 5.2 billion down to 4.8 billion. B. decreased from 2 billion down to 7 million. C. increased from 125 million up to 9 million. D. increased from 4.5 billion up to 7.3 billion. 4. The argument in favor of redistribution is based upon a claim that, so long as people have a diminishing marginal utility for money, total social welfare can be increased by transferring income/wealth from the rich to the poor. A. Utilitarian Justice B. Rawlsian Justice (a.k.a., Social Contract Theory) C. Labor Theory of Value D. Libertarian Justice 5. refers to a situation in which total social surplus is decreased as a result of government intervention in a market. A. The Economic Calculation Problem B. The Incidence of a Tax C. Market Failure D. Government Failure 6. Which of the following was discussed in lecture to illustrate how something akin to the Coasian Solution to Externalities has been implemented in practice? A. How the Defenders of Wildlife established the Bailey Wildlife Wolf Compensation Trust in order to facilitate the re-introduction of the gray wolf into the wild in the western United States. B. How differences in the costs of doing business and complying with government bureaucracy across different countries can lead to drastically different outcomes in regards to the level of entrepreneurial activity. C. How rational ignorance on the part of voters can lead to an inefficient oversupply of government goods/services. D. How kids at Chuck E. Cheese s will often try to ride the carousel for free after another child pays a token to start the ride.

2 7. is defined as the process by which a legislator votes to approve one bill in exchange for favorable votes from other legislators on other bills. A. Regulatory Capture B. Logrolling C. The Economic Calculation Problem D. Rational Ignorance 8. As of 212, government spending on welfare programs in the U.S. was A. $, since all government welfare programs were abolished by President George W. Bush in January 29, right before he left office. B. roughly $317 billion (about 2% of GDP). C. roughly $952 billion (about 6% of GDP). D. roughly $2,38 billion (about 15% of GDP). For questions 9 through 11, consider a market with Supply and Demand as illustrated below. $ Supply a b c d e Demand quantity 2,2 4, 3,1 9. Imposing a per unit tax of $1.5 on buyers in this market would result in a Deadweight Loss equal to A. area (e). B. area (d). C. areas (b)+(d). D. areas (a)+(b)+(c). 1. Consider the following two proposed taxes: Tax A is a $1. per unit tax imposed on buyers; Tax B is a $2. per unit tax imposed on sellers. We can infer that A. the quantity of trade would be identical under Tax A and Tax B. B. producers would prefer Tax A over Tax B. C. Deadweight-Loss would be larger under Tax A than under Tax B. D. More than one (perhaps all) of the above answers is correct. 11. A per unit tax of $6. imposed on sellers would generate tax revenue for the government of A. $. B. $13,2. C. more than $13,2 but less than $18,6. D. $18,6.

3 12. One of the 7 Determinants of Productivity, Income, and Wealth is acquired skills, which refers to the recognition that differences in income or wealth across individuals could result from differences in A. the abilities and experiences that people obtain through education, training, and work experience. B. the amount of money that individuals receive as inheritances during their lifetime. C. how hard individuals choose to work. D. the natural talents that people are endowed with at birth. 13. The Labor Theory of Value, which states that the value of a commodity depends upon only the amount of labor required to produce the commodity, is most closely associated with the ideas of A. Karl Marx. B. Ronald Coase. C. Max Lorenz. D. John Rawls. For questions 14 through 16, consider a situation in which four candidates (Jon, Karen, Bob, and Judson) are potentially running for a vacant U.S. Congressional seat. Preferences are summarized by the table below. Assume all people vote sincerely/truthfully (i.e., in-line with actual preferences). Voter Type 1 st Choice 2 nd Choice 3 rd Choice 4 th Choice % of Population [i] Jon Bob Karen Judson 24% [ii] Jon Karen Judson Bob 2% [iii] Karen Judson Bob Jon 1% [iv] Karen Bob Jon Judson 8% [v] Bob Karen Judson Jon 2% [vi] Bob Judson Karen Jon 6% [vii] Judson Bob Karen Jon 8% [viii] Judson Jon Karen Bob 4% 14. In an election between all four candidates, would receive the most votes. A. Bob B. Jon C. Judson D. Karen 15. If there were a two way election between only Karen and Bob, which voter types would vote for Karen? A. All eight voter types. B. Only types [i], [ii], [iii], [iv], [vii] and [viii]. C. Only types [ii], [iii], [iv], and [viii]. D. Only types [iii] and [iv]. 16. Suppose that the position were filled by first having a vote over all four candidates, followed by a head-to-head runoff between the two highest vote getters. The person chosen as the eventual winner from this process would be. A. Jon B. Karen C. Bob D. Judson

4 17. Under the current U.S. Federal Income Tax, in 213 the Top 1% of wage earners paid A. about 8.67% of all taxes collected, an amount which is less than half of their share of total adjusted gross income (of 19.4%). B. about 19.4% of all taxes collected, an amount exactly equal to their share of total adjusted gross income earned (since President Obama established a proportional income tax for the United States immediately after assuming office in March 212). C. about 37.8% of all taxes collected, an amount which is almost twice as large as their share of total adjusted gross income earned (of 19.4%). D. 1% of all taxes collected, due to the fact that nobody with adjusted gross income below $25, per year pays any income taxes. 18. Since becoming informed on matters of public policy has high costs and low benefits for individual voters, many people choose to remain uninformed about issues. This phenomenon is described as A. Rent Seeking. B. Rational Ignorance. C. The Economic Calculation Problem. D. Corruption. For questions 19 and 2, refer to the graph below, which illustrates the Lorenz Curves in Country X and Country Y in 217. Note that the Lorenz Curve for Country Y starts out below but eventually intersects and passes above the Lorenz Curve for County X. CFI 1 A C County X Lorenz Curve B County Y Lorenz Curve CFP These curves provide a graphical illustration of the A. external costs realized in each country from negative externalities. B. amount of inefficiency from rent seeking in each country. C. distribution of income within each country. D. level of corruption in each country. 2. Suppose (Area A)=(.24), (Area B)=(.6), and (Area C)=(.4). It follows that the value of the Gini-Coefficient is A..72 in Country X and.7 in Country Y. B..56 in Country X and.6 in Country Y. C..28 in Country X and.3 in Country Y. D..8 in Country X and.12 in Country Y.

5 21. refers to the academic subfield which uses the tools and framework of economics to analyze issues that historically fall within the domain of political science. A. Microeconomics B. Public Choice C. Comparative Economic Systems D. Business Law 22. Between 1959 and 214, the poverty rate in the United States has ranged between a A. minimum of 11.1% in 1973 and a maximum of 22.4% in B. minimum of 6.9% in 22 and a maximum of 1.5% in 214. C. minimum of 4.6% in 1959 and a maximum of 31.2% in 29. D. minimum of % in 212 and a maximum of 1.5% in The Distribution Function of Government refers to A. government production of goods or regulation of business, to ensure that the right mix of products are produced, each in the ideal quantity and at the ideal quality. B. government policies intended to decrease Total Social Surplus. C. government policies aimed at minimizing fluctuations in overall macroeconomic activity. D. government policies aimed at altering the final levels of consumption of goods/services across consumers/households, usually with the intention of realizing a fairer apportionment of consumption/income/wealth. For question 24, consider the graph below which illustrates the Average Tax Rate as a function of income which results from an income tax in Country A, Country B, and Country C. % ATR in Country A ATR in Country B ATR in Country C Income 24. It appears that the income tax in Country A is a tax, the income tax in Country B is a tax, and the income tax in County C is a. A. progressive; regressive; progressive. B. progressive; proportional; regressive. C. regressive; proportional; progressive. D. None of the above answers are correct.

6 25. The value of the Gini-Coefficient in the U.S. between 1974 and 1994 and then between 1994 and 214. A. decreased from.598 to.471; decreased further from.471 to.352. B. decreased from.897 to.721; increased from.721 to.94. C. increased from.171 to.246; decreased from.246 to.195. D. increased from.395 to.456; increased further from.456 to.48. For Questions 26 through 29, consider a good for which Marginal Private Benefits, Marginal Private Costs, Marginal Social Benefits, and Marginal Social Costs are as illustrated below. $ Marginal Social Costs a b c d e f g Marginal Private Costs (Marginal Private Benefits) = (Marginal Social Benefits) 6,2 11,9 16,8 26. It appears as if production/consumption of this good generates A. a negative externality. B. a positive externality. C. neither a positive externality nor a negative externality. D. both a positive externality and a negative externality. quantity 27. Focusing on the 11,9 th unit, the Marginal External Cost for society from producing/consuming this unit is equal to. A. $66.2 B. $26.2 C. $14.6 D. $ The free market level of trade is, while the efficient level of trade is. A. 6,2 units; units. B. 6,2; 11,9 units. C. 11,9 units; units. D. 11,9 units; 6,2 units. 29. At the free market outcome there would be a Deadweight-Loss equal to A. area (g). B. areas (e)+(f). C. areas (c)+(d). D. areas (a)+(b).

7 3. In the textbook, was described as an ill-governed kleptocracy in which corruption is not a happy side-effect of power, but the core of the system. A. Great Britain during the 198s B. Finland during the 199s C. present day Russia D. the United States under President Donald Trump 31. Examining how Real (i.e., inflation adjusted) Household Incomes have changed between 1974 and 24, mean household income of the middle 5th of all households while the mean household income of the top 5th of all households between these years. A. increased from $48,282 to $55,661; increased from $123,542 to $189,82. B. increased from $36,149 to $57,512; decreased from $71,519 to $68,118. C. decreased from $86,927 to $78,361; increased from $356,489 to $489,22. D. decreased from $19,884 to $15,523; decreased from $96,993 to $8, A group of teachers at a middle school is trying to decide where to take their students on a field trip. They are considering three options: an art gallery, an amusement park, and a zoo. When voting between only the art gallery and the amusement park, the art gallery receives more votes. When voting between only the zoo and the art gallery, the zoo receives more votes. When voting between only the amusement park and the zoo, the amusement park receives more votes. These outcomes illustrate the A. Economic Calculation Problem. B. Condorcet Paradox. C. Costs of Complying with Government Bureaucracy. D. Incidence of a Tax. For question 33, consider a situation in which representatives from five legislative districts need to consider two proposals. The surplus that would be realized by constituents in each legislative district for each project is given by the table below. Recognize that if each proposal was considered separately (with representatives voting for/against each based upon surplus realized by constituents of his/her own district), each proposal would be defeated by a vote of three to two. District 1 District 2 District 3 District 4 District 5 Proposal I Proposal II Suppose that the representatives from District 4 and District 5 agree to trade votes, with the representative from District 4 voting in favor of Proposal II in exchange for the representative from District 5 voting in favor of Proposal I. Continue to suppose that the other representatives vote truthfully (i.e., in the best interest of their own constituents) and that there is a separate vote on each proposal. When the representatives from Districts 4 and 5 trade votes in this manner, A. both proposals are now approved, resulting in a decrease in realized total social surplus (i.e., realized total social surplus is smaller than it would be if no vote trading took place). B. both proposals are now approved, resulting in an increase in realized total social surplus (i.e., realized total social surplus is larger than it would be if no vote trading took place). C. both proposals are now approved, but the realized value of total social surplus is unchanged (i.e., realized total social surplus is the same at it would be if no vote trading took place). D. both proposals are still rejected.

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