Questions and Answers of Issues in economics

Total federal spending on health care, after adjusting for inflation, has beena. Growing.b. Relatively constant.c. Declining slowly.d. Declining rapidly.
The largest single item in federal spending isa. International aid.b. Welfare.c. Interest on the debt.d. Social Security.
In most school districts, all other characteristics held constant, an excellent teacher earns ____ a poor teacher.a. The same asb. More thanc. Less than
One significant feature of a “single-payer” system lacking in the U.S. system isa. Government involvement in health care.b. Coverage for the elderly.c. Coverage for the poor.d. Universal coverage.
Mandatory spending implies spending that isa. Required by a previously passed set of laws.b. Required by the U.S. Constitution.c. Needed more than discretionary spending.d. Off-limits for any cuts at
The problem of the “third-party payer” arises in health care in the form ofa. Doctors having to pay part of the own expenses.b. Government and/or private insurance paying a significant part of
If all K–12 schools were privately owned with a constant subsidy paid by the government to the school for each student enrolled, what would be one potential and likely negative consequence?a.
The evidence on charter schools is that theya. Have had no impact in any locations they have been tried.b. Have had an enormously positive impact on education generally.c. Have had a negative impact
Medical care inflation is likely to be easily overstated (if you look simply at the increase in the cost of a hospital stay) because that calculation ignoresa. The original costs.b. The new costs.c.
Disagreements between the Congress and the president about the federal budget occur frequently. When they cannot agree on a budget but want to keep the government running, theya. Use the
The institution of teacher tenure is meant toa. Ensure job security for teachers with 10 years of experience.b. Ensure that teachers do not get fired for political reasons.c. Allow teachers to engage
Which of the following forms of private insurance is likely to have the lowest premiums and least doctor choice flexibility?a. Medicareb. An HMOc. A PPOd. A fee-for-service plan
The job losses during this recession werea. Typical of a short recession.b. Nonexistent.c. Significant and rapid.
The argument that spending more money on teachers has little impact on educational outcomes in K–12 isa. Inconsistent with any economic model.b. Consistent with the upward-sloping nature of a
For a market economy to function, economists insist that government must protecta. Private property.b. Rights to free speech.c. Freedom of assembly.d. Free access to health care.
Under perfect competition, the supply curve isa. The marginal cost curve for all price quantity combinations.b. The marginal cost curve, but only that portion that is downward sloping.c. The marginal
Economic theory would suggest that the profitability of an industry would bea. Directly related to the number of firms competing in the industry.b. Inversely related to the number of firms competing
When compared to people of your grandparents’ generation, you can expect the net present value of Social Security to bea. Much better.b. About the same.c. Slightly worse.d. Much worse.
To counter the slowing rate of economic growth, conservative economists would recommenda. Taxation and spending policies that decrease aggregate demand.b. Taxation and spending policies that increase
The question of whether Social Security increases or decreases savings depends mostly on whether the _________ effect outweighs the ________ effect or visa versa.a. Bequest; asset substitutionb.
Whether a firm stays in business or shuts down depends heavily on the concept ofa. Economic profit.b. Actual profit.c. Market share.d. Concentration ratios.
The asset substitution effect implies that Social Security will _______ from where it would have been without it.a. Increase savingsb. Increase workc. Decrease workd. Decrease savings
Owing to its usefulness and relative simplicity, the supply and demand model is often useda. Because nearly every major industry in the United States is governed by perfect competition.b. Because
In 2013, a worker who earned $125,000 would have _____ in Social Security taxes taken out of his or her pay and _____ would also be paid by the employer.a. $17,396; $17,396 (both equal to
To counter the slowing rate of economic growth, liberal economists would recommenda. Taxation and spending policies that decrease aggregate demand.b. Taxation and spending policies that increase
An industry in which there are a very limited number of large firms is likely to be characterized bya. Monopoly.b. Oligopoly.c. Monopolistic competition.d. Perfect competition.
Since its inception, the portion of earnings that have been subject to the Social Security tax hasa. Remained roughly intact.b. Increased substantially.c. Decreased slightly.d. Decreased
An industry in which there are many competitors with specific marketing niches is likely to be characterized bya. Monopoly.b. Oligopoly.c. Monopolistic competition.d. Perfect competition.
When an existing prescription drug goes over the countera. Everyone wins.b. Drug companies win but consumer lose.c. Drug companies lose but consumers win.d. Drug companies likely win because of the
One issue that some call a consequence and others call a cause of slowing growth isa. A slowing rate of increase in the population.b. A change in the demographic mix of people to non-working
The average index of monthly earnings is indexeda. For wage inflation.b. For consumer price inflation.c. For producer price inflation.d. Via a combination of wage and price inflation.
One of the reasons a government-run annuity system such as Social Security may be better for society than simply relying on private savings is thata. No one would save for themselves.b. People, being
Social Security’s revenue emanates from taxes ona. All income.b. Payrolls.c. Capital.d. Estates.
The intermediate-term external benefits of Head Starta. Focus on reducing the likelihood of the children ending up in prison.b. Focus on reducing the likelihood that the children will become pregnant
The approval process for new drugs, if governed by economic thinking, should set stringency standards so that the __________ equals the ___________.a. Total cost; total benefitb. Average cost;
What source of rapid (1950–1975) growth is not duplicable?a. Electrification of lightingb. Increases in educationc. Increases in productivity
Current evidence suggests that the long-term benefits of Head Start area. Sufficiently positive to make the net present value positive.b. Sufficiently positive such that when added to the short- and
The typical Head Start teacher isa. An ill-trained minimum-wage worker.b. A professional credentialed worker making more than typical day-care worker.c. A college graduate making $30,000 a year or
The market form for a new drug in an area that had one other drug isa. Perfect competition.b. Monopolistic competition.c. Oligopoly.d. Monopoly.
The early evidence on programs like Head Start made it clear thata. The rate of return to these programs was very low.b. The net present value of the external benefits was positive.c. The short-run
The large increase in the Labor Force Participation Rate is ________ source of growth.a. A duplicableb. An un-duplicable
Though the high-quality preschool experience is a private benefit for the children and their parents, the economic justification for Head Start is based ona. External costs.b. Its low total cost.c.
If Head Start were a good long-run investment from a strictly economic perspective, for current children enrolled in the program it woulda. Make them happier.b. Help their parents with subsidized day
The market form for a new drug in an area where there are no competitors isa. Perfect competition.b. Monopolistic competition.c. Oligopoly.d. Monopoly.
From an economic perspective the tool one would use to analyze the costs and benefits of Head Start would bea. Present value.b. Supply and demand.c. Production possibilities.d. Marginal net benefit.
Orphan drug laws were created because the motivation to invent drugs for these diseases wasa. Much greater than normal because prices could be high.b. Much less than normal because prices would be
The large increase in the Labor Force Participation Rate that occurred between 1950 and 2000 was becausea. Women’s participation in the labor force doubled.b. Men’s participation in the labor
The impact of slowing economic growth over a long period of time isa. Negligible.b. The lost growth times the number of years.c. Substantial because of the exponential aspect of growth.
A patent is necessary to motivate innovation in areas where the innovation isa. Costly to figure out and easily copied.b. Cheap to figure out and difficult to copy.c. Costly to figure out and
The prescription drug industry is characterized by products that havea. Low fixed costs and low marginal costs.b. Low fixed costs and high marginal costs.c. High fixed costs and low marginal costs.d.
The evidence is that welfare reform in 1996resulted in ____welfare rolls.a. A substantial increase inb. A slight increase inc. A substantial decrease ind. No impact on
The most obvious pattern in poverty rates isthe degree to which they are higher duringa. Democratic administrations.b. Wars.c. Odd years.d. Recessions.
The distribution of aid to the poor between in-kind and in-cash isa. Roughly equal.b. Weighed heavily toward in-cash benefitsc. Weighted slightly toward in-kind benefitsd. Weighted heavily toward
Medicare’s prescription drug coverage will likelya. Cost substantially more than it was estimated to cost in 2003.b. Cost substantially less than it was estimated to cost in 2003.c. Cost slightly
Using a poverty line of $12,500, under the current system of calculating the poverty rate, which of the following people are considered to be in poverty and probably ought not to be?a. A rural family
Using a poverty line of $12,500, under the current system of calculating the poverty rate, which of the following people are not considered to be in poverty and probably ought to be?a. A rural family
In a simple 300 million-person world of all four-person families, if the poverty line is $12,500 and half of the 10 million families (with 40 million poor people) earn $10,000 and the other half earn
Per capita real economic growth during the Industrial Revolution through the mid-1970s wasa. Negative.b. Zero.c. 1 percent.d. 2 percent.
The Medicare Trust Fund is necessary becausea. Current expenses are greater than current revenues.b. Current expenses are less than current revenues.c. Future expenses will be greater than future
In a simple 300 million-person world of all four-person families, if the poverty line is $12,500 and half of the 10 million families (with 40 million poor people) earn $10,000 and the other half earn
The DRG system controls Medicare expenses bya. Preventing doctors from using particular procedures.b. Paying hospitals after they submit bills.c. Paying hospitals on the basis of a disease or injury
The result that a firm should produce where MC=MR except when the shutdown condition is met is based on the assumption that it is attempting toa. Maximize profit.b. Maximize market share.c. Minimize
Poverty is a _______ concept in that a person with that income in the United States may be considered in poverty, while a person with that same income in Somalia may be in the upper quarter of income
Medicaid spending per recipient isa. Twice that of the average citizen’s use of health care.b. Somewhat less than the average citizen’s use of health care.c. Somewhat greater than the average
When a firm chooses to shutdown, it isa. Making a poor decision because it should always produce where marginal cost equals marginal revenue.b. Making a poor decision because it should always produce
Per capita real economic growth during the pre–Revolutionary War era wasa. Negative.b. Zero.c. 1 percent.d. 2 percent.
When a program like Medicaid is introduced, the market demand curve for health care willa. Increase and flatten.b. Increase and become more steep.c. Decrease and flatten.d. Decrease and become more
Whether marginal revenue is constant or decreasing depends ona. Whether the firm is benefiting from the division of labor.b. Whether the firm is dealing with diminishing returns.c. How much the firm
The cost of educating a college studenta. Is less than the cost of educating a high school student because college classes are generally large.b. Is equal to the cost of educating a high school
The economic tool that proves the value of an expensive college education isa. Production possibilities.b. The yield curve.c. Supply and demand.d. Present value.
When a 65-year-old goes to the hospital, the part of Medicare that pays for the hospital bill isa. Part A.b. Part B.c. Part C.d. Part D.
The average total cost curve will be cut by the marginal cost curve from below as long asa. Fixed costs are rising.b. Average costs are decreasing.c. Marginal costs eventually increase.d. Marginal
Authors are typically paid for their worka. Based on a percentage of sales at college bookstores.b. Based on a percentage of the sales from publishers to bookstores.c. According to a fixed amount
Suppose a firm has $1,000,000 in fixed costs and variable costs equal to $100; for every unit they produce,a. Their marginal costs are decreasing.b. Their fixed costs are decreasing.c. Their average
If a program’s cost rises only with inflation and increases in those that qualify for the program, this representsa. An increase in spending using baseline budgeting.b. A decrease in spending using
If you have a $2000 covered health expense, a deductible of $500, and a 20% co-pay, then you pay _____ and the insurance company pays _____.a. $1500, $500b. $1000, $1000c. $800, $1200d. $700, $800
The government, in the form of Medicare, Medicaid and the Children’s Health Insurance Program pay for ____ of health care costs.a. Less than 10 percentb. Slightly less than halfc. About 75
The Obama administration's stimulus package wasa. Almost entirely made up of tax cuts.b. Almost entirely made up of spending on "shovel ready" projects.c. A balance between tax cuts, spending on
The FY 2016 federal budget was arounda. $4 million.b. $4 billion.c. $4 trillion.d. $4 quadrillion.
The fact that education benefits not just the person being educated but society as a while suggests that there is aa. Positive externality.b. Negative externality.c. Congestion.d. Monopoly.
The risk-averse person will buy health insurancea. Only if the expected health costs equal the insurance premium.b. Only if the expected health costs are greater than the insurance premium.c. Even if
Federal spending is typically ___ percent of GDP.a. Less than 10b. Between 18 and 22c. Between 25 and 30d. More than 30
The evidence on the impact of spending on K–12 education outcomes suggests that, ceteris paribus,a. The more a school district spends, the better it does.b. The more a school district spends, the
The Federal Reserve's response to the recession of 2007-2008 wasa. Clearly effective in shortening the recession.b. Quick but not obviously effective in shortening the recession.c. Slow and subject
The primary motivation for the purchase of any insurance lies in the fact that most people area. Risk lovers.b. Risk averse.c. Risk neutral.d. Risk tolerant.
Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the
History suggests that rent control lawsa. Tend to be declared unconstitutional.b. Tend to be overturned soon after they are adopted.c. Tend to become a permanent fixture of a community.d. Are
Gasoline prices _______ in late 2007 through mid-2008.a. Spikedb. Increased relatively slowlyc. Remained constantd. Plunged
When a satellite television company gains a subscriber there is no impact on existing subscribers. That is, there is no rivalry in the consumption for their service. This is an example of aA. Purely
Which of the following is likely to occur after several years of relevant rent control?a. Rents exceeding equilibriumb. An increase in available housingc. A decrease in available housingd. Rents
If the equilibrium rent is _____ the controlled level, then rent control laws are ______.a. Above; necessaryb. Above; irrelevantc. Below; necessaryd. Below; irrelevant
In the years prior to the recession the economy was growinga. At about its typical rate.b. At a rate much slower than typical.c. At a rate much faster than typical.
An environmental economist would likely recommend which of the following policies?a. Eliminate fossil fuel consumptionb. A tax on gasoline equal to the environmental damage caused by a gallon of
Rent control is an example of a _________a. Price ceiling.b. Price floor.c. Price irrelevancy.d. Price equalization.
When looking at the impact of a change in trade policy, economists use consumer and producer surplus to look at the winners and losers. Free-trade economists insist thatA. No one loses.B.
The evidence on most environmental pollutants (lead in the air and water, sulfur in the air, etc.) is thata. They are not nearly as harmful as once thought.b. They are increasing at an alarming
If supply and demand are lines then at equilibrium consumer and producer surplus are bothA. Equal.B. Shown as squares.C. Shown as trapezoids.D. Shown as triangles.
In the long run, rent control has ________ impact because, over time, supply and demand become ______ elastic.a. An increasing; moreb. A decreasing; morec. An increasing; lessd. A decreasing; less
The principal argument against rent control is thata. Landlords and all tenants are made worse off.b. Landlords and a few tenants are made worse off by less than the majority of tenants are made
Overfishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase would suggest that there

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