QUESTION 1 Recent income distribution figures in the United States show O less equity. O greater equity. O slightly more inequality. O less inequality. QUESTION 2 Income in the form of goods and services is O known as income in kind. O not considered income by economists. O known as money income. O not part Of wealth. QUESTION 3 The Opportunity cost Of going to college for a student receiving a scholarship O is the risk Of dropping out. O is the food and living expenses that she has to purchase while in college. O is the income that she would have earned if she did not go to college. O is zero because she does not have tO pay tuition. QUESTION 4 The effects of the national health care program on goods and services markets will O increase the marginal cost of the firm. O decrease the quantity demanded for all goods and services. O increase the quantity produced of the firm. O consumers will pay lower prices for many goods and services. QUESTION 5 According to the text, the portion of total U.S. national income spent on health care was about in 2015 as opposed to about in 1965. O 17 percent; 34 percent O 34 percent; 17 percent O 6 percent; 17 percent O 17 percent; 6 percent QUESTION 6 The age-earning cycle C) shows the average incomes of people broken down by age categories. O depicts differences in the relationship between age and earnings across countries. O is an earnings profile of an individual throughout his or her lifetime. O shows the earnings differences by age and by gender. QUESTION 7 The graph which represents the distribution of income in an economy is called the O aggregate demand curve. C) distribution curve. C) Laffer curve. C) Lorenz curve. QUESTION 8 The more bowed the Lorenz curve, the O poorerthe society. O more unequal the distribution of money income. O more equal the distribution of income. O richer the society. QUESTION 9 The richest 'IO percent of U.S. houses hold more than twothirds of all wealth. The problem with this statement is that C) it is based entirely on nonhuman wealth. C) it does not consider private and public pension plans. C) it is based entirely on human wealth. C) it does not consider an individual's current income. QUESTION 10 Changes in the Lorenz curve since 1929 in the United States indicate that O the distribution of income today is identical to what it was in 1929. O the distribution of income is slightly less equal today than in 1929. O the distribution of income is much more equal today than it was in 1929. O the distribution of income is slightly more equal today than in 1929. QUESTION 11 Relative poverty O has been eliminated in the United States. C) will always be with us. 0 has never existed in the United States. 0 can be eliminated in the next 20 years. QUESTION 12 Which of the following sources of productivity is the most difficult to acquire? 0 education 0 talent 0 experience 0 training QUESTION 13 The official number of poor in the United States O was lowest in the late 19603. O is higher today than at any other time in our history. O has risen steadily since 1981. O is lowest today. QUESTION 14 If an individual receives in-kind transfers from the government in the form of food stamps, public housing, and so on, his money income is O equal to his inkind income plus his wages. O less than his total income. O greater than his total income. O the same as his total income. QUESTION 15 The Lorenz curve is a geometric representation of O the standard of living experienced by the poor in a country. O the profile of earnings for a "typical" family over time. Q the distribution of income. O the difference between pre-tax and post-tax income. QUESTION 16 In calculating income for the Lorenz curve, one factor that is omitted, is O pure economic rent. O dividend payments. capital gains income. in-kind transfer payments from the government. QUESTION 17 The most widely used measure of income inequality is the Bureau of Labor Statistics' cost-of-living index. O the Laffer curve. the Lorenz curve. O the Gemini coefficient. QUESTION 18 The 45 line on a Lorenz curve represents O complete income equality. O complete wealth equality. O complete income inequality. O complete wealth inequality.QUESTION 19 In the year 2015, the United States spent about O 2 percent of GDP on health care. O 6 percent of GDP on health care. O 100 percent of GDP on health care. O 17 percent of GDP on health care. QUESTION 20 According to the text, today's Lorenz curve is O a vertical line. C) more bowed than in 1929. O less bowed than in 1929. O a straight line. QUESTION 21 The incidence of absolute poverty is reduced by O annual recalculations of the poverty line. O economic growth. O the size of the budget deficit. O government welfare programs. QUESTION 22 The distribution of income in one nation can be illustrated by the O Laffer curve. O aggregate demand curve. 0 Lorenz curve. O Phillips curve. QUESTION 23 The Lorenz curve is criticized for all of the following EXCEPT O that it does not account for the size differences of households. O that it excludes transfers-inkind income. O that it does not account for the impact of trade on the standard of living. O that it does not account for age differences of households. QUESTION 24 100 100 of Money Income Cumulative Percentage Cumulative Percentage of Money Income 100 100 Cumulative Percentage Cumulative Percentage of Households of Households Panel A Panel B 100 100 of Money Income Cumulative Percentage Cumulative Percentage of Money Income 100 100 Cumulative Percentage Cumulative Percentage of Households of Households Panel C Panel D Refer to the above figure. Which of the above panels represents complete income equality? O Panel A O Panel B O Panel C O Panel DQUESTION 25 Rising health care spending is a problem confronting the federal government because O the federalfunded VA hospitals have been expanding faster than government revenues can provide for. O the medical expenses of federal employees has been rising at a rate much faster than for non-federal workers. O it is the government's job to make sure everyone receives the health care they need. O federal spending on health care has increased rapidly over the last thirty years. QUESTION 26 Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are C) paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications. O continuing to overproduce the good, lowering the price of the good, or cutting output. O reducing the pollutioncausing activity, changing production techniques, or paying a price to pollute. O installing pollution abatement equipment, paying to pollute, orjust ignoring the issue. QUESTION 27 The marginal benefit of the pollution abatement curve C) slopes downward. O slopes upward. O has a zero slope. O has a positive slope up to a certain point and then a negative slope. QUESTION 28 Price In the above gure, 51 represents the supply curve which includes private costs, and 52 is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity? 0 P4, 01 0 P3, 02 0 P1, 04 0 P2, 03 QUESTION 29 Marginal :5 .. Benet C W .3 E 1;. 2 C E 2 4: 3 5 E P s =c ' - go I m '5 _ : 1' Marginal I Cost : I I I Degree 01 Air Cleanliness (Percent) In the above gure O the optimal degree of air cleanliness is less than 100 percent. O the marginal cost curve slopes up because of the law of diminishing returns. 0 Neither the optimal degree of air cleanliness is less than 100 percent nor the marginal cost curve slopes up because of the law of diminishing returns are correct. 0 Both the optimal degree of air cleanliness is less than 100 percent and the marginal cost curve slopes up because of the law of diminishing returns are correct. QUESTION 30 Which of the following statements concerning pollution is correct? O Pollution should be reduced to the extent necessary to return production to the production possibilities frontier. Economic efficiency requires that pollution be completely eliminated. O Economic efficiency dictates that the optimal amount of pollution arises at the point at which price equals private marginal cost. Pollution should be reduced to the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. QUESTION 31 Technological change that makes it easier to produce in a "cleaner" fashion would cause O the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality. O the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality. the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality. O the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality. QUESTION 32 Property owned by everyone is generally referred to as O natural property. O common property. free property. O social property.QUESTION 33 Which of the following constitutes an external cost of driving an automobile? O license insurance O pollution O fuel QUESTION 34 A good that has external benefits associated with its production will be O underproduced. O not produced. O produced at the optimal level. O overproduced. QUESTION 35 There is "too much" steel production if the O social benefits of steel production are declining. social costs of steel production are significantly lower than the private costs. O social costs of steel production are significantly higher than the private costs. O social costs of steel production are declining.QUESTION 36 When both internal and external costs for using a scarce resource are included, then there is O a positive externality. C) an increase in the price of the good. O a negative externality. C) an increase in the production of the good. QUESTION 37 For voluntary action to correct an externality O transaction costs have to be low. Q transaction costs have to be split evenly between all of the parties involved. 0 transaction costs have to be high. Q transaction costs are irrelevant. QUESTION 33 The optimal amount of pollution is NOT zero because C) it has been found that pollution in moderate amounts actually has positive benefits. 0 we don't have the political structure that could accomplish the goal. 0 there are no benefits to anyone from having zero pollution. O zero pollution would be too costly. QUESTION 39 Social costs is equal to the sum of O internal and external costs. internal and private costs. 0 internal and implicit costs. O internal and production costs. QUESTION 40 Marginal Cost PA P3 Marginal Cost or Benefit of Pollution Cleanup P2 P, Marginal Benefit Q1 Q2 Q3 QA Quantity of Units to Cleanup In the above figure, if a firm is cleaning up Q2 units of pollution, it is an O efficient solution, because marginal social benefits are greater than marginal social costs. efficient solution, because marginal social benefits are equal to marginal social costs. O inefficient solution, because marginal social benefits are greater than marginal social costs. O inefficient solution, because marginal social costs are greater than marginal social benefits.QUESTION 41 The marginal benefit of pollution abatement is graphically illustrated by O a horizontal curve. C) a vertical curve. C) a downward sloping curve. 0 an upward sloping curve. QUESTION 42 Suppose there are two factories on a river. and both need clean water for their production processes. The upstream factory takes in clean water and dumps dirty water back into the river. The downstream firm must clean up the water it gets from the river before using it. In this situation 0 the social costs are greater than the private costs for the upstream firm. while the social costs are less than the private costs for the downstream firm. 0 the private costs of the downstream factory are more than the private costs of the upstream factory, but for both factories private costs and social costs are the same. 0 the upstream factory's private costs are less than its social costs, and its external costs are borne by the downstream factory. O the internal costs of the upstream factory are externalized by the downstream factory, which then passes them on to its customers. QUESTION 43 The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen Q will not be able to sh. Q will externalize their private costs to the government. C) will lower their private costs to fish. 0 can trade their rights (shares) to sh or not. QUESTION 44 Which of the following is NOT a possible solution to the problem of pollution? O converting a resource that is communally owned into a privately owned resource O subsidizing the costs of production of activities that generate pollution O imposing a pollution tax on producers O regulating the quantity of pollution that can be generated QUESTION 45 Changing the ownership of the ocean from common property to private property would O not be economically desirable. O ensure that this resource would be allocated in a less efficient manner than under common property rights. O result in no appreciable change in efficiency of utilization of this resource. O ensure that this resource would be allocated in a more efcient manner. QUESTION 46 Which of the following is a TRUE statement? O Opportunity costs turn external costs into social costs. O Voluntary agreements can always yield a situation in which all externalities are internalized. O Opportunity costs always exist with whoever has property rights. O Any property right system will yield a situation in which all externalities are internalized. QUESTION 47 Wild animals are likely to be O private property. O endangered species. 0 externalities. O All of these. QUESTION 48 In a market for emission permits, firms that emit over their allowed limits O are forced to shut down. Q will sell their excess allowances through a trading system. Q must buy more allowances through a trading system. Q are taxed by the government for the amount of emissions. QUESTION 49 A good that has social costs that are equal to private costs has a price that is O too low. Q just right. 0 too high. Q equal to marginal cost. QUESTION 50 All of the following are examples of goods for which external costs commonly exist EXCEPT O cigarettes. O automobiles. O oil transportation. O vaccinations