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Econ 201 Exam 3 Questions & answers
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Econ 201 Exam 3 Questions & answers
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Econ 201 Exam 3Once it becomes obvious that a public good is being underprovided, - ANS-the marginal
benefit of further production to a individual fails to outweigh the individual's marginal
cost.
Conditions under which externalities can be solved in a decentralized manner. -
ANS-The Coase Theorem
3. The market failure of moral hazard may occur when one party - ANS--Has symmetric
information about the other party's ACTION
4. The libertarian position on redistributing income (distinct from antipoverty programs)
is that - ANS--The govt transferring money among people after incomes were fairly
earned, is unjust
5. Two firms each pollute 50 tons. Permit for each ton polluted. Dow got 10 and dupoint
got 30. And each can be either used or sold. It costs Dupoint $100 for each ton before it
pollutes and costs dow $50 for each ton. It is likely that - ANS-5. Two firms each pollute
50 tons. Permit for each ton polluted. Dow got 10 and dupoint got 30. And each can be
either used or sold. It costs Dupoint $100 for each ton before it pollutes and costs dow
$50 for each ton. It is likely that
6. Many economists like the flat income tax (in which there is a large standard deduction
but no (or few) itemized deductions and a single non-zero marginal tax rate) because -
ANS-it would be much simpler than the current tax code.
Regarding the value of education, the human capitla views says that education_______,
while the signaling view says that education______ - ANS-enhances productivity; is
merely correlated with natural ability
Last year Bert earned 75k and paid 9k in taxes while Ernie earned 75k and paid 3.2K.
whether this system is fair is a question of - ANS-Horizontal equity
A fundamental similarity of common resurces and public goods is that in both cases -
ANS-consumption is not excludable
, Unemployment Insurance is both mandated and provided by the govt, whereas workers
compensation insurance (WCI) is merely mandated by the govt. The best economic
explanation for this difference is that - ANS-the market for UI suffers from aggregate
risk, but the market for WCI does not
Economists r generally favorable to Earned Income TaxCredit because - ANS-All
theory predicts--> increase labor force participation
Unlike minimum wage, it distinguishes between income levels
it doesnt create disincentives to working more hours at very low income
The existence of insurance markets requires - ANS-that some economic agents be
risk-averse
An additional electric automobile on a ocngested freeway creates - ANS-a negative
consumption externality because its presence reduces the speed of traffic for cars
already on the freeway
When a market with a negative externality is at its socially optimal level of output -
ANS-None of the above
or
the external MC is not 0
the efficient provision of a public good (Sam Condition) is such that - ANS-The sum of
all private marginasl benefits equals the marginal cost of production
The liberal (or Rawlsian) case for redistributing income is based on the assumption of -
ANS-extreme risk aversion
UI is mandated and provided by Govt, WCI is merely mandated by the govt. best econ.
explanation is - ANS-market for UI suffers from aggregate risk but the market for WCI
does not
The continued existence of the marriage tax is an example of - ANS-how difficult it is to
achieve horizontal equity in practice
Dan has a more dangerous job than chuck but he has more education. why does dan
earn more - ANS-Compensating differential
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