Applied Microeconomic Analysis
Exam Practice Tests
Course Introduction
Applied Microeconomic Analysis focuses on the practical application of microeconomic theories to real-world decision-making in both private and public sectors. The course covers essential topics such as consumer and producer behavior, market structures, pricing strategies, and the implications of government policy. Emphasis is placed on using quantitative and qualitative tools to analyze and solve economic problems, interpret data, and evaluate the effectiveness of business strategies and public interventions. Through case studies and empirical exercises, students develop skills to address contemporary economic challenges and inform strategy and policy-making using microeconomic principles.
Recommended Textbook
Microeconomics An Intuitive Approach with Calculus 1st Edition by Thomas Nechyba
Available Study Resources on Quizplus
29 Chapters
598 Verified Questions
598 Flashcards
Source URL: https://quizplus.com/study-set/3169 Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
10 Verified Questions
10 Flashcards
Source URL: https://quizplus.com/quiz/62713
Sample Questions
Q1) To say that one policy is better than another because it is more efficient is a normative,not a positive,statement.
A)True
B)False
Answer: True
Q2) When economists assume that people are rational,they are assuming that people generally agree what is good for human beings.
A)True
B)False
Answer: False
Q3) Suppose two models give the same predictions --- but one is simplistic and unrealistic in its assumptions while the other is rich in detail and resembles the real world more closely.If the sole goal of the economist is to predict,then the economist should use the simple and unrealistic model.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: A Consumers Economic Circumstances
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/62714
Sample Questions
Q1) Consider a consumer with a choice set that emerges from an exogenous income I.Suppose that,as a result of changes in a consumer's economic circumstances,the budget line rotates outward,with the vertical intercept remaining unchanged but the horizontal intercept shifting to the right.Demonstrate,using the budget line equation,how this could have happened if the price of the good on the horizontal axis did not change? Answer: The budget equation is x<sub>2</sub>=I/p<sub>2</sub>(p<sub>1</sub>/p<sub>2</sub>)x<sub>12</sub>,with the first term representing the intercept and the term in parenthesis representing the slope.The rotation of the budget that is described implies the intercept remains constant and the slope falls in absolute value.If p<sub>1</sub> does not change,this can happen only if I and p<sub>2</sub> change by the same factor k --- which then cancels in the first term (leaving the intercept unchanged)and causes the second term to fall in absolute value.
Q2) The only way for a consumer choice set to be non-convex is for the budget line to be kinked.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Economic Circumstances in Labor and Financial Markets
Available Study Resources on Quizplus for this Chatper
12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/62715
Sample Questions
Q1) Progressive wage taxes cause worker leisure/consumption budgets (with leisure on the horizontal axis)to become steeper as leisure increases.
A)True
B)False
Answer: False
Q2) The opportunity cost of current consumption differs for borrowers and savers only if the interest rate for savers differs from the interest rate for borrowers.
A)True
B)False
Answer: True
Q3) An increase in the interest rate is an increase in the opportunity cost of consuming in the future.
A)True
B)False
Answer: False
Q4) A decrease in a wage taxes causes the opportunity cost of leisure to increase. A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Tastes and Indifference Curves
Available Study Resources on Quizplus for this Chatper
15 Verified Questions
15 Flashcards
Source URL: https://quizplus.com/quiz/62716
Sample Questions
Q1) You like bundle A better than bundle B,and bundle C is an average between A and B.If your tastes satisfy convexity,then C is at least as good as A and as B.
A)True
B)False
Q2) Consider a worker who dislikes working end enjoys consuming a composite good.With labor hours on the horizontal and the composite consumption good on the vertical axis,which of the following statements are true.
a.
If the worker's tastes are convex,the slope of indifference curves increases as we move to the right in the graph.
b.
The worker becomes better off as we move to the northwest in the graph.
c.
A tax on wage income does not change this worker's indifference map.
d.
All of the above.
e.
None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Different Types of Tastes
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62717
Sample Questions
Q1) Tastes for perfect substitutes are both homothetic and quasilinear.
A)True
B)False
Q2) Suppose the only characteristic of beer that a consumer cares about is alcohol content.Currently,Bud Light and Miller Lite have the same alcohol content.
a.Using
\(x _ { 1 }\) to denote ounces of Miller Lite and \(x _ { 2 }\) to denote ounces of Bud Light,what's the simplest possible utility function that can describe this consumer's tastes over the two products.
b.Suppose Bud Light lowers its alcohol content by 50%.How would you change the utility function to account for this?
c.Derive the MRS for the functions in (a)and (b)--- and interpret your answer.
Q3) There is no elasticity of substitution that is inconsistent with tastes being homothetic.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter
Available Study Resources on Quizplus for this Chatper
17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/62718
Sample Questions
Q1) Which of the following is correct about a consumer's optimization problem:
a.
In order for a consumer to not be optimizing at a corner solution,it is necessary for us to assume that all goods are essential.
b.
In order for a consumer to not be optimizing at a corner solution,it is sufficient for us to assume that all goods are essential.
c.
In order for a consumer to not be optimizing at a corner solution,it is necessary and sufficient for us to assume that all goods are essential.
d.
None of the above.
Q2) Suppose tastes satisfy our usual assumptions.Kinks in budget constraints do not give rise to the possibility of multiple solutions unless the kinds produce a non-convexity in the choice set.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Income and Substitution Effects in Consumer
Goods Markets
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62719
Sample Questions
Q1) At most museums,you can either buy a year-long membership that gives you free access to the museum any time,or you can pay a daily fee every time you visit.(Assume for purposes of this exercise that everyone can in principle afford the year-long membership.)
a.
Those who choose to pay the daily fees all place the same value on their marginal museum visit.
b.
We cannot tell how much value anyone places on the marginal museum visit because we cannot compare utility across individuals.
c.
If someone is indifferent between the two options,she will go to the museum at least as much if she chooses the year-long membership than if she does not.
d.
Both (a)and (c)are true.
e.
Both (b)and (c)are true.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Wealth and Substitution Effects in Labor and Capital Markets
Available Study Resources on Quizplus for this Chatper
16 Verified Questions
16 Flashcards
Source URL: https://quizplus.com/quiz/62720
Sample Questions
Q1) When tastes over current and future consumption are characterized by Cobb-Douglas utility functions,a borrower who has no income now and all income in the future will borrow more when the interest rate falls.
A)True
B)False
Q2) In a model with leisure hours and a composite consumption good,you cannot tell whether workers will work more or less if tastes are quasilinear in the consumption good.
A)True
B)False
Q3) Taxing savings in ways that lower the interest rate received by savers will lower savings.
A)True
B)False
Q4) In a model of consumption and leisure,a drop in the wage will cause workers to work less if tastes are quasilinear in leisure.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Demand for Goods and Supply of Labor and Capital
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62721
Sample Questions
Q1) An increase in the price of good 2 will cause the demand curve for good 1 to shift out.
A)True
B)False
Q2) Unless a good is a Giffen good,the demand curve shifts to the right as income rises.
A)True
B)False
Q3) When tastes are quasilinear in leisure,the labor supply curve is vertical.
A)True
B)False
Q4) If future consumption is a normal good,the interest rate/borrowing relationship cannot be upward sloping.
A)True
B)False
Q5) Leisure being a normal good is neither necessary nor sufficient for labor supply to slope up.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Consumer Surplus and Deadweight Loss
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/62722
Sample Questions
Q1) Suppose Coke and Pepsi are perfect substitutes.
a.Derive the shape of the (uncompensated)demand curve.
b.Derive the shape of the compensated demand (or MWTP)curve.
Q2) If tastes are homothetic,there exists a utility function (that represents those tastes)such that the indirect utility function is homogeneous of degree 1 in income.
A)True
B)False
Q3) When tastes are not quasilinear,the positive economist will introduce error into the analysis if he uses the uncompensated (rather than the compensated)demand curve to analyze changes in consumer surplus.
A)True
B)False
Q4) For perfect complements,the (uncompensated)demand curve slopes down and the compensated demand (or MWTP)curve is perfectly vertical.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: One Input and One Output: a Short-Run
Producer Model
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/62723
Sample Questions
Q1) The output level is constant along any isoprofit line.
A)True
B)False
Q2) Labor demand curves always slope down.
A)True
B)False
Q3) Every cost-minimizing producer is profit-maximizing.
A)True
B)False
Q4) Since the marginal product of labor can increase initially as I hire more workers,demand for labor is also upward sloping for the initial workers I hire.
A)True
B)False
Q5) Labor demand curves are homogeneous of degree zero.
A)True B)False
Q6) Whenever average cost is increasing,marginal cost must also be increasing. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Production With Multiple Inputs
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/62724
Sample Questions
Q1) A price taking firm employs each of its inputs into production until its marginal product is equal to 1.
A)True
B)False
Q2) We have worked a lot with homothetic production technologies.Suppose instead that a production process that uses capital and labor is quasilinear in capital and that capital is fixed in the short run.Then,assuming the firm currently profit maximizes at a given wage and rental rate,the short and long run slices of the production frontier are identical.
A)True
B)False
Q3) All economically efficient production plans are technologically efficient.
A)True B)False
Q4) Quasiconcave production functions give rise to convex producer choice sets. A)True B)False
Q5) Output prices are irrelevant for a firm as it is calculating its cost curves. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Production Decisions in the Short and Long Run
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/62725
Sample Questions
Q1) The fixed expense on a fixed level of capital in the short run becomes a fixed cost for the firm in the long run.
A)True
B)False
Q2) If a firm's labor input response to a decrease in the wage differs between the short and the long run,we know that more workers will be hired after the initial short run adjustment.
A)True
B)False
Q3) If the rental rate increases,we know that output and labor input will fall in the long run.
A)True
B)False
Q4) The parameter A re-scales the production function \(f ( k , \ell ) = A \left( \alpha \ell ^ { - \rho } + ( 1 - \alpha ) k ^ { - \rho } \right) ^ { - \beta / \rho }\) -- allowing us to transform a decreasing returns to scale production function to an increasing returns to scale production function.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Competitive Market Equilibrium
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62726
Sample Questions
Q1) An increase in license fees -- a long run recurring fixed cost -- will lead to a drop in the number of firms competing in a competitive industry.
A)True
B)False
Q2) The reason long run market supply curves are shallower than short run market supply curves is because individual firm supply curves are shallower in the long run than in the short run.
A)True
B)False
Q3) If firms differ in terms of their technologies,a drop in demand will cause a long run decrease in output price.
A)True
B)False
Q4) Short run market supply curves are formed by adding up individual firm supply curves in the industry.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Invisible Hand and the First Welfare
Theorem
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62727
Sample Questions
Q1) If a group of individual consumers can be treated as a single representative consumer,then the aggregate consumer surplus of the group can be measured along the market demand curve.
A)True
B)False
Q2) Absent any violations of the first welfare theorem,the competitive equilibrium is efficient.
A)True
B)False
Q3) Aggregate producer surplus in an industry is measured along the market supply curve is and only if firm production technologies exhibit the quasilinearity property.
A)True
B)False
Q4) Absent any violations of the first welfare theorem,the competitive market production level of a good will be the same as that chosen by a social planner whose goal includes (but is not necessarily limited to)efficiency.
A)True
B)False
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: General Equilibrium
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/62728
Sample Questions
Q1) If the two goods in an Edgeworth Box are perfect complements for one person and perfect substitutes for the other,then all efficient allocations are such that the first person has the same amount of good 1 as of good 2.
Q2) Suppose we live in an exchange economy with two goods.I own 50 of both goods,and you own 250 of both goods.My tastes are captured by the utility function \[u \left( x _ { 1 } , x _ { 2 } \right) = x _ { 2 } + 50 \ln x _ { 1 }\] and yours are captured by the utility function \(u \left( x _ { 1 } , x _ { 2 } \right) = x _ { 2 } + 100 \ln x _ { 1 }\) .
a.Calculate the competitive equilibrium price.
b.How much do each of us consume of good 1 in equilibrium?
c.Suppose the government transfers 100 units of your good 1 endowment to me.How is your answer to (a)and (b)affected?
d.Suppose the government instead transfers 100 units of good 2 from you to me.How is your answer to (a)and (b)affected?
e.Do you think your answers to (c)and (d)generally hold for most types of tastes -- or do you think they arise because of some specific feature of these tastes?
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Choice and Markets in the Presence of Risk
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62729
Sample Questions
Q1) Suppose an investor with state-independent tastes is offered the choice between investment A and investment B.Investment A offers profit of $2,000 with probability 0.4,$4,000 with probability 0.2 and $6,000 with probability 0.4.Investment B offers profit of $2,000 with probability of 0.5 and $6,000 with probability 0.5.If the investor is risk averse,he will choose investment A.
A)True
B)False
Q2) When tastes are risk loving,a person will always choose a gamble that is riskier over one that is less risky.
A)True
B)False
Q3) Gamble A results in $10 with probability 0.4 and $30 with probability 0.6.Gamble B results in $20 with probability 1.If an individual prefers Gamble A to Gamble B,the independence axiom implies that he prefers Gamble C that gives $0 with probability 0.5,$10 with probability 0.2 and $30 with probability 0.3 to Gamble D that results in $20 with probability 0.5 and $0 with probability 0.5.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/62730
Sample Questions
Q1) The equilibrium increase in marginal costs for firms resulting from the imposition of a price floor will be larger the more inelastic the price elasticity of demand is.
A)True
B)False
Q2) The greater the price elasticity of market demand,the less will be the reduction in market output from a price floor.
A)True
B)False
Q3) Deadweight loss from the imposition of a price floor increases as consumer demand becomes more price elastic.
A)True
B)False
Q4) If a consumer's demand curve as constant own-price elasticity of -2,the consumer's spending will fall as price increases.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Distortionary Taxes and Subsidies
Available Study Resources on Quizplus for this Chatper
26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/62731
Sample Questions
Q1) If supply is perfectly elastic in a consumer goods market,a per unit tax will always be inefficient unless the market demand curve for consumers is perfectly inelastic.
A)True
B)False
Q2) The economic benefit of a per-unit subsidy accrues disproportionately to the side of the market that is more price-inelastic.
A)True
B)False
Q3) When the leisure demand curve is relatively inelastic,the bulk of the burden of a wage tax falls on workers.
A)True
B)False
Q4) A wage tax in a labor market with a perfectly inelastic labor supply curve is efficient. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Prices and Distortions Across Markets
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62732
Sample Questions
Q1) When speculators buy gasoline during the low demand spring in order to sell it during the high demand summer,they cause an increase in dead weight loss in the spring that is more than made up for by an increase in social surplus in the summer.
A)True
B)False
Q2) Suppose the price of good x in country A is lower than the price of good x in country B when no trade is permitted.In the absence of transportation costs,if the supply curve for good x in the two countries is sufficiently elastic,free trade in good x implies that country B will stop producing x.
A)True
B)False
Q3) When tariffs on imports are eliminated,everyone benefits.
A)True
B)False
Q4) A speculator who takes a long position in a market buys low and sells high,whereas a speculator who taxes a short position in a market buys high and sells low.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: Externalities in Competitive Markets
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/62733
Sample Questions
Q1) Explain how any cap-and-trade system can be made to be equivalent to a pollution tax and vice versa.
Q2) The Coase Theorem implies that the reason people sue each other in court is that property rights have not been sufficiently well specified.
A)True
B)False
Q3) In order for a Pigouvian tax to be efficient,the amount of revenue raised plus the economic value of the reduction in pollution must together be larger than the loss in consumer and producer surplus.
A)True
B)False
Q4) Explain how the introduction of an additional competitive market can always solve the efficiency problem that emerges from a positive externality.
Q5) In order for a cap-and-trade system to work,it must be that pollution permits are bought by producing firms -- and not given to them as part of an attempt to prevent them to lobby against the cap-and-trade system
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 22: Asymmetric Information in Competitive Markets
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62734
Sample Questions
Q1) In a competitive separating equilibrium,low cost consumers of insurance will not fully insure because insurance rates offered to them are not actuarily fair.
A)True
B)False
Q2) Adverse selection in insurance markets results in missing markets because people engage in riskier behavior once they are insured.
A)True
B)False
Q3) A pooling equilibrium in insurance markets is inefficient because everyone buys too little insurance (relative to the efficient amount).
A)True
B)False
Q4) If a pooling equilibrium exists in an insurance market,no separating equilibrium can exist.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 24
Chapter 23: Monopoly
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/62735
Sample Questions
Q1) How would a regulator of a monopoly think differently about regulating price discrimination depending on whether the regulator's objective is to maximize efficiency or to maximize consumer surplus?
Q2) If a monopolist faced a downward sloping average cost curve that lies fully above market demand,he will not produce if he can only charge a single per-unit price,but it would also be inefficient for him to produce.
A)True
B)False
Q3) Consider a commonly owned fishery in a market with no other fisheries.Given the Tragedy of the Commons,it is more efficient to let a single firm take over the fishery even if that gives the firm monopoly power.
A)True
B)False
Q4) Under second degree price discrimination,the average price per unit paid by high demand consumers is not equal to marginal willingness to pay for one additional unit.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
25
Chapter 24: Strategic Thinking and Game Theory
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/62736
Sample Questions
Q1) Suppose player 1 potentially moves twice in a sequential game,each time choosing from one of two possible actions -- "Left" or "Right".His first move is at the beginning of the game.He gets to move a second time if he moved "Left" the first time and after observing one of two possible actions by player 2 ("Up" or "Down").But if he moves "Right" in the first stage,he gets no further moves and the game ends after player 2 chooses one of two actions ("Up" or "Down").Draw the game tree and list all possible strategies for players 1 and 2.
Q2) Suppose a player can play 2 possible actions and has 5 possible decision nodes in a sequential game.Then he has 10 possible strategies he can play.
A)True B)False
Q3) If players discount the future sufficiently,cooperation in infinitely repeated Prisoners' Dilemma games cannot emerge as a subgame perfect equilibrium. A)True B)False
Q4) Dominant strategy Nash equilibria are efficient. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 25: Oligopoly
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/62737
Sample Questions
Q1) In a 2-firm oligopoly,if you can choose to either be a simultaneous move Cournot competitor or a Stackelberg leader,you will always choose to be a Stackelberg leader.
A)True
B)False
Q2) Suppose two Bertrand price competitors have different constant marginal costs.In any simultaneous move Nash equilibrium,only the lower cost firm will produce.
A)True
B)False
Q3) Explain how two Bertrand price competitors can price above marginal cost in an infinitely repeated game setting.
Q4) Recurring fixed costs may lead to only one firm producing in a Cournot oligopoly model.
A)True B)False
Q5) Explain why firms in a cartel might lobby for government regulation.
Q6) Two firms in an oligopoly can always do better if one firm buys the other.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Product Differentiation and Innovation in Markets
Available Study Resources on Quizplus for this Chatper
13 Verified Questions
13 Flashcards
Source URL: https://quizplus.com/quiz/62738
Sample Questions
Q1) Bertrand price competitors can recover some market power when they differentiate their products.
A)True
B)False
Q2) Describe the tradeoffs involved when thinking about setting the time over which a patent grants an innovator exclusive monopoly rights.
Q3) Information advertising might provide information about prices in stores,or it might provide information about product characteristics that consumers might not know about.Which one do you think is more likely to be efficient?
Q4) Since firms outside an industry cannot have an incentive to enter the industry in equilibrium,firms inside a monopolistically competitive equilibrium must be making zero profit.
A)True B)False
Q5) In the circle model with constant marginal cost,each point on the circle will contain a firm in equilibrium if fixed entry costs are zero.
A)True
B)False
28
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Public Goods
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/62739
Sample Questions
Q1) If giving to public goods is subsidized through deductions under a progressive income tax,the government subsidizes public goods consumed by higher income individuals at greater rates than public goods consumed by lower income individuals.
A)True
B)False
Q2) What problem are mechanism designers attempting to overcome when they "design mechanisms" to provide public goods?
Q3) Any efficient allocation of public goods will be such that the sum of the marginal benefits is equal to the marginal cost -- but the level of the public good may differ depending on how income is distributed in the population.
A)True
B)False
Q4) We say that individuals get a "warm glow" from giving to a public good if they not only get utility from the public good but also from giving itself.Explain the following: "While warm glow lessens the free rider problem,it cannot eliminate it."
Q5) If private giving to public goods involves externalities,what is a Pigouvian solution to the public goods problem?
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Governments and Politics
Available Study Resources on Quizplus for this Chatper
17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/62740
Sample Questions
Q1) The "Anything-Can-Happen" theorem doesn't really imply "anything can happen" in a democratic process with multiple issues; rather,it implies that political outcomes can be manipulated,and some political institutions are better at constraining the degree to which this can be done than others.Do you agree or disagree with this statement? Why?
Q2) Suppose voter preferences over a public good funded through a proportional income tax are single peaked.If everyone has the same tastes and the public good is a normal good,then ideal points for higher income individuals will lie to the right of ideal points of lower income individuals.
A)True
B)False
Q3) In 2000,three candidates appeared on virtually all ballots in the US Presidential election: George W.Bush,Al Gore and Ralph Nadar.Bush arguably won the election by 537 votes in Florida where Ralph Nadar received nearly 100,000 votes.It is often argued that Al Gore would have won the election had Ralph Nadar not been on the ballot in Florida.Discuss how this suggests that the social choice process the US uses to elect Presidents does not satisfy the Independence of Irrelevant Alternatives (IIA)assumption in Arrow's theorem.
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: What Is Good Challenges From Psychology and Philosophy
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/62741
Sample Questions
Q1) In the presence of compensating wage differentials,explain why the consumption possibility frontier is not a good approximation of the utility possibility frontier.
Q2) Any consequentialist approach to normative economics that uses standard indifference maps as social indifference maps (over utilities or consumption)will choose efficient outcomes in the first-best case.
A)True
B)False
Q3) Suppose $100 invested next year results in a return of b two years from now.If individuals do not discount the future but have a beta of 0.5 (in the beta-delta model),for what range of b will an individual plan to make the investment but then reverse course next year?
Q4) What's the Easterlin Paradox -- and in what sense does it suggest reference-dependent preferences?
Q5) One way to think of ideas coming out of behavioral economics is to map the ideas into either impacting "tastes" or "constraints".Can you give an example of each?
Q6) Comment on the following: "Present-biased people are impatient,but impatient people don't necessarily have to be present-biased."
Page 31
To view all questions and flashcards with answers, click on the resource link above.