IU Economics - B251, Gerhard Glomm - Exam 2 Q's, A's (password: 123)

1. The US government severely reduces the imports of goods into the USA. As a consequence, there are now fewer high-quality chainsaws available on the market in the US. Because of this change, the demand for one particular brand of chainsaws in the US has become

a. More elastic

b. Less elastic

c. Smaller

d. Smaller in the spring and larger in the fall

b. Less elastic

2. Imagine that a modern bubonic plague hits the Midwest in a few years. It might kill about a third of the population, regardless of age, withing a few days. Then we would expect for the survivors

a. Wages to rise fast at first and to fall fast back to pre-plague levels

b. Wages to fall fast at first and to rise fast back to pre-plague levels

c. Wages to rise fast at first and then to fall gradually back to pre-plague levels

d. Wages to fall fast at first and then to rise gradually to pre-plague levels

c. Wages to rise fast at first and then to fall gradually back to pre-plague levels

3. Jackie likes hiking. For this coming Saturday he is planning to go on a two-hour hike in a nearby state park. Saturday morning, Jill, her best friend calls her up and asks if she could come along. This will make the entire hike much more enjoyable. As a consequence, in the rational actor model,

a. Jackie's hike will be longer.

b. Jackie's hike will be shorter.

c. The length of Jackie's hike will not change.

d. hikers and other nature enthusiasts are mostly driven by emotions and not so much rational action.

a. Jackie's hike will be longer.

4. Human capital accumulation is crucial for economic growth. The rapid growth of human capital in the US starting in the 1960 can be explained by

a. A large fraction of women deciding to major in Psychology

b. A large fraction of men between ages 25 to 55 to withdraw from the labor market

c. A large fraction of women deciding to go to college

d. The retirement age in the country rising gradually

c. A large fraction of women deciding to go to college

5. Imagine that Jackie studies for an exam for Econ B251. She intends to stop studying when the marginal benefit of studying is still very large and, in fact, exceeds the marginal cost of studying. Then, if Jackie is rational, she should

a. Study less

b. Follow through with her intensions

c. Study more

d. Change her major

c. Study more

6. You love rides at amusement parks. The marginal benefit of rides has the usual downward slope. The marginal cost of a ride is $1. When you get to the amusement park, you find out that the entry fee into the park has gone up from $30 to $35. Of course, you are disappointed, but you pay the entry fee anyway. As a consequence of the higher entry fee, you decide to

a. Go on fewer rides

b. Go on more rides

c. Go on same number of rides

d. Take your favorite ride twice

c. Go on same number of rides

7. A Toyota Camry is a normal good in a community where

a. Most people are already rich enough to afford a Camry

b. Most people are not sufficiently wealthy to afford a Camry

c. The price of a Honda Civic is higher than the price of a Camry

d. The price of a Honda Civic is lower than the price of a Camry

b. Most people are not sufficiently wealthy to afford a Camry

8. In a competitive industry a tariff on washing machines is expected to

a. Increase the price of dryers

b. Decrease the price of dryers

c. Keep the price of dryers constant

d. Decrease the price of washing machines

b. Decrease the price of dryers

9. Technological progress in the chicken industry that lowers the marginal cost of producing chicken is expected to _______ the price of beef and to _____ the quantity of beef consumed.

a. increase; increase

b. increase; decrease

c. decrease; decrease

d. decrease; increase

c. decrease; decrease

10. A green policy that reduces the demand for fossil fuels in the US by a substantial margin will

a. Increase the world price of fossil fuels

b. Decrease fossil fuel consumption outside of the US

c. Increase fossil fuel consumption outside of the US

d. Shift the supply curve

c. Increase fossil fuel consumption outside of the US

11. Imagine a large city where barbershops are heavily regulated. A "free-market" city government is elected that eliminates much of this regulatory framework. In a competitive market we would expect this reform to

a. Increase the price because of a shift in demand

b. Decrease the price because of a shift in demand

c. Increase the price because a shift in supply

d. Decrease the price because of a shift in supply

d. Decrease the price because of a shift in supply

12. In the presence of an externality efficiency requires that

a. Marginal private benefit is equal to marginal private cost

b. Marginal social benefit is equal to marginal social cost

c. Marginal social benefit is equal to marginal external cost

d. Marginal external cost is equal to marginal external benefit

b. Marginal social benefit is equal to marginal social cost

13. Imagine that the marginal external cost is 5 quid and the Pigouvian tax is 3 quid. Then we have

a. Overproduction

b. Underproduction

c. Efficient production

d. Abundance

a. Overproduction

14. Lard and bread are complements. Lard is an inferior good. Bread is a normal good. Since lard is inferior, during a recession the demand for lard rises. We therefore would expect, during a recession that the price of bread

a. Increases

b. Decreases

c. Stays constant

d. There is not enough information to make this judgement

d. There is not enough information to make this judgement

15. Maple syrup and corn syrup are substitutes. Maple syrup is normal, corn syrup is inferior. We would expect, during a recession that the price of maple syrup

a. Increases

b. Decreases

c. Stays constant

d. There is not enough information to make this judgement

d. There is not enough information to make this judgement

16. Imagine the provision of goods like private clubs that have swimming pools, lounges, bars, and restaurants in a large city like Seattle. We would expect the provision of this type of good to

a. Efficient because it is excludable

b. Inefficient because it is excludable

c. Efficient because it is non-excludable

d. Inefficient because it is non-excludable

a. Efficient because it is excludable

17. The amount of cod caught in the Atlantic is

a. Inefficient because there are no property rights established for cod in the Atlantic

b. Efficient since cod in the ocean is a private good

c. Inefficient since cod in the ocean is rival

d. Efficient since cod in the ocean is exclusive

a. Inefficient because there are no property rights established for cod in the Atlantic

18. When a country's exports are hit with a tariff imposed by the importing country it is natural to expect the pre-tariff price to respond. In the paper on such pre-tariff responses by Chinese and US exporters, the pre-tariff price response for US exports to China was five times bigger than the pre-tariff price response for Chinese exports to the US. We would expect such different price responses if

a. Chinese exports to US are differentiated and US exports to China are more homogenous

b. Chinese exports to the US are homogenous and US exports to Chine and more differentiated

c. Both types of exports are relatively homogeneous

d. Both types of exports are relatively differentiated.

a. Chinese exports to US are differentiated and US exports to China are more homogenous

19. The price elasticity of the demand for home heating oil is 0.2 in absolute value. The government imposes at tax on home heating oil that increases the price by 25%. Then we would expect the quantity of home heating oil to

a. Decrease by 5%

b. Increase by 5%

c. Decrease by 10%

d. Decrease by 2.5%

a. Decrease by 5%

20. Which one of the following is not a public good, according to the definition used in class

a. A Harvard econ class

b. A fourth grade math class

c. A swimming pool

d. All of the above

d. All of the above

21. In an unregulated competitive market for a public good, we would expect

a. Overproduction because of economies of scale

b. Overproduction because of a free rider problem

c. Underproduction because of economies of scale

d. Underproduction because of a free rider problem

d. Underproduction because of a free rider problem

22. If the price of ski lift tickets in ski resorts increases, we would expect the demand for skis to

a. Decrease

b. Increase

c. Double

d. Fall 50%

a. Decrease

23. If the price of ski lift tickets in ski resorts increases, we would expect the supply of skis to

a. Increase

b. Decrease

c. Stay constant

d. Fluctuate

c. Stay constant

24. Which of the following will not shift the market supply curve to the right?

a. An increase in demand

b. A decrease in the demand

c. A decrease in the number of firms in the market

d. All of the above

d. All of the above

25. It has been documented that there has been tremendous technological progress in the production of solar panels. We would expect this technological progress to

a. Decrease the price of solar panels

b. Increase the number of households that install solar panels

c. Shift supply of solar panels to the right

d. All of the above

d. All of the above

26. The Coase Theorem says:

a. In the presence of a global externality efficient allocations can be achieved by bargaining of the affected parties

b. In the presence of a local externality efficient allocations can be achieved by the imposition of Pigouvian taxes

c. In the presence of a local externality efficient allocations can be achieved if the government takes over production

d. In the presence of a local externality efficient allocations can be achieved by assigning property rights to one party

d. In the presence of a local externality efficient allocations can be achieved by assigning property rights to one party

27. In the example of the farmer and fishery example in class, which one of the following would tend to generate an efficient outcome?

a. Assigning property rights to the farm

b. Assigning property rights to the fishery

c. Joint ownership of farm and fishery

d. All of the above

d. All of the above

28. Imagine Jack and Jackie have together $10,000. Which one of the following allocations in dollars is efficient? (An allocation here simply specifies how much Jack gets and how much Jackie gets.)

a. 5,000; 5,000

b. 9,000; 1,000

c. 100; 9,900

d. All of the above

d. All of the above

29. Indiana and Michigan have pursued fundamentally different policies regarding Covid-19. In order to study the differences in the effectiveness of these policies it is best to consider data

a. From the five largest cities in each state

b. From rural areas in each state

c. From counties in each state that are on the IN-MI border

d. From all counties

c. From counties in each state that are on the IN-MI border

30. One case against markets in the play Markets on Trial involved the market for vitamins: Vitamin A, B, C, and D. According to the data presented in the play the number of firms providing these vitamins worldwide has been

a. 4

b. 14

c. 24

d. 34

a. 4