ECON 1100 Global Economics Section 06 Exam 3 Summer 2011 Version D Answer Key 1 Between 1991 and 2006 Government Expenditures as a percentage of GDP in Germany C were between 45 and 50 in each year taking on a mean value of 47 92 over this entire time period 2 Which of the following could NOT result in a Change in Supply for Mp3 Players B A decrease in the market price of Mp3 Players 3 In a free market economy profits C serve as a signaling device directing resources to their most valued uses 4 was a central figure in the formulation of the ideas of Utilitarianism which argues that society should strive for the greatest happiness for the greatest number of people B Jeremy Bentham 5 An industry in which is a natural monopoly A there are very high fixed costs of production and or declining marginal costs of production 6 A Rival Good is one for which D None of the above answers are correct 7 The efficient level of output for this good is units C 2 900 8 To maximize profit this monopolist would D sell 1 700 units of output each at a price of 20 00 9 When this monopolist chooses the price and quantity which maximizes profit D More than one perhaps all of the above answers is correct 10 A 4th of July Fireworks display in Kennesaw is D More than one perhaps all of the above answers is correct 11 Which of the following countries has an income tax that is progressive A The United States 12 Which of the following is NOT one of the 7 Sources of Government Failure C Pricing by firms with Market Power 13 Under the current U S Federal Income Tax the Top 1 of income earners pay roughly 39 38 of all income tax dollars which is roughly the same amount of income tax dollars paid by the who collectively pay about 40 33 of all income tax dollars D bottom 95 of income earners 14 One of the 6 Determinants of Productivity Income and Wealth is acquired skills which refers to the recognition that differences in income or wealth across individuals could result from differences in C the skills and experiences that people acquire through education training and work experience 15 Ben lives in a country in which military output is not provided by the government but rather is supplied by profit maximizing firms and purchased by individual consumers in a free market Ben chooses to enjoy the benefits of national security which result from military output purchased by others while purchasing zero units of military output of his own This example illustrates C the Free Rider Problem 16 Consider the market for corduroy pants Suppose blue jeans are a substitute for corduroy pants suppose corduroy pants are a normal good Which of the following would lead to an increase in demand for corduroy pants B an increase in consumer income 17 Based upon this graph it appears as if this good B generates a negative externality 18 The free market level of trade is while the efficient level of trade is B 760 units 585 units 19 If a per unit tax of 4 75 were imposed on sellers in this market then C Deadweight Loss would be equal to zero 20 In 2010 government spending in the U S combined at all levels of government as a percentage of GDP was approximately B 43 85 higher than the percentage in all but three previous years in the entire history of our country with the exceptions being 1943 1944 and 1945 21 Which of the following was discussed in lecture to illustrate how something akin to the Coasian Solution to Externalities has been implemented in practice C How the Defenders of Wildlife established the Bailey Wildlife Wolf Compensation Trust in order to facilitate the re introduction of the gray wolf into the wild in the western United States 22 The U S Federal Income Tax C was first established in 1913 and authorized by the passage of the 16th Amendment to the U S Constitution 23 During recent decades consumers in the U S have become increasingly aware of the adverse health effects of smoking cigarettes As a result there has been a significant decrease in the average number of cigarettes smoked per adult per year Which of the following best explains this decrease in equilibrium quantity C Individual consumers concerned about their own health decreased their demand for cigarettes resulting in a decrease in equilibrium quantity 24 The Big Dig a construction project in Boston MA which relocated 3 5 miles of existing Interstate Highway underground at a total cost of 14 6 billion was discussed in lecture as an example of C a Pork Barrel project 25 Imposing a per unit tax of 2 00 on buyers in this market would generate tax revenue of D less than 40 000 26 In comparison to the free market outcome imposing a per unit tax of 1 25 on sellers in this market would decrease Producers Surplus by D less than areas a b 27 Consider the following two proposed taxes Tax A is a 1 per unit tax imposed on buyers Tax B is a 1 per unit tax imposed on sellers We can infer that C Tax A and Tax B would generate the exact same amount of tax revenue for the government 28 says that in order for a tax to be fair two individuals of equal economic capacity should have equal tax burdens A The notion of horizontal equity 29 Which of the following is a good example of a Pure Public Good D None of the above answers are correct 30 An increase in supply is visually illustrated by C a rightward shift of the entire supply curve 31 The argument in favor of redistribution claims that in some cases redistribution can be used as a tool to maintain social stability by essentially bribing potentially disruptive or revolutionary members of society B Social Control 32 Tina earns 500 000 per year and Mike earns 200 000 per year As a result A Tina must pay a greater amount of dollars in taxes than does Mike 33 It appears as if this tax is a A Progressive Tax 34 Ronald Coase argued that in order to realize an efficient outcome in the presence of an externality society should A internalize the externality by clearly and completely defining property rights and allowing affected parties to negotiate with each other 35 Antitrust Policy refers to A regulatory and legal action designed to promote freedom of entry into a market and to prohibit the merger or collusion of competitive firms 36 Market Failure can generally be described as a situation in which B there is a positive Deadweight Loss at the free market outcome 37 During the time when George W Bush was President the highest Marginal Tax Rate under the U S Federal Income Tax was decreased from 39 6 to 35 while the lowest Marginal
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