32 Cards in this Set
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Explain why wearing high-heeled boots might be viewed as the result of positional externality. How could high-heeled boots create external costs?
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If there was a social advantage to being relatively tall, then those individuals who wear high-heeled boots have an advantage and do better than those who don't wear high-heeled boots. But when everyone wears them, then the relative height distribution remains the same.
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Explain how steroids could be seen as a positional externality?
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Benefits are that it ensures someone who earns an extra dollar keeps at least part of that, incentive to work greater with welfare system, and administered by IRS so it is cheaper than welfare.
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describe one drawback of the negative income tax
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Drawbacks are that incentive to work are still not high enough for everyone, and people could cheat the system and live solely off their tax credit therefore not producing anymore taxes and making everyone’s lives worse.
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What is the purpose of a tax system?
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A: A proportional tax is when the same percentage of income is required from all taxpayers, regardless of your earnings. It is also known as a flat tax rate. The presidential candidate is Dr. Ben Carson, who plays to implicate a 10% flat tax rate if he’s elected.
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How does government revenue from income taxes changed from 1900 to now?
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A: In the early 1900’s the percent of the US government GDP from income taxes was in the single digits. Since then, taxing power has shifted from local and state governments to the federal government whose GDP is now made of almost 18% income taxes.
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Explain how marginal tax rates work
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Tax systems that employ marginal tax rates apply different tax rates to different levels of income; as income rises, it is taxed at a higher rate. For example if you make $20,000 you may pay 10% tax on your first $10,000 which would be 1,000 and then pay 20% tax on the next $10,000 which …
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what is the aim of marginal taxes?
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The aim of the marginal tax rate is to fairly tax everyone based on their income. The rich pay more in taxes because the have the means to do so, and the poor pay less in effect, evening out wealth distribution.
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Why might an individual's supply of labor curve be backward-bending? Explain.
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An individual's labor supply curve may be backward-bending because at some point in an individual's life, they might prefer more leisure to working more, even at a higher wage. When individual's wages increase they may buy more leisure.
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What is Negative Income Tax?
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A system under which the government would grant every citizen a cash payment each year, financed by an additional tax on earned income.
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What is the definition of Efficient allocation and which equilibrium type generates it
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The allocation of persons to firms that maximizes the total gains from trade in the labor market is efficient allocation. A competitive equilibrium generates an efficient allocation of labor resources.
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Human capital investment consists of
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any activity that enhances the quality of labor
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1. Why does discrimination in the labor market affect income inequality?
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1. Employers will hire people based on race and gender. They will also offer more money to certain races and genders leading to a differences in earned income.
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1. How does minimum wage help close the gap of income inequality?
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1. Minimum wage forces employers to pay their workers a certain amount of money so that the workers earn enough to survive and so that employers cannot barely pay workers while exploiting their labor to make a fortune.
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1. What is the difference between wage inequality and income inequality?
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1. Wage inequality- Inequality based on what a person earns from working. Some people get paid more or less depending on what job they perform which leads to inequality in wages.
Income inequality- income is the amount of money someone gets regardless of whether they work for it…
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1. What is Human Capital? Give at least two factors of human capital.
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1. Human Capital are factors a person has that makes that person more qualified for a job and dictates the worth of that person.Examples: education, experience, training, intelligence, energy, work habits, trustworthiness, and initiative.
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Why would some people argue that income inequality is a moral issue? Why would people argue the opposite
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1. People would argue that income inequality is a moral issue because most people would say it is wrong to give someone else more money than another person.
People argue against this idea because some people deserve more money based on their skills and the job that they perform
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What is one way that governments can combat the declining population of elephants, and what is one reason that this solution would be impractical
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a. The government can put a limit on number of elephants that can be hunted or a ban on elephant hunting. Poachers will likely defy these laws, though, and they could prove hard to enforce over a wide land area.
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1. Two separate countries on the Mediterranean Sea both have a great economic incentive to pollute, therefore harming the overall air quality of the region. Assuming the countries have independent legislative bodies, what is one reason that imposing environmental regulations would be …
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a. They have separate governments, therefore law would be difficult to implement.
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Each country has a greater short-term benefit in polluting.
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Explain how the Tragedy of the Commons principle applies to the given example above and provide a solution to how this problem can be overcome.
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The Tragedy of the Commons principle applies to the given example because this principle describes the relationship between a commonly used economic resource and its diminishing marginal benefit. As more people purchase pigs and allow them to feed off the commons, the less valuable the v…
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1. What happens when negotiations between private parties are costly?
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Externalities tend to be over-produced.
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1. What is the marginal cost of abatement?
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The cost of reducing one more unit of an environmental negative.
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1. What are the two price incentives for environmental regulations?
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taxation and permits
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when is environmental regulation effective?
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when the marginal cost of abatement is the same for every firm
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a group of physicians who charge a fixed rate for health coverage.
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Health maintenance organization
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If a family with 3 children who athletes. Two play football and one plays basketball, which leads to an annual medical bills cost of over $1500. Between First Dollar Coverage and $1000 deductible, which is the better choice for the family
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first dollar
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Based on the cost benefit criteria, a medical procedure should only be performed if
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marginal benefit > marginal cost
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what act was passed by congress to help more americans become medically insured?
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affordable care act of 2010
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Q. Tom looking to buy health insurance to help pay for the impending costs he knows he will have in the future due to an illness. His provider will offer coverage to a healthy individual for $5000, and they will charge someone who is sick $8000. However, Tom does not inform the provider o…
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In this situation, the provider should charge Tom $8000 regardless of the information he gives. Because the provider has no knowledge of Tom's health, they have to assume he is sick and is looking to insure himself to pay for future costs. In addition, using prior knowledge that healthy p…
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Q. If given the option to buy one of two used cars, both listed at the same blue book price with the following reasons on why the car is being sold;
A) “Work transfer to Switzerland, must sell”
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B) “Want a newer, nicer car, will sell”
Which car would you choose and why?
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You should choose car A, because the reasoning is unrelated to the car and forced due to circumstance. The chances in this situation are that car B is being sold because it has more wear and tear, and the owner would prefer a more reliable car. Because you can buy car A for the same p…
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Q. Why might it be irrational for young and healthy people to buy Health insurance?
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When you buy health insurance, you make premium payments to an insurance company. If you are healthy and rarely visit the doctor you are likely to pay more in premiums then you receive back in benefits. Therefore, a healthy person might rationally decide that he or she would be better…
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Q. In what sense do young and healthy people who buy health insurance provide a subsidy to people who are older or who are ill?
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These people are likely to receive more in benefits than they paid in insurance premiums. healthy people are in the opposite situation of being likely to pay more in premiums than they receive in benefits. The only way an insurance plane can make payments to people who are ill and make ma…
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Which of the following is not apart of Positional Arms Races and Positional Arms Control Agreements?
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Private Ownership
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ECON 2000: Exam 3