Question 1

The system of government insurance that pays benefits to workers injured on the job is referred to as:

Accepted Answer

A) Social Security. 
B) welfare. 
C) OSHA. 
D) workers' compensation. 
A) Social Security. 
B) welfare. 
C) OSHA. 
D) workers' compensation.

Question 2

Private markets would lead to a ______ vaccination rate because:

Accepted Answer

A) socially optimal; price serves as a signal of marginal benefit and marginal cost. 
B) suboptimally high; the external cost of being vaccinated would not fully be taken into account by decision makers. 
C) suboptimally low; the external benefit of being vaccinated would not fully be taken into account by decision makers. 
D) inequitable; health care services should not be provided based on ability to pay. 
A) socially optimal; price serves as a signal of marginal benefit and marginal cost. 
B) suboptimally high; the external cost of being vaccinated would not fully be taken into account by decision makers. 
C) suboptimally low; the external benefit of being vaccinated would not fully be taken into account by decision makers. 
D) inequitable; health care services should not be provided based on ability to pay.

Question 3

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 &\$700 \
\hline
\end{array}$$ If pollution is unregulated, then a total of ______ tons of smoke will be emitted each day.

Accepted Answer

A) 1 
B) 2 
C) 4 
D) 8 
A) 1 
B) 2 
C) 4 
D) 8

Question 4

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 & \$700\
\hline
\end{array}$$ If the City Council imposes a tax of $91 per day on each ton of smoke emitted, then what will be the total cost to society of the resulting reduction in pollution?

Accepted Answer

A) $90 
B) $180 
C) $270 
D) $360 
A) $90 
B) $180 
C) $270 
D) $360

Question 5

Suppose that all workers value a safe job $2,000 per year more than a risky job. The cost to firms of providing a safe job is $700 per year for each worker. Firms currently pay workers $35,000 per year, without any effort to improve safety. If new firms began to offer workers $34,000 per year and safe jobs, then

Accepted Answer

A) no workers would apply for jobs at the new firms. 
B) only low-quality workers would apply for jobs at the new firms. 
C) only injury-prone workers would apply for jobs at the new firms. 
D) all workers would apply for jobs at the new firms. 
A) no workers would apply for jobs at the new firms. 
B) only low-quality workers would apply for jobs at the new firms. 
C) only injury-prone workers would apply for jobs at the new firms. 
D) all workers would apply for jobs at the new firms.

Question 6

According to the textbook, the Manning study suggests that a large share of the increase in medical expenditures since World War II has been caused by:

Accepted Answer

A) advances in medical technology. 
B) the increase in high-deductible policies. 
C) the annual stipend given to the poor to defray medical expenses. 
D) the increase in first-dollar medical insurance. 
A) advances in medical technology. 
B) the increase in high-deductible policies. 
C) the annual stipend given to the poor to defray medical expenses. 
D) the increase in first-dollar medical insurance.

Question 7

An economic argument in favor of providing medical care through HMOs is that they:

Accepted Answer

A) increase provision of care to the sickest patients. 
B) reduce incentives for providing unnecessary or excessive care. 
C) reduce the cost of seeing a specialist. 
D) reduce the probability of patients filing a malpractice claim. 
A) increase provision of care to the sickest patients. 
B) reduce incentives for providing unnecessary or excessive care. 
C) reduce the cost of seeing a specialist. 
D) reduce the probability of patients filing a malpractice claim.

Question 8

If the marginal cost of treating an illness is zero, then the optimal amount of treatment to receive is the amount:

Accepted Answer

A) for which the marginal benefit of treatment is zero. 
B) that makes the patient is as healthy as possible. 
C) for which the average benefit of treatment is zero. 
D) for which the total benefit of treatment is zero. 
A) for which the marginal benefit of treatment is zero. 
B) that makes the patient is as healthy as possible. 
C) for which the average benefit of treatment is zero. 
D) for which the total benefit of treatment is zero.

Question 9

The figure below shows the marginal benefit of hiring a security guard at the airport (MBA), the bank (MBB) and City Hall (MBC). The marginal cost of hiring a security guard is the same at all three places and is given by MC.   The optimal number of security guards is ______ at the airport, ______ at the bank and ______ at City Hall.

Accepted Answer

A) 3; 2; 1 
B) 2; 4; 6 
C) 7; 6; 5 
D) 6; 4; 2 
A) 3; 2; 1 
B) 2; 4; 6 
C) 7; 6; 5 
D) 6; 4; 2

Question 10

The defining characteristic of an HMO is:

Accepted Answer

A) the emphasis on acute medical treatment. 
B) that medical treatment is provided for a fixed annual fee. 
C) that patients have the freedom to see nonmember physicians. 
D) that medical treatment is provided on a fee-for-service basis. 
A) the emphasis on acute medical treatment. 
B) that medical treatment is provided for a fixed annual fee. 
C) that patients have the freedom to see nonmember physicians. 
D) that medical treatment is provided on a fee-for-service basis.

Question 11

Suppose there are three power-generating plants, each of which has access to 5 different production processes. The table below summarizes the cost of each production process and the corresponding number of tons of smoke emitted each. $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & (1 \text { ton/day) } & \text { (0 tons/day) } \
\hline \text { Cost to Firm } X(\$ / \text { day) } & \$ 500 & \$ 514 & \$ 530 & \$ 555 & \$ 585 \
\hline \text { Cost to Firm Y (\$/day) } & \$ 400 & \$ 420 & \$ 445 & \$ 480 & \$ 520 \
\hline \text { Cost to Firm Z(\$/day) } & \$ 300 & \$ 325 & \$ 360 & \$ 400 & \$ 550 \
\hline
\end{array}$
 For all three firms, the marginal cost of pollution abatement is:

Accepted Answer

A) increasing 
B) decreasing 
C) constant 
D) decreasing and then increasing 
A) increasing 
B) decreasing 
C) constant 
D) decreasing and then increasing

Question 12

Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation.   When Matt chooses the safe job, Gabe will get more satisfaction by choosing the ______ job, and when Matt chooses the risky job, Gabe will get more satisfaction by choosing the ______ job.

Accepted Answer

A) risky; risky 
B) risky; safe 
C) safe; risky 
D) safe; safe 
A) risky; risky 
B) risky; safe 
C) safe; risky 
D) safe; safe

Question 13

According to the textbook, Manning and his colleagues found that people with $1,000-deductible policies spent ­______ on health care relative to people with first-dollar coverage.

Accepted Answer

A) less 
B) 40 percent more 
C) the same amount 
D) 50 percent more 
A) less 
B) 40 percent more 
C) the same amount 
D) 50 percent more

Question 14

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 &\$700 \
\hline
\end{array}$$ Suppose pollution is initially unregulated. If the City Council imposes a tax of $91 per day on each ton of smoke emitted, then total emissions will fall to ______ tons of smoke per day.

Accepted Answer

A) 1 
B) 2 
C) 4 
D) 8 
A) 1 
B) 2 
C) 4 
D) 8

Question 15

Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted. $$\begin{array} { | c | c | c | c | c | c | } 
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Process } & \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 tons/day) } \
\hline \text { Cost to Industrio (\$/day) } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1,000 \
\hline \text { Cost to Capitalista (\$/day) } & \$ 225 & \$ 250 & \$ 290 & \$ 400 &\$600 \
\hline
\end{array}$$ Suppose the government decides to sell 6 permits allowing a total of 6 tons of pollution. The government starts the bidding with an opening price of $30. What happens next?

Accepted Answer

A) A total of five permits will be demanded, forcing the government to lower the price. 
B) Industrio will purchase all available permits at $30. 
C) Industrio will demand 3 permits and Capitalista will demand 3 permits. 
D) A total of seven permits will be demanded, forcing the government to raise the price. 
A) A total of five permits will be demanded, forcing the government to lower the price. 
B) Industrio will purchase all available permits at $30. 
C) Industrio will demand 3 permits and Capitalista will demand 3 permits. 
D) A total of seven permits will be demanded, forcing the government to raise the price.

Question 16

Suppose that all workers value a 1 percent reduction in the workplace injury rate at $1,000 per year. The cost of reducing the injury rate by 1 percent is $200 per year for each worker. Firms currently pay $20,000 per year to workers, without any effort to improve safety. If new firms began to offer workers $19,500 and a 1 percent reduction in the injury rate, then:

Accepted Answer

A) no workers would be willing to work at the new firms. 
B) the new firms would not be able to compete with the existing firms. 
C) workers would want to work at the new firms. 
D) only injury prone workers would want to work at the new firms. 
A) no workers would be willing to work at the new firms. 
B) the new firms would not be able to compete with the existing firms. 
C) workers would want to work at the new firms. 
D) only injury prone workers would want to work at the new firms.

Question 17

Two firms, Acme and FirmCo, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Process } & \text { A } & \text { B } & \text { D } & \text { D } \
\hline \text { (smoke/day) } & \text { (10 tons/day) } & \text { (8 tons/day) } & \text { (6 tons/day) } & \text { (4 tons/day) } & \text { (2 tons/day) } \
\hline \text { Cost to Acme (\$/day) } & \$ 750 & \$ 800 & \$ 1,000 & \$ 1,400 & \$ 2,000 \
\hline \text { Cost to FirmCo (\$/day) } & \$ 500 & \$ 750 & \$ 1,200 & \$ 2,200 & \$ 4,000 \
\hline
\end{array}$
 Suppose the firms are both currently using process A. If the government imposes a tax of $110 per ton of smoke emitted, then Acme will use process ______, and FirmCo will use process ______.

Accepted Answer

A) B; A 
B) C; A 
C) C; C 
D) D; C 
A) B; A 
B) C; A 
C) C; C 
D) D; C

Question 18

Suppose that all workers value a 1 percent reduction in the workplace injury rate at $1,000 per year. The cost of reducing the injury rate by 1 percent is $200 per year for each worker. Firms currently pay $20,000 per year to workers, without any effort to improve safety. If new firms began to offer workers $19,500 and a 1 percent reduction in the injury rate, then the total annual cost of hiring a worker would be ______ at the new firms and ______ at the existing firms.

Accepted Answer

A) $19,500; $20,000 
B) $18,500; $20,000 
C) $19,500; $19,800 
D) $19,700; $20,000 
A) $19,500; $20,000 
B) $18,500; $20,000 
C) $19,500; $19,800 
D) $19,700; $20,000

Question 19

All else equal, the amount of waste caused by full health insurance is:

Accepted Answer

A) larger the lower is the price elasticity of demand for medical services. 
B) larger the higher is the price elasticity of demand for medical services. 
C) larger the lower is the price elasticity of supply for medical services. 
D) smaller the higher is the price of medical services. 
A) larger the lower is the price elasticity of demand for medical services. 
B) larger the higher is the price elasticity of demand for medical services. 
C) larger the lower is the price elasticity of supply for medical services. 
D) smaller the higher is the price of medical services.

Question 20

If the marginal cost of pollution abatement is smaller for large firms than it is for small firms, then it is efficient for:

Accepted Answer

A) small firms to reduce pollution by more than large firms. 
B) small firms and large firms to reduce pollution by a fixed proportion. 
C) small firms and large firms to increase pollution by a fixed proportion. 
D) large firms to reduce pollution by more than small firms. 
A) small firms to reduce pollution by more than large firms. 
B) small firms and large firms to reduce pollution by a fixed proportion. 
C) small firms and large firms to increase pollution by a fixed proportion. 
D) large firms to reduce pollution by more than small firms.

The system of government insurance that pays benefits to workers injured on the job is referred to as:

Private markets would lead to a ______ vaccination rate because:

According to the textbook, the Manning study suggests that a large share of the increase in medical expenditures since World War II has been caused by:

An economic argument in favor of providing medical care through HMOs is that they:

If the marginal cost of treating an illness is zero, then the optimal amount of treatment to receive is the amount:

The defining characteristic of an HMO is:

According to the textbook, Manning and his colleagues found that people with $1,000-deductible policies spent ______ on health care relative to people with first-dollar coverage.

All else equal, the amount of waste caused by full health insurance is:

If the marginal cost of pollution abatement is smaller for large firms than it is for small firms, then it is efficient for:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

Filters

Exam 13: The Environment, Health, and Safety

The system of government insurance that pays benefits to workers injured on the job is referred to as:

Private markets would lead to a ______ vaccination rate because:

According to the textbook, the Manning study suggests that a large share of the increase in medical expenditures since World War II has been caused by:

An economic argument in favor of providing medical care through HMOs is that they:

If the marginal cost of treating an illness is zero, then the optimal amount of treatment to receive is the amount:

The defining characteristic of an HMO is:

According to the textbook, Manning and his colleagues found that people with $1,000-deductible policies spent ­______ on health care relative to people with first-dollar coverage.

All else equal, the amount of waste caused by full health insurance is:

If the marginal cost of pollution abatement is smaller for large firms than it is for small firms, then it is efficient for:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

Filters

According to the textbook, Manning and his colleagues found that people with $1,000-deductible policies spent ______ on health care relative to people with first-dollar coverage.