Question 1

Medical insurance covering routine medical care became common

Accepted Answer

A) at the turn of the last century. 
B) in the 1920's. 
C) after World War II. 
D) during the 1980's. 
A) at the turn of the last century. 
B) in the 1920's. 
C) after World War II. 
D) during the 1980's. C

Question 2

Some social scientists have justified safety regulation as necessary to prevent worker exploitation.The textbook offers an alternative explanation for the existence of workplace safety regulation.The explanation sees safety regulations as

Accepted Answer

A) the result of well intentioned buy misguided activists. 
B) a solution to the prisoner's dilemma that confronts workers when choosing between high wage,risky jobs and low wage,safe jobs. 
C) a response to greater value given to life today. 
D) an attempt by large companies to drive smaller companies out of business. 
A) the result of well intentioned buy misguided activists. 
B) a solution to the prisoner's dilemma that confronts workers when choosing between high wage,risky jobs and low wage,safe jobs. 
C) a response to greater value given to life today. 
D) an attempt by large companies to drive smaller companies out of business. B

Question 3

Suppose a treacherous stretch of road winds through Deadman's Canyon for 5 miles.A highway department study estimates that better lighting would reduce the traffic fatality rates as follows: $$\begin{array} { c c c } 
\text { Number of lights } & \text { Estimated deaths per year } & \text { Total installation cost (in millions) } \
0 & 3 & \$ 0 \mathrm {~m} \
1 & 2 & \$ 3 \mathrm {~m} \
2 & 1.5 & \$ 7 \mathrm {~m} \
3 & 1.2 & \$ 12 \mathrm {~m} \
4 & 1 & \$ 18 \mathrm {~m} \
5 & 0.9 & \$ 25 \mathrm {~m}
\end{array}$$
Suppose that experts have estimated the statistical value of a life saved to be $8m.The highway department has a limited budget,and can save,on average,1 additional life per year for each $2 million dollars it spends on guardrails.If this is the case,the highway department should install ___ lights in Deadman's Canyon.

Accepted Answer

A) 0 
B) 1 
C) 2 
D) 3 
A) 0 
B) 1 
C) 2 
D) 3 A

Question 4

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is

Accepted Answer

A) nonpayment of the tax. 
B) it would cause prices to rise. 
C) that it only works in theory. 
D) establishing the optimal size of the tax. 
A) nonpayment of the tax. 
B) it would cause prices to rise. 
C) that it only works in theory. 
D) establishing the optimal size of the tax.

Question 5

For a fixed percent reduction in pollution emissions to be economically efficient,it would have to be the case that

Accepted Answer

A) the marginal cost of pollution control is the same across all firms. 
B) enforcement is vigorous. 
C) all firms be the same size. 
D) large polluters reduce emissions by more than small polluters. 
A) the marginal cost of pollution control is the same across all firms. 
B) enforcement is vigorous. 
C) all firms be the same size. 
D) large polluters reduce emissions by more than small polluters.

Question 6

First-dollar insurance coverage means that

Accepted Answer

A) most of the insured's expenses are covered. 
B) some of the insured's expenses are covered. 
C) all of the insured's expenses are covered. 
D) the first 10% of the insured's expenses are covered. 
A) most of the insured's expenses are covered. 
B) some of the insured's expenses are covered. 
C) all of the insured's expenses are covered. 
D) the first 10% of the insured's expenses are covered.

Question 7

Suppose that a government agency is trying to decide between two pollution reduction policy options.Under the permit option,100 pollution permits would be sold,each allowing emission of one unit of pollution.Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit.Under the pollution tax option,firms would be taxed $250 for each unit of pollution produced.The regulated firms all currently pollute and face varying costs of pollution reduction,though all face increasing marginal costs of pollution reduction.
Because firms face increasing marginal costs to reduce pollution,demand for pollution permits will be

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) perfectly inelastic. 
D) perfectly elastic. 
A) upward sloping. 
B) downward sloping. 
C) perfectly inelastic. 
D) perfectly elastic.

Question 8

Using the economist's definition,to say that the amount of crime control is efficient means that

Accepted Answer

A) the crime rate is approximately zero. 
B) few false arrests occur. 
C) the marginal benefit of the last dollar spent on crime control equals the marginal cost. 
D) the conviction rate is nearly 100%. 
A) the crime rate is approximately zero. 
B) few false arrests occur. 
C) the marginal benefit of the last dollar spent on crime control equals the marginal cost. 
D) the conviction rate is nearly 100%.

Question 9

Two firms can choose from five different technologies to reduce their pollution: A,B,C,D and E.The amount of pollution emitted by each technology and the cost of the technologies are shown in the table.Both firms have adopted technology A and currently emit 4 tons apiece.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
$$\begin{array} { l c c c c c } 
& \mathrm { A } : & \mathrm { B } : & \mathrm { C } : & \mathrm { D } : & \mathrm { E } : \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$$
Industrio would be willing to pay up to ___ for the right to discharge 1 ton of pollution,and Capitalista would be willing to pay up to __ for the right to discharge 1 ton of pollution.

Accepted Answer

A) $50;$25 
B) $1000,$600 
C) $50,$50 
D) $300,$200 
A) $50;$25 
B) $1000,$600 
C) $50,$50 
D) $300,$200

Question 10

Suppose that there are three power-generating plants,all of which generate emissions.The table summarizes the cost of emission reduction for each firm given five different levels of pollution: $$\begin{array} { l l l l l r } 
\text { Tons of smoke emitted per day } & 4 & 3 & 2 & 1 & 0 \
\text { Total abatement cost, firm A } & 0 & \$ 14 & \$ 30 & \$ 50 & \$ 75 \
\text { Total abatement cost, firm B } & 0 & \$ 20 & \$ 45 & \$ 80 & \$ 120 \
\text { Total abatement cost, firm C } & 0 & \$ 25 & \$ 60 & \$ 100 & \$ 150
\end{array}$$
Suppose that the government imposes a tax of $21 per ton of pollution generated.Firm A will emit ____ tons;Firm B will emit ___ tons and Firm C will emit ___ tons.

Accepted Answer

A) 0;2;3 
B) 1;3;4 
C) 3;4;4 
D) 1;2;4 
A) 0;2;3 
B) 1;3;4 
C) 3;4;4 
D) 1;2;4

Question 11

Suppose that there are three power-generating plants,all of which generate emissions.The table summarizes the cost of emission reduction for each firm given five different levels of pollution: $$\begin{array} { l l l l l r } 
\text { Tons of smoke emitted per day } & 4 & 3 & 2 & 1 & 0 \
\text { Total abatement cost, firm A } & 0 & \$ 14 & \$ 30 & \$ 50 & \$ 75 \
\text { Total abatement cost, firm B } & 0 & \$ 20 & \$ 45 & \$ 80 & \$ 120 \
\text { Total abatement cost, firm C } & 0 & \$ 25 & \$ 60 & \$ 100 & \$ 150
\end{array}$$
In general,all three firms face _____ costs of abatement,suggesting that the principle of _____ applies to pollution abatement.

Accepted Answer

A) increasing marginal;low-hanging-fruit 
B) excessive;cost-benefit 
C) high;adverse selection 
D) decreasing average;economies of scale 
A) increasing marginal;low-hanging-fruit 
B) excessive;cost-benefit 
C) high;adverse selection 
D) decreasing average;economies of scale

Question 12

A police department is trying to allocate crime control resources between murder and burglary.Detectives cost $40,000 each.Suppose that she marginal benefit of one less murder is $20,000 while the marginal benefit of one less burglary is $1,000.The number of murders and burglaries that occur at different levels of detective allocation is shown in the table. $\begin{array}{ccc}
\begin{array}{c}
\text { Number of } \
\underline { \text { Detectives Assigned }}
\end{array} & \begin{array}{c}
\text { Number of } \
\underline { \text { Murders }}
\end{array} & \begin{array}{c}
\text { Number of } \
\underline { \text { Burglaries }}
\end{array} \
 0 & 20 & 100 \
1 & 16 & 60 \
2 & 13 & 30 \
3 & 11 & 10 \
4 & 10 & 0
\end{array}$
The marginal benefits of 1,2,3,and 4 detectives being assigned to burglary prevention are

Accepted Answer

A) $40,000,$30,000,$20,000,and $10,000. 
B) $60,000,$30,000,$10,000,and 0. 
C) $40,000,$70,000,$90,000 and $100,000. 
D) 40,30,20,and 10. 
A) $40,000,$30,000,$20,000,and $10,000. 
B) $60,000,$30,000,$10,000,and 0. 
C) $40,000,$70,000,$90,000 and $100,000. 
D) 40,30,20,and 10.

Question 13

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

Accepted Answer

A) no workers are applying for their jobs. 
B) only lower quality workers would apply for their jobs. 
C) only injury prone workers would apply. 
D) workers would be willing to accept their offer. 
A) no workers are applying for their jobs. 
B) only lower quality workers would apply for their jobs. 
C) only injury prone workers would apply. 
D) workers would be willing to accept their offer.

Question 14

Pat has just graduated from college and has two job offers.One pays $45,000 and requires that Pat supervise employees doing construction work on a busy highway.The other is an office job that pays $40,000.Chris has received the same offers from the same firms.Pat values the added safety of the office job at $6,000 per year and Chris values the added safety of the office job at $3,000 per year.
Suppose that the agency that regulates highway safety requires that the freeway construction firm provide additional safety precautions.After the changes,Chris places no additional value on working at the office,and Pat values the added safety of the office job by $2,000 per year.The salaries remain the same.Who will choose to work where?

Accepted Answer

A) Pat will certainly take the office job and Chris will be indifferent. 
B) Both will certainly take the freeway job. 
C) Both will certainly take the office job. 
D) Chris will certainly take the freeway job and Pat will be indifferent. 
A) Pat will certainly take the office job and Chris will be indifferent. 
B) Both will certainly take the freeway job. 
C) Both will certainly take the office job. 
D) Chris will certainly take the freeway job and Pat will be indifferent.

Question 15

Assume that larger firms can reduce pollution emissions more cheaply than smaller firms.A fixed percent reduction in pollution emissions would therefore

Accepted Answer

A) penalize large and small firms equally. 
B) penalize large firms more. 
C) ensure the reduction in pollution was achieved at the lowest cost. 
D) penalize smaller firms more. 
A) penalize large and small firms equally. 
B) penalize large firms more. 
C) ensure the reduction in pollution was achieved at the lowest cost. 
D) penalize smaller firms more.

Question 16

A police department is trying to allocate crime control resources between murder and burglary.Detectives cost $40,000 each.Suppose that she marginal benefit of one less murder is $20,000 while the marginal benefit of one less burglary is $1,000.The number of murders and burglaries that occur at different levels of detective allocation is shown in the table. $\begin{array}{ccc}
\begin{array}{c}
\text { Number of } \
\underline { \text { Detectives Assigned }}
\end{array} & \begin{array}{c}
\text { Number of } \
\underline { \text { Murders }}
\end{array} & \begin{array}{c}
\text { Number of } \
\underline { \text { Burglaries }}
\end{array} \
 0 & 20 & 100 \
1 & 16 & 60 \
2 & 13 & 30 \
3 & 11 & 10 \
4 & 10 & 0
\end{array}$
Suppose the police department has $160,000 to spend on detectives.The allocation of detectives which results in the greatest social benefit is to assign

Accepted Answer

A) all four detectives to murder prevention. 
B) two detectives to murder prevention and two to burglary. 
C) three detectives to murder prevention and one to burglary. 
D) one detective to murder prevention and three to burglary. 
A) all four detectives to murder prevention. 
B) two detectives to murder prevention and two to burglary. 
C) three detectives to murder prevention and one to burglary. 
D) one detective to murder prevention and three to burglary.

Question 17

Suppose that firms that had high rates of injury had to pay more for workers' compensation than firms with lower rates of injury.This change would

Accepted Answer

A) unfairly penalize innovative firms. 
B) provide an incentive for firms to reduce risk of injury. 
C) provide an incentive for firms to reduce expenditures on safety equipment. 
D) reduce efficiency in labor markets. 
A) unfairly penalize innovative firms. 
B) provide an incentive for firms to reduce risk of injury. 
C) provide an incentive for firms to reduce expenditures on safety equipment. 
D) reduce efficiency in labor markets.

Question 18

The Federal Aviation Administration requires large commercial jets to install greater amounts of safety equipment than small,private planes.This policy

Accepted Answer

A) violates the notion of efficiency because the marginal costs of safety on small planes are smaller. 
B) violates the notion of efficiency because the benefit of one less fatality is the same whether a jet or a small plane is involved. 
C) affirms the notion of efficiency because one fewer commercial jet accident will save more lives than one fewer private plane accident. 
D) affirms the notion of efficiency because airlines can spread the costs out over many tickets. 
A) violates the notion of efficiency because the marginal costs of safety on small planes are smaller. 
B) violates the notion of efficiency because the benefit of one less fatality is the same whether a jet or a small plane is involved. 
C) affirms the notion of efficiency because one fewer commercial jet accident will save more lives than one fewer private plane accident. 
D) affirms the notion of efficiency because airlines can spread the costs out over many tickets.

Question 19

One implication of the results of the Manning study is that the demand for non-catastrophic health care is

Accepted Answer

A) perfectly inelastic 
B) somewhat elastic 
C) driven by the media 
D) not subject to standard economic theory 
A) perfectly inelastic 
B) somewhat elastic 
C) driven by the media 
D) not subject to standard economic theory

Question 20

Suppose that a government agency is trying to decide between two pollution reduction policy options.Under the permit option,100 pollution permits would be sold,each allowing emission of one unit of pollution.Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit.Under the pollution tax option,firms would be taxed $250 for each unit of pollution produced.The regulated firms all currently pollute and face varying costs of pollution reduction,though all face increasing marginal costs of pollution reduction.
Suppose the regulators chose the permit policy.What might explain that decision?

Accepted Answer

A) Permit auctions raise more revenue than do taxes. 
B) The permit policy allows regulators to achieve reduction goals without having detailed knowledge about firms' abatement costs. 
C) The permit policy will reduce pollution by more than would the tax policy. 
D) Firms prefer the permit policy because it allows them to choose the least-cost reduction technology. 
A) Permit auctions raise more revenue than do taxes. 
B) The permit policy allows regulators to achieve reduction goals without having detailed knowledge about firms' abatement costs. 
C) The permit policy will reduce pollution by more than would the tax policy. 
D) Firms prefer the permit policy because it allows them to choose the least-cost reduction technology.

Medical insurance covering routine medical care became common

Some social scientists have justified safety regulation as necessary to prevent worker exploitation.The textbook offers an alternative explanation for the existence of workplace safety regulation.The explanation sees safety regulations as

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is

For a fixed percent reduction in pollution emissions to be economically efficient,it would have to be the case that

First-dollar insurance coverage means that

Using the economist's definition,to say that the amount of crime control is efficient means that

Assume that larger firms can reduce pollution emissions more cheaply than smaller firms.A fixed percent reduction in pollution emissions would therefore

Suppose that firms that had high rates of injury had to pay more for workers' compensation than firms with lower rates of injury.This change would

The Federal Aviation Administration requires large commercial jets to install greater amounts of safety equipment than small,private planes.This policy

One implication of the results of the Manning study is that the demand for non-catastrophic health care is

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

Spending, Income, and GDP

Inflation and the Price Level

Wages and Unemployment

Economic Growth

Saving, Capital Formation, and Financial Markets

Money, Prices, and the Financial System

Short-Term Economic Fluctuations

Spending, Output, and Fiscal Policy

Monetary Policy and the Federal Reserve

Aggregate Demand, Aggregate Supply, and Business Cycles

Macroeconomic Policy

Exchange Rates, International Trade, and Capital Flows

Filters

Exam 13: The Environment, Health, and Safety

Medical insurance covering routine medical care became common

Some social scientists have justified safety regulation as necessary to prevent worker exploitation.The textbook offers an alternative explanation for the existence of workplace safety regulation.The explanation sees safety regulations as

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is

For a fixed percent reduction in pollution emissions to be economically efficient,it would have to be the case that

First-dollar insurance coverage means that

Using the economist's definition,to say that the amount of crime control is efficient means that

Assume that larger firms can reduce pollution emissions more cheaply than smaller firms.A fixed percent reduction in pollution emissions would therefore

Suppose that firms that had high rates of injury had to pay more for workers' compensation than firms with lower rates of injury.This change would

The Federal Aviation Administration requires large commercial jets to install greater amounts of safety equipment than small,private planes.This policy

One implication of the results of the Manning study is that the demand for non-catastrophic health care is

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

Spending, Income, and GDP

Inflation and the Price Level

Wages and Unemployment

Economic Growth

Saving, Capital Formation, and Financial Markets

Money, Prices, and the Financial System

Short-Term Economic Fluctuations

Spending, Output, and Fiscal Policy

Monetary Policy and the Federal Reserve

Aggregate Demand, Aggregate Supply, and Business Cycles

Macroeconomic Policy

Exchange Rates, International Trade, and Capital Flows

Filters