Question 1

In general,the optimal amount of medical care to receive is

Accepted Answer

A) as much as one can afford. 
B) enough to get well. 
C) that quantity for which the total costs of the care equal the total benefits. 
D) that quantity for which the marginal costs of the care equal the marginal benefits. 
A) as much as one can afford. 
B) enough to get well. 
C) that quantity for which the total costs of the care equal the total benefits. 
D) that quantity for which the marginal costs of the care equal the marginal benefits.

Question 2

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.
$$\begin{array} { l c c c c c } 
& \mathrm { A } : & \mathrm { B } : & \mathrm { C } : & \mathrm { D } : & \mathrm { E } : \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$$
A government regulation that requires both firms to reduce pollution by 50% results in process ___________ being adopted and the private costs are __________.

Accepted Answer

A) A;$575 
B) B;$650 
C) C;$790 
D) D;$1100 
A) A;$575 
B) B;$650 
C) C;$790 
D) D;$1100

Question 3

Suppose that the marginal benefit of having a security guard at the airport is MB1,at the bank is MB2,and at the mall is MB3.The marginal cost of assigning security guard is the same for all three places,and it is represented by MC2.  
Suppose all three locations hire the efficient number of guards,and that the marginal cost of having a security guard equals his or her wage.Efficiency would also require that

Accepted Answer

A) all security guards be paid the same wage regardless of where they work. 
B) more security guards be hired at the location at which marginal cost is lowest. 
C) more security guards would be hired at the location at which marginal cost is greatest. 
D) security guards at the airport be subsidized because private markets will under-provide them. 
A) all security guards be paid the same wage regardless of where they work. 
B) more security guards be hired at the location at which marginal cost is lowest. 
C) more security guards would be hired at the location at which marginal cost is greatest. 
D) security guards at the airport be subsidized because private markets will under-provide them.

Question 4

The optimal amount of workplace safety is the amount

Accepted Answer

A) that results in zero injuries. 
B) that results in a 50% reduction in injuries. 
C) at which the total benefits of safety equal the total costs of providing a safe environment. 
D) at which the marginal benefits of increased safety equal the marginal costs. 
A) that results in zero injuries. 
B) that results in a 50% reduction in injuries. 
C) at which the total benefits of safety equal the total costs of providing a safe environment. 
D) at which the marginal benefits of increased safety equal the marginal costs.

Question 5

To reduce the social loss due to first-dollar insurance coverage of the medical treatment,

Accepted Answer

A) the marginal cost should be reduced. 
B) the marginal cost should be increased. 
C) the marginal benefit should be reduced. 
D) the consumer must bear some of the marginal cost. 
A) the marginal cost should be reduced. 
B) the marginal cost should be increased. 
C) the marginal benefit should be reduced. 
D) the consumer must bear some of the marginal cost.

Question 6

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

Accepted Answer

A) no workers are applying for their jobs. 
B) their costs of wages and injury reduction exceed the costs of the existing firms. 
C) workers would be willing to accept their offer. 
D) only injury prone workers would apply. 
A) no workers are applying for their jobs. 
B) their costs of wages and injury reduction exceed the costs of the existing firms. 
C) workers would be willing to accept their offer. 
D) only injury prone workers would apply.

Question 7

Your state is considering enacting a law requiring that all motorcycle operators and their passengers wear a helmet.Motorcyclists vary in the degree to which they value being able to ride helmet-less and in the extent to which they value the safety provided by a helmet.
If ___ external costs are incurred if a cyclist is involved in an accident,the optimal level of helmet wearing will be ___ provided by private markets.

Accepted Answer

A) zero;efficiently 
B) zero;under 
C) substantial;efficiently 
D) substantial;over 
A) zero;efficiently 
B) zero;under 
C) substantial;efficiently 
D) substantial;over

Question 8

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 the absence of either government regulation or private negotiation,total expenditure on pollution abatement will be $__________,and total pollution will be __________.

Accepted Answer

A) 0;4 tons 
B) 0;12 tons 
C) 59;9 tons 
D) 44;8 tons 
A) 0;4 tons 
B) 0;12 tons 
C) 59;9 tons 
D) 44;8 tons

Question 9

Suppose Marion and Gab must both choose between two jobs,a safe job that pays $250/week and a risky job that pays $300/week.The value of safety to each is $75/week.Each also values having a higher income than the other at $75/week.Having the same job (income)as the other means no change in satisfaction.The following payoff matrix shows the income (satisfaction)each would get based on the other decision. $\begin{array}{c}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Marion }\
\text { Gab }
\begin{array}{|l|l|l|}
\hline& \text { Safe Job @ \$250 } & \text { Risky Job @ \$300 } \
\hline \text { Safe Job @ \$250 } & \begin{array}{l}
\text { Gab: \$325 } \
\text { Marion: \$325 }
\end{array} & \text { Gab: \$325 } \
& \text { Marion: \$375 } \
\hline \text { Risky Job @ \$300 } & \begin{array}{l}
\text { Gab: \$375 } \
\text { Marion: \$325 }
\end{array} & \begin{array}{l}
\text { Gab: \$300 } \
\text { Marion: \$300 }
\end{array} \
\hline
\end{array}\end{array}$
Suppose that Gab chooses the safe job,Marion is most likely to choose the ____ and obtain a total of ____ satisfaction.

Accepted Answer

A) safe job;$325 
B) safe job;$250 
C) risky job;$375 
D) risky job;$300 
A) safe job;$325 
B) safe job;$250 
C) risky job;$375 
D) risky job;$300

Question 10

Workplace safety laws are ___ in developed countries because

Accepted Answer

A) rare;policy makers believe that they undermine the free market system. 
B) rare;corporate lobbyists convince legislators to vote against them. 
C) necessary;without them firms that hire workers in competitive labor markets would have no incentive to provide safe workplaces. 
D) common;policy makers believe that labor markets are not perfectly competitive and so firms may not provide the optimal level of safety. 
A) rare;policy makers believe that they undermine the free market system. 
B) rare;corporate lobbyists convince legislators to vote against them. 
C) necessary;without them firms that hire workers in competitive labor markets would have no incentive to provide safe workplaces. 
D) common;policy makers believe that labor markets are not perfectly competitive and so firms may not provide the optimal level of safety.

Question 11

The major characteristic of an HMO is

Accepted Answer

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

Question 12

Suppose that the marginal benefit of having a security guard at the airport is MB1,at the bank is MB2,and at the mall is MB3.The marginal cost of assigning security guard is the same for all three places,and it is represented by MC2.  
Starting with MB1 (marginal benefit curve for the airport)and MC2,suppose the federal government decided to increase security at the airport.As a result training costs for security guards increases.This would shift ______ and ______ the optimal number of security guard at the airport.

Accepted Answer

A) MC2 to MC3; increase 
B) MC2 to MC3; decrease 
C) MC1 to MC2; increase 
D) MC2 to MC1; increase 
A) MC2 to MC3; increase 
B) MC2 to MC3; decrease 
C) MC1 to MC2; increase 
D) MC2 to MC1; increase

Question 13

If the workers' compensation premium accurately reflected the social costs of workplace injuries,then

Accepted Answer

A) many firms would be forced out of business. 
B) the premium would function like a tax on injuries. 
C) injury rates would rise. 
D) firms would become less capital intensive. 
A) many firms would be forced out of business. 
B) the premium would function like a tax on injuries. 
C) injury rates would rise. 
D) firms would become less capital intensive.

Question 14

Compared to the taxing of pollution,pollution permits offer the advantage of

Accepted Answer

A) eliciting the largest reduction in pollution from those firms that can do so most cheaply. 
B) raising revenues for the government. 
C) allowing the public to influence the amount of pollution allowed through the purchasing of permits. 
D) ensuring all firms reduce pollution by the same percentage. 
A) eliciting the largest reduction in pollution from those firms that can do so most cheaply. 
B) raising revenues for the government. 
C) allowing the public to influence the amount of pollution allowed through the purchasing of permits. 
D) ensuring all firms reduce pollution by the same percentage.

Question 15

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.
$$\begin{array} { l c c c c c } 
& \mathrm { A } : & \mathrm { B } : & \mathrm { C } : & \mathrm { D } : & \mathrm { E } : \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$$
If the government decided to use permits instead of regulation,in order to reduce pollution by 50% it would need to sell _____ permits.

Accepted Answer

A) 4 
B) 2 
C) 3 
D) 5 
A) 4 
B) 2 
C) 3 
D) 5

Question 16

The use of pollution permits by the government to reduce pollution is

Accepted Answer

A) theoretically interesting,but untried in the United States. 
B) unworkable. 
C) common in several parts of the United States. 
D) common in the third world. 
A) theoretically interesting,but untried in the United States. 
B) unworkable. 
C) common in several parts of the United States. 
D) common in the third world.

Question 17

According to the textbook,the reason parents use safety seats for their infant children in cars but not in airplanes is

Accepted Answer

A) they are not required to when flying. 
B) parents are generally unconcerned with the safety of their children in planes. 
C) buying an extra plane ticket is more than the benefit of a small increment in safety. 
D) airlines fail to produce safety seats. 
A) they are not required to when flying. 
B) parents are generally unconcerned with the safety of their children in planes. 
C) buying an extra plane ticket is more than the benefit of a small increment in safety. 
D) airlines fail to produce safety seats.

Question 18

HMO's might provide lower levels of medical treatment because they

Accepted Answer

A) have legal protection from malpractice lawsuits. 
B) employ lower quality doctors. 
C) receive a fixed payment for medical services regardless of the amount of services provided. 
D) save costs by purchasing lower quality medical equipment. 
A) have legal protection from malpractice lawsuits. 
B) employ lower quality doctors. 
C) receive a fixed payment for medical services regardless of the amount of services provided. 
D) save costs by purchasing lower quality medical equipment.

Question 19

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease.  
As more children are immunized,the marginal cost increases because ____ and the marginal benefit decreases because ___.

Accepted Answer

A) of the low-hanging-fruit principle;it is a prisoner's dilemma. 
B) of the low-hanging-fruit principle;the probability of spreading the disease declines. 
C) the probability of spreading the disease declines;of the low-hanging-fruit principle. 
D) of diminishing marginal utility;the probability of spreading the disease declines. 
A) of the low-hanging-fruit principle;it is a prisoner's dilemma. 
B) of the low-hanging-fruit principle;the probability of spreading the disease declines. 
C) the probability of spreading the disease declines;of the low-hanging-fruit principle. 
D) of diminishing marginal utility;the probability of spreading the disease declines.

Question 20

Suppose that you are an economic researcher,and you have access to detailed information about all of the firms in a given geographic area.You would conclude that the pollution reduction policy in that area is efficient if you observe that

Accepted Answer

A) all firms produce approximately the same amount of pollution. 
B) the cleanest firms are also the most profitable. 
C) all firms have approximately equal marginal costs of reduction at current emission levels. 
D) all firms currently use the same pollution reduction technology. 
A) all firms produce approximately the same amount of pollution. 
B) the cleanest firms are also the most profitable. 
C) all firms have approximately equal marginal costs of reduction at current emission levels. 
D) all firms currently use the same pollution reduction technology.

In general,the optimal amount of medical care to receive is

The optimal amount of workplace safety is the amount

To reduce the social loss due to first-dollar insurance coverage of the medical treatment,

Workplace safety laws are ___ in developed countries because

The major characteristic of an HMO is

If the workers' compensation premium accurately reflected the social costs of workplace injuries,then

Compared to the taxing of pollution,pollution permits offer the advantage of

The use of pollution permits by the government to reduce pollution is

According to the textbook,the reason parents use safety seats for their infant children in cars but not in airplanes is

HMO's might provide lower levels of medical treatment because they

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. As more children are immunized,the marginal cost increases because __ and the marginal benefit decreases because _.

Suppose that you are an economic researcher,and you have access to detailed information about all of the firms in a given geographic area.You would conclude that the pollution reduction policy in that area is efficient if you observe that

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

In general,the optimal amount of medical care to receive is

The optimal amount of workplace safety is the amount

To reduce the social loss due to first-dollar insurance coverage of the medical treatment,

Workplace safety laws are ___ in developed countries because

The major characteristic of an HMO is

If the workers' compensation premium accurately reflected the social costs of workplace injuries,then

Compared to the taxing of pollution,pollution permits offer the advantage of

The use of pollution permits by the government to reduce pollution is

According to the textbook,the reason parents use safety seats for their infant children in cars but not in airplanes is

HMO's might provide lower levels of medical treatment because they

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. As more children are immunized,the marginal cost increases because ____ and the marginal benefit decreases because ___.

Suppose that you are an economic researcher,and you have access to detailed information about all of the firms in a given geographic area.You would conclude that the pollution reduction policy in that area is efficient if you observe that

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

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. As more children are immunized,the marginal cost increases because __ and the marginal benefit decreases because _.