MicroEconomics Final Review – Flashcards

a government-run health care system public tennis courts in a public park the U.S. Postal Service none of the above meets the criteria of a public good ans: none of the above meets the criteria of a public good

supply curve for the good will understate the true social cost of producing the good.

all economic activity generating more benefits than costs be undertaken.

individuals will tend to become free riders, and private firms will have difficulty generating enough revenue to produce an efficient quantity of the good.

property rights are well-defined and enforced.

The flu shot reduces the likelihood others will catch the flu.

projects that are efficient will tend to be favored by an overwhelming majority of voters.

members of special interest groups favoring these programs feel strongly about them while most other voters are rationally uninformed about them.

Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. Public-sector agencies typically do not face competition. All of the above explain why government agencies have little incentive to be efficient. ANS: All of the above explain why government agencies have little incentive to be efficient.

No, the unfunded promises reflect the shortsighted nature of the political process.

the expectation of individual voters that their vote will not be decisive.

unorganized taxpayers to well-organized interest groups.

The job is prestigious, and the work is quite interesting.

all individuals were homogeneous. all jobs were equally attractive. workers were perfectly mobile among jobs. all of the above are true. ANS: all the above is true.

worker preferences are an important source of earning differentials.

undesirable.

an employer who discriminates will experience higher costs.

technological improvements increased output per worker-hour.

Yes; the lower rates of interest will increase the value of future income (and capital gains), and stock prices will rise to reflect this factor.

A.These investors generally serve on the boards of directors of corporations. B.These investors tend to buy and sell stocks in a way that rewards good management. C.These investors help allocate capital efficiently among firms and among investment projects. ANS: Both b and c are true.

current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy.

high average real rate of return, and the variation in that return has been relatively small.

primary market

Indexed funds have lower operating costs because they engage in less stock trading.

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They confront high implicit marginal tax rates.

is headed by a person with a college degree. has both a husband and a wife who work full time. is headed by a person between the ages of 35 and 64. ANS:is all of the above.

an implicit marginal tax.

The incentive to produce and perform efficiently would be virtually eliminated.

There is a fixed size of economic pie available for the government to allocate among individuals. In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly valued by others. Taxes and transfers do not affect the amount of income that is created. How income is distributed exerts little impact on the total amount of income generated. ANS: In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly valued by others.