ex2f08 - UNIVERSITY OF ARIZONA . ELLER COLLEGE OF...

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Unformatted text preview: UNIVERSITY OF ARIZONA . ELLER COLLEGE OF MANAGEMENT DEPARTMENT OF ECONOMICS FALL, 2008 PROFESSOR McBREARTY INDV 103 INDIVIDUALS & SOCIETY: AN ECONOMIC PERSPECTIVE SECTION 1 8:00-9:15AM ILC 120 SECOND MID—TERM EXAMINATION (THURSDAY, OCTOBER 30, 2008) Name: A Z t STUDENT ID# lease print clearly) Signature: ' E—mail SLA SEC. # GENERAL INSTRUCTIONS TURN OFF ALL CELL PHONES! NO CAPS/HOODS AND NO EAR PIECES! . NO CALCULATORS! There are 50 Multiple Choice Questions on the examination. The total examination is worth 100 points or 25% of the course grade. Print your name, Student ID number, section and E—mail address on both the Questions and the Scantron Answer Sheet. Fill in your answers in the spaces provided 0 n the Scantron Answer Sheet by coloring completely the box for the appropriate letter for the Multiple Choice questions. Make dark marks on the Scantron sheet with a No. 2 or mechanical pencil. SCANTRON INSTRUCTIONS - Use #2 Pencil or Mechanical Pencil ‘ 0 Enter your student ID number If your SID starts with an “S” substitute “0” Bubble your SID 0 Put down your Last Narne, First Name and MI Bubble your name 0 Enter the Test Form based on your exam version Yellow: Form A Blue: Form B 0 Enter your e-mail address where it says “Name”, followed by the Subject, Date and Hour (8:00AM) 0‘" Indicate the color of your exam in the middle above where it says,”Parscore Score Sheet” 0 Completely erase any mistakes 0 At the front Of the classroom in two separate piles, turn in your: Exam Questions , ‘ ' Scantron Answer Sheet . Make sure your Scantron answer sheet is put into the appropriate pile, i.e., Form A or Form B Multi 1e Choice uestions (Please color over the most appropriate answer on the Scantron Answer Sheet.) 1 l. The best way of evaluating crime prevention pro grams from an economic perspective is to look at their: a. deterrent effects X benefits and costs c. number of prosecutions d. popularity with the public 6. ’ employment effects Use the following to answer questions 2-4. It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. Operators of hydroelectric plants on the river find they must clean up the river’s water before it flows through their equipment. 2. The above situation is an example of: a. an external economy X a spillover cost .c. the exclusion principle d. a spillover benefit e. transaction costs 3. Refer to the above information. Which of the following policies would be r_n_o_st appropriate for dealing with this problem? a. levy a tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources b. levy a tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products 0. levy a tax on the producers of electricity and use the tax revenues to clean up the river X levy a tax on the producers of paper products and use the tax revenues to clean up the river e. none of the above would be appropriate 4. Refer to the above information. If nothing i_s done to correct the situation: a. there will be an over allocation of resources to the production of electricity b. there will be an under allocation of resources to the produCtion of paper products X there will be an over allocation of resources to the production of paper products (1. the price of electricity will be lower than it should be e. the price of paper products will be higher than it should be 5. Dinah visits her doctor complaining of dizziness. Dr. Smith orders a CAT. scan even though she believes Dinah is suffering fiom an inner-ear infection. She prescribes the test in order to avoid a potential law suit. This is an example of: managed care I spillover benefits malpractice a. b. c. d. offensive medicine ‘ X defensive medicine 6. What was the basic purpose of the “play or pay” proposal for health care reform introduced in Congress in 1993? a. improve government efficiency by using tax credits and vouchers as part of a national health insurance system . b. decrease the demand for health care services by making consumers pay a higher cover more workers by requiring all employers to offer a health insurance ' X deductible and co-payments for health insurance program for employees and their dependents or pay a special payroll tax for health care (1. get the Federal government to pay more of the cost of health care so states can “plajf’ with these funds to achieve other objectives e. to impose a system of national health insurance similar to that in the UK. 7. - Many people argue that legalization of street drugs, particularly “hard” drugs, would result in: a. increased law enforcement costs X increased birth defects as many pregnant women might use such drugs for pain/discomfort c. increased criminal activity (1. greater family stability as drug users would no longer be stigmatized as law breakers fewer hospital admissions as hospitals would not have many drug—related ,‘ overdose/side effects/ violence cases to deal with 8. Suppose Jane is a recreational user of marijuana. If the price of marijuana increases due to more strict enforcement of the law prohibiting the selling and use of marijuana, we would expect: a. Jane’s expenditures on marijuana to be unchanged b. Jane’s expenditures on marijuana to increase 0. Jane’s expenditures on marijuana to first increase and then fall back to their original level as her demand for the drug stabilizes X , Jane’s expenditures on marijuana to decrease 9. Spending on health Care in the US. constitutes approximately what percentage of gross domestic product (GDP)? a. 5% ' b. 10% . 16% d. 20% e. 25% 10. ’ch of the following is r_1__o_t true for health savings accounts (HSA’s) v they will provide universal coverage of health insurance to the 47 million people 7 , now without it through mandatory payroll taxes on every employer and employee they work in tandem with a high deductible (minimum $1,150-single person) health insurance plan 0. they enable a person to put an amount equal to the deductible into a tax—flee account (up to certain caps) d. contributions are not taxed, nor are withdrawals for health care expenses e. the money in a health savings account belongs to the individual, and does not revert to the employer at the end of the year if not spent 11. Effects of law enforcement efforts focusing on the supply side, particularly in dealing with drugs and prostitution, include all of the following except: a. b. c. X 6. costs of the illegal operation are higher drug/prostitution prices are higher buyers and sellers of the illegal goods/services must resort to private methods of contract enforcement drug pushers will focus more on marijuana than cocaine, heroin, or methamphetamines less emphasis will be placed on drug education programs 12. Which of the following is no_t a reason for the price inelasticity of health @ in the U.S.? a. S? d. e. no good substitutes available often provided in emergency situations the high number of health care professionals most patients have some type of health insurance consumers prefer a long term relationship with their physicians 13. Under the Medicare Modernization Act of 2003, which of the following is n_ot true? K d. e. all 40+ million Medicare beneficiaries are provided with the opportunity to enroll in a voluntary prescription drug benefit plan provided by a private insurance company , Medicare will pay the full costs (100%) of all prescription drugs up to $2,5'0 annually ' ' there is a “doughnut” provision — Medicare pays a certain % up to the first $2,510, and then picks up again after $5,725 at a higher % some 12+ million low—income seniors benefit the most with 100% coverage of prescription drug costs with a $1.00 to $5.00 co-pay there is a provision for Health Savings Accounts (HSA’s) 14. In general, drug prohibition tends to: a. increase drug use K cause drug prices to increase due to large decreases in the supply of drugs f c. cause drug pushers to entice use by providing free drugs to most first—time users (1. cause increased supply as organized crime moves in and takes advantage of?» profitable opportunities 6. be associated with decreases in both Violent crimes and crimes against property 15. One consequence of increased enforcement of drug laws is: a. b. c. d. an increase in property crimes contamination of the illegal substance the creation of more criminals _ more people being arrested, convicted and imprisoned for drug offenses all of the above 83 16. Electrical generating plants burning high-sulfur coal contribute to a sulfuric gig soliltion known as: ' ’ a. nitrogen oxide b. sulfur dioxide X acid rain d. a volatile organic compound ' 6. carbon dioxide 17. Many scientists say the main culprit in global warming is: a. b. c. m 18. Ina )( b. d. e. ozone sulfuric acid sulfilr dioxide carbon dioxide methane gas pure market economy the amount of pollution is: likely to be greater than the efficient amount because polluters do not bear the full . costs of pollution likely to be the efficient amount because in general the price system causes production to be carried out to the point where quantity demand and quantity supplied are equal likely to be less than the efficient amount because the government regulations designed to reduce pollution increase firms’ production costs causing them to decrease output likely to be the efficient amount due to the regulatory powers of agencies like the Environmental Protection Agency minimal since firms factor this cost into their marginal private costs 19. According to Ronald Coase: a. b. d. e. pollution can be controlled by using the appropriate government regulations efficient levels of production will occur only if property rights are assigned to non-polluters efficient levels of production could occur regardless of who receives property rights regulations could be made more efficient by eliminating technology restrictions there is no such thing as the “tragedy of the commons” Offset requirements as that term is used in the Clean Air Act as amended, refer to the 20. requirements that: a. gasoline stations in non-attainment carbon monoxide zones must offset pollutants , by using oxygenated gasoline ( areas that have not attained ozone and carbon monoxide standards can permit new pollution sources only by reducing pollutants from existing sources at a 1.5 to 1.0 ratio 0. areas that have not attained ozone and carbon monoxide standards must offset pollutants by using state—of-the—art technologies for new emissions sources (1. the Environmental Protection Agency set national ambient air quality standards (NAAQSs) in order to offset pollution 6. firms emitting sulfur dioxide must be subject to either a “cap and trade” system of pollution control or an emissions tax 21. If an individual is less inclined to aygid accidents or illness because she has health insurance, this is an example of X C. d. e. the free-rider problem the moral hazard problem the adverse selection problem the Coase theorem defensive medicine 22. Which of the following would likely result if the use of a new drug, “euphoria,” were made illegal? v a. an increase in the demand for “euphoria” a decrease in the supply of “euphoria” V c. a decrease in the price of “euphoria” (1. less organized criminal activity associated with the trade of “euphoria” e. all of the above 23. Suppose that prohibition causes the price of marijuana to increase from $5.00 per” ounce ' to $40.00 per ounce. Which of the following is most likely responsible for most of this increase? a. prohibition causes a decrease in demand for marijuana b. as a result of prohibition, the purity of the drug bought by consumers is often questionable )K' prohibition causes a decrease in supply due to the increased risk associated with selling the drug ' d. prohibition will probably cause the sale of marijuana to take place in more competitive markets as numerous dealers will emerge to take advantage of the profits that can be made through illegal sales 6. a huge increase in demand since marijuana has more chic (stylish) now that it is legally prohibited 24. The Kyoto Protocol is an agreement designed to reduce international emissions a mercury b all hazardous air pollutants c chlorofluorocarbons, which damage the ozone in the earth’s stratosphere d. sulfur dioxide, the source of acid rain ' X carbon dioxide, a greenhouse gas 25. Which'of the following is a demand—increasing factor in the health m market? a. ' rising incomes b. the aging of the population c. unhealthy lifestyles d. health insurance X all of the above 26. Suppose government. were to legalize the use of cocaine and heroin. As a result of this action there is likely to be: a. a decrease in the number of property crimes because it will cost less to purchase these drugs b. a decrease in organized criminal activity associated with the drug trade c. an increase in certain violent crimes such as rapes, spousal/child abuse arising from increased usage of such hard drugs (1. an increase in cocaine and heroin addiction X’ all of the above it 27. In terms of importance, the number 93 supply factor leading to rising medical costs in the U.S. is: 9X9 9‘!» fear of lawsuits medical ethic of best treatment extensive public/private health insurance coverage . . . cost of new and ever more sophisticated medical technologYAvo [1‘0 ’ W!" (J an aging population 28. The largest share of each health care dollar spent in the U.S. goes to: a. b. c. d. physicians home health care pharmaceutical companies laboratories ' hospitals 29. During Prohibition, in the U.S. from 1920 to 1933, which of the following was pry-g? b. c. d. e. the murder rate in the U.S. increased physical abuse of women and children by drunken husbands/fathers ceased all illegal alcohol was produced in the U.S. — none made it in from Canada nor Mexico thanks to vigorous law enforcement by the federal government the death rate from acute alcohol poisoning went down bootleggers concentrated more on supplying beer and wine rather than hard liquor to speakeasies 30. If you have a $2,000 covered health expense, have a deductible of $500 and a 29 percent co-pay then you pay a. b. If e. and the insurance company pays $1,500, $500 $1,000, $1,000 8 $800, $1,200 $700, $800 $500, $1,500 31. Medicaid and Medicare differ in that: a. b. A/ d. 6. Medicare is means—tested, but Medicaid is not , Medicaid is funded by a 1.45 percent federal tax on wages, but Medicare is funded by the general tax revenues of state and federal governments to be eligible for Medicaid, families have to be poor or low-income, but there is no means test (income test) for Medicare Medicaid is meant only for retirees, but Medicare is meant for people of all ages Medicaid just covers children only, whereas Medicare covers persons 65 and over 32. Economist Steven Levitt in his Book, Freakonomics, has drawn an unexpected connection between crime and a. b. >5 6. obesity the political party in office abortion rights global warming income/poverty 33. The rational criminal model draws a parallel to the thought processes 91‘: a. b. C. H d. x lawyers politicians law enforcement officers educators investbe ‘ 34. Compared to a recreational user of a street drug, an addicted user’s elasticity o_f demand .0 9.0x? a, much more elastic more inelastic unitary elastic flatter always perfectly vertical, i.e., totally inelastic 35. If policy makers were to attempt to set a 12% equal to the external costs of alcohol, one would have to evaluate: a. b. 75 e. the cost of alcohol production the price paid by consumers the expected value of innocent lives lost to drunk driving the expected value of the shortened lives of alcoholics none of the above I 36. Which of the following would be most liker to _l_ac_k health insurance coverage? , a. b. c. d. X a part-time worker a worker for a small firm a 65-year—old retired person a secretary for a major Fortune 500 corporation both a and b ‘ Use the following table to answer question 37. Marginal Cost of Control Tons-per Day Plant A Plant B 1 $200 $ 900 2 400 1,200 3 600 1,600 4 800 2,100 ’ 37. I Suppose Plant A and Plant B are currently emitting 4 tons of pollution each. The government requires each plant to reduce emissions by two tons and issues two one-ton marketable pollution permits to each plant. Will any permits be traded? a. b. c. d x?” both firms’ costs of control are so high, no trading will occur yes, Plant A would be willing to buy one permit from Plant B yes, Plant A would be willing to buy two permits from Plant B yes, Plant B would be willing to buy one permit from Plant A yes, Plant B would be willing to buy two permits from Plant A Use the following information to answer questions 38 and 39. 38. 39. 40. 41. 42‘; ” Marginal cost of control at Tons per day Plant X Plant Y 1 $ 200 $ 400 " 2 400 700 3 600 1,000 4 800 1,300 - a 1 600 1,000 , U! Suppose both plants are currently emitting 5 tons of pollution per day. Government enacts regulations that require both plants to reduce (abate) 3 tons of emissions per day. What is the total goit of the emissions reduction? a. $1,200 b. $2,100 0. $3,100 ., X $3,300 » e. $3,600 0 Suppose instead, government requires each plant to control 3 tons of emissions per day and issues each plant 2 pollution permits. Each permit allows it to emit 1 ton of pollution per day. How many permits, if any, will be traded? a.0 )5: I Suppose the marginal social post of producing Baby Soft Wipes is currently $12 while the marginal private Q31 is Q. Then the marginal external post is: a. $12 b. $9 $3 (1. $15 6. $21 The evidence on some environmental pollutants in the US such as 192$ and sulfur in the air is that: a. , they are not nearly as harmful as once thought b. they are increasing at an alarming rate X they have decreased substantially in the last 25 years (1. they have stabilized in the air at their all-time high e. they produce greenhouse gases aggravating global warming 9' Suppose Sticky Glue, Inc. is currently producing at a point where its marginal private cost is $10.50 and its marginal social cost is $20.25. Suppose that at current consumption levels marginal social benefit is $10.50. The marginal external cost (MEC) associated with Sticky Glue’s level of production is: a. $0 because marginal private cost and marginal social benefit are equal X $9.75 0. $10.50 cl. $20.25 e. $22.50 43. Which of the following is an example of a marginal external _c_9_s_t? a. a patron of McDonald’s is burned when coffee is spilled on their lap b. a firm’s production costs increase because government regulations force it to provide more employee health and safety benefits c. the cost of iron ore to a steel manufacturer (1. the price a corporation must pay for pollution control devices such as scrubbers X the people who fish in a river find their catch decreasing because pollution from a factory is killing the fish 44. To reduce sulfur dioxide emissions, the Clean Air Act of 1990: ' a. subsidized companies that installed “maximum achievable control technologies” by year 2000 b. limited the emissions of automobiles in major US. cities with air pollution problems c. set stricter limits on pollution contributing to ozone depletion )( created a market for sulfur dioxide pollution rights among firms in an area 6. imposed a sulfur dioxide emissions tax on all emissions of sulfur dioxide i 45. Suppose you go to a doctor but your health insurance plan does n_ot reimburse you . because you have not yet paid enough out-of-pocket for the year to qualify for insurance benefits. This is an example of: ' a. - coinsurance b. a maximum benefit limit c. defensive medicine ' d. - managed care '" Y a deductible 46. A substantial (e. g. 50 cents to one dollar per gallon) increase in the federal excise tax on gasoline would: increase the price paid by consumers for gasoline — reduce the supply of gasoline result in less gasoline use is advocated by some economists to cut our dependence on imported oil all of the above Kemp‘s» 47. Which of the following statements is correct? a. The Canadian government will pay for an unlimited amount of health care for its citizens. b. Because of Canadian government expenditure limits, there is often an excess? supply of health services K Because of Canadian government expenditure limits, there is often an excess demand for health services sometimes resulting in quite long waits for patients. d. Canadians tend to pay high partial cost priCes (co-payments) for their health can! e. the Canadian health care system is essentially the same as that in the UK. Use the following diagram to answer questions 48—50. 48. Suppose a new drug, nirvana, were made illegal. We would expect: a. price to remain unchanged K price to increase to P2 c. quantity to increase to Q3 from Q; (1. price will increase to P3 e. price to fall to P1 49. Suppose a new drug, nirvana, were made illegal. We would expect: a. demand to remain unchanged b. supply to remain unchanged , 0. supply to change from $2 to 81 (I. demand to change from D; to D1 X supply to change from $1 to 82 50. Suppose a new drug, nirvana, were made illegal. We would expect: a. supply to remain unchanged b. demand to remain unchanged c. supply to change from S; to $1 / demand to change from D1 to D2 e. demand to change from D2 to D1 a v, ...
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This note was uploaded on 04/07/2009 for the course INDV 002 taught by Professor Mcbrearty during the Spring '09 term at University of Arizona- Tucson.

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ex2f08 - UNIVERSITY OF ARIZONA . ELLER COLLEGE OF...

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