Second Midterm Spring 2007_3

Second Midterm Spring 2007_3 - UNIVERSITY OF ARIZONA ELLER...

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Unformatted text preview: UNIVERSITY OF ARIZONA ELLER COLLEGE OF MANAGEMENT DEPARTMENT OF ECONOMICS SPRING, 2007 PROFESSOR MCBREARTY INDV 103 INDIVIDUALS & SOCIETY: ' AN'ECONOMIC PERSPECTIVE SECTION 62 8:00-9:15AM ILC 120 SECOND MID—TERM EXAMINATION (THURSDAY, MARCH 22, 2007) Name: QMWf/f' A é Z STUDENT|D# ( le eprintciearly) , ’ Signature E-mail GENERAL INSTRUCTIONS TURN OFF ALL CELL PHONES! .NO CAPS/H0003 AND NO EAR PIECES! There are 50 Multiple Choice Questions on the examination. The total examinat worth 100 points or 25% of the course grade. ' , . Print your name Student ID number, section and E- mail address on bo__t__h the Queue and the Scantron Answer Sheet. Fili' In your answers in the Spaces provided on Scantron Answer Sheet by coloring completely the box for the appropriate letter Multiple Choice questions. Make dar___k m_a___rks on the Scantron sheet with a No.2 mechanical pencil. The Questions along with an analysis of your results (but__ not the Scantron Sheet) will be returned to you in one week. SCANTRON INSTRUCTIONS 0 Use #2 Pencil or Mechanical Pencil . Enter your student ID Number _ o If your SID starts with an “S" substitute “0" 0 Bubble your SID . . Put down your Last Name, First Name and Mi. 0 Bubble your name '- Enter the Test Form based on your exam version " Pink: FormA Yellow: Form B . Enter your e- mail address where it says “Name" followed by the S Date, and Hour (8:00) . indicate the color of your exam in the middle above where it says “Parscore Score Sheet" . Completely_ erase any mistakes . ; I I- At the front of the classroom In two separate piles Iurn In your._ .. I ' 0 Exam Questions . - o Scantron A9$wer Sheet Over fishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase wo d suggest that there would be no problem if: . someone owned (and could control) the ocean . b. . peoplestopped eating fish - - - - - - - - people reacted according to the golden rule countries agree to voluntary restrictions on fishing Fl.“ The evidence on some environmental pollutants in the US. such as leadand sulfur in the air is that: they are not nearly as harmful as once thought they are increasing at an alarming rate a b. X they have decreased substantially in the last 35 years d. they have stabilized in the air at their all-time high In a free marketeconomy, the amount of pollution is: i...- a. is likely to be the efficient amount because the price system forces firms _to_ operate at the point at which marginal social cost and marginal social benefit are _ equal _7 5 ,b. likely to be less than efficient amount due to government regulations X likely to be more than the efficient amount because firms do not take'tfie' marginal external cost of pollution into account d. like to be more than the efficient amount because firrns include on! arglnal external cost in their production decisions " ' ' ' Suppose Sticky Glue, Inc. is currently producing at a point where its margina’L-pnvate cost is $10.50 and its marginal social cost is $20.25. Suppose that at current-15;”. consumption levels marginal social benefit is $10.50. The marginal externalcost (MEC) associated with Sticky Glue’s level of production is: -’ a. $0 because marginal private cost and marginal social benefit are equal . $9.75 - c. $15.00 cl. $22.50 Suppose that Mr. Big’s oii refinery is currently producing at a point where marginal social cost is $47 and marginal social benefit is $35. in this instance: ' a. output is not at the efficient level _ b. 7 Mr. Big’s company is imposing a net loss on society . "c. ' production should be decreased in order to bring about efficiency X all of these The extra costs that are ngt captured by‘thécfnarket'prOCess are called: ~ ' f" _ . a. operating costs ‘ = )f external costs ‘ ‘ ' c. producer surplus '. -‘ d. 'fixed costs 7. 8. 9. 11. 12. Whenever there are external costs: a. the market price will be too high b. too little of the good is produced c. marginal private costs exceed marginal private benefits X too much of the good will be produced An emissions tax can bring about an efficient solution to the pollution problem because it a. forces firms only to bear the full cost of the tax X forces both firms and households to bear the full cost of their decisions 0. eliminates the external cost associated with pollution ' d. allows government agencies to use benefit-cost analysis to determine the efficient level of pollution Which of the following Is n_g__t an external c_ost attributed to the automobile? a. air pollution b. congestion c. noise X purchase price of gasoline Which of the following is n_ot a way economists have suggested for' Imposr gi _extemal costs of driving on consumers? a. - higher gasoline taxes mandatory limits on driving c. congestion pricing d. parking cash-outs Which of the following__ Is an example of a marginal external cost? . a. a patron of McDonald 3 is burned when coffee Is spilled on their lap . b. a t" rm 5 production costs Increase because government regulations force it to provide more employee health benefits -- 3/ the people who fish In a river find their catch decreasing because pollutIon from a factory Is killing the fish d. the price a corporation must pay for pollution control devices such as scrubbers Suppose that at current consumption levels, the marginal social cost of- using the Los A_.nge|es freeway system is $25 while the marginal social benefit Is $15. in this instance government officials should: ' , X take actions to decrease use of the freeway system take actions to Increase use of the freeway system b c. take no actions to change use of the freeway system d build more freeways 13. Assuming that the production of paint results in chemical pollution of the land and water and that Sp represents the private supply curve and 85 represents the social supply curve, the socially optimal level of output in the graph below is: " - r|-7-._ . 1- ., P OOD'DJ . C. ' i d. l; ‘ .- According to economists, the decisions abo'ut'pollution control in the casefaji331lu iOn that extends beyond state boundaries should be made by: ' a. city governments b. county governments 0. state governments X the federal (national) government (and sometimes international govef,’ _ 15. Atax on gasoline: a. increases the price paid by consumers for gasoline b. reduces the supply of gasoline 0. results in less gasoline use if all of the above 16. To reduce sulfur dioxide emissions, the Clean Air Act of 1990: . , a. subsidized companies that installedi‘maximumeachievable contro 'fr' by the year 2000 , ~ b. limited the emissions of automobiies in major US. cities with air pollutgo probiems ' c. * set stricter limits on pollution contributing to ozone depletion y created a market for sulfur dioxide pollution rights among firms in a 17. The Coase theorem states that: a. government should levy excise taxes on firms that generate Spillover or external costs b. taxes should be levied such that they change private behavior as little as possible ( bargaining between private parties will remedy externality problems where property rights are clearly defined, the number of people involved are f ‘ and bargaining (transaction) costs are negligible (small) d. trading of votes to secure favorable outcomes may increase efficient: 18. Suppose that a large tree on Shawn 3 properly :8 blocking Sam' 3 view of the lake below. Shawn accepts Sam' 5 offer to pay Shawn $100 for the right to cut down the tree"' This situation describes: X the Coase theorem b. the diamond-water paradox c. "logroliing" d a market for externality rights ' 19. Sam decides to join the Gigantic State University 3 rugby team when he lear at his "i‘ health insurance will pay for any subsequent' Injury. This illustrates. ' a. the diagnosis-related-group system ' : b. a “pay or play“ system - X the moral hazard problem d the Coase theorem 20. A ta_x subsidy is involved in employer-financed health insurance because. a. all working adults are covered by Medicare b all working adults are covered by Medicaid employer payments for health' Insurance are not subject to income or payroll taxes d. corporations that provide health" Insurance pay lower corporate Incometax 21. The "play or pay" proposal for health care reform was designed to: X increase access to health care by inducing more employers to provid‘ insurance b. make health care vouchers freely available to all people living' In pov__ rty mum-«w - c. a provide health care to all Americans through- the Federal governmen =asthe ' ‘ single' Insurer A ‘ d.’ contain health care costs through ngernmen't determination of doctor’s ass and hospital charges 22. insurance companies use deductibles and (so-payments sto: a. increase access to health care . X reduce health care costs by alleviating overuse of the health care 5 st 0. prevent small companies from self-insuring their workers d. keep government out of the health care in'sUrance industry Use the following to answer questions 23-25. ' 23. Refer to the above demand and supply diagram that relates to the health caremmarket .n. Without health Insurance the equilibrium price and quantity of health care w d be: P1 and 01 ‘ P1 and 02 P2 and Q2 1 , P2 and Q1 fiepex Refer to the above demand and supply diagram that relates to the health; care II arket. 24.." If Insurance pays one- -half of all health care costs the immediate price to th” " j titer and quantity of health care consumed would be. - ' " " a. P1 and 01 b. P1 and 02 X P2 and Q2 d. P2 and Q1 25. Refer to the above demand and supply diagram that relates to the health care market Health care insurance causes: - 3. resources to be under allocated to the health care industry _‘ X resources to be over allocated to the health care industry c. health care to be under consumed _ d. the price of health care to the insuree (patient) to be higher than the market price ’1"; -- $26.7 —- Suppose you go to a doctor but your health.’ Insurance plan does n_o_t reimburse ou - ' because you have not yet paid enough out-of—pocket for the year to quality fo n_s rance benefits. This' Is an example of: , .Im a III—:93 am .. .. _ a. coinsurance X a deductible c.. H ' monopsony (single buyer) power d; managed care 27. Th program that provides health care for individuals ®a_n_ ado _d_ler is known as: Medicare Medicaid b. -c. Supplementary Medical Care - - - - d Temporary Assistance to Needy Families (TANF) 28. In recent years, third- -parties have paid for approximately what percent of national health care expenditures? x 78% b. 60% c. 55% d. 33% 29. The principal “third parties" in the market for health care are: X private insurance companies and government agencies b. private insurance companies and business firms c. government agencies and business firms d. those who are self-insured and private insurance companies The national health expenditure (NHE) as a share of gross domestic produ (GDP)is _< x rising b. failing ' c.‘ conStant d. at its peak- 31. Managed ca__r_e helps slow the rising costs of health care by: a. having a third party review services and price b. denying payments for some services c. negotiating price with providers X all of the above 32. Which of the following statements' Is _c___orrect? The Canadian government will pay for an unlimited amount of health care. b. BecaUse of Canadian government expenditure limits, there' Is often " supply of health services. -;. v , . _ - demand for health services sometimes resulting In quite long waits d. Canadians tend to pay high partial cos't- prices (co- -payments) for thei care, in addition to their taxes -- . , 33. Of the following, it is likely that the largest source of excessive spending: , ., ' lth care , is: ' ' “ l' physician- induced demand - ' - -. defensive medicine ' too rapid growth' In medical technology third- party payments _ ‘ 34. Even though Joan knows there' Is no possibility of her being pregnant Dr. Jones prescribes a pregnancy test for Joan before putting her on medications. He does this in order to avoid any potential lawsuits that might arise This' Is an example of: - a. - physician sovereignty b. physician- induced demand 0. protective medicine if defensive medicine 35. Which of the following is n__ot a reason for the price inelasticity of health care in the U. S ? no good substitute available often provided In emergency situations b. X the high and rapidly rising number of health care professionals d. most patients have some type of health insurance 9. consumers prefer a long term relationship with their physicians 36. What are the twom maior problems sfacing the health care system of the Unitedg-States? a. the inadequate supply of physicians and the need to build more hospital - b. increasing the demand for and decreasing the supply of health car c. the rapid rate cf technological change and an unhealthy population _ x the need to control costs and make health care accessible to the uni To an economist the correct distribution of money among police, the justi and prisons is one that ' 3. sets an equai amount to each b. sets the amount each gets equal to its average benefit 0. sets the amount each gets so that none is wasted X sets the amount each gets so that no other element could get better use (In - terms of crime reduction) of the marginal dollar _ , 38. The rational crime model explains crimes of a. passion b. stupidity X profit d. love/hate 39. The rational criminal model draws a parallel to the thought processes of investors - -- ' educators - Lei: 5521-: :7 law enforcement officers politicians ’l 91on 40. Decriminalizing a drug is likely to lead to a price decrease if ' the anticipated supply effect IS greater than the anticipated demand the anticipated demand effect Is greater than the anticipated sup l the anticipated demand effect :3 exactly equal to the anticipate b. c. d both demand and supply decrease 41. If policy makers were to attempt to set a tax equal to the external costs of alcohol one would have to evaluate a. .b.... K d. 42. Suppose the federal government were to prohibit the production sale and use of tobacco. The most likely result would be: ' a. b. 3X9???“ Som if c. d Suppose the demand and supply of marijuana an illegal substance are current! ’D1 and 81, respectively. Government legalizes the use of marijuana. This wo‘ lag . Pricc me individuals argue forthe legalization of drugs on the basis that legali . increase property crimes the cost of production thepricepaidbyconsumers - -- - ,, -- . the" value of innocent lives lost to drunk driving the value of the shortened lives of alcoholics a decrease" In the price of tobacco because people would purchase less of the illegal substance and increase in the quantity of tobacco bought because some IndIVIduals enjoy the thrill of breaking the law an increase in the price of tobacco because some producers will ceases? _ production as the risk associated with growing the illegal substance rIses ' an increase in the supply of tobacco because producers will be enticed to increase production as the price of the illegal substance rises ' u' "Lise: Quantity of Mcrfiuana an increase in supply from S1 to 82 an increase in supply for 82 to 81 an increase in demand from D1 to D2 a decrease in demand from D2 to D1 ' both (a) and (c) as. 2 on would. decrease organized criminal activity result in more corruption of police officials -= -- t1: -.— impose significant third party-effectson- society ------ ... -u__-_ 77 -.r‘... —-...—. ...-. . .7,_._.- _y ._.__ 45. Many people argue that legalization of drugs would result in: x b. C. d. increased birth defects increased criminal activity greater family stability as drug users would'n'o longer‘be stigmatized ' ‘ ‘ ' ‘ more hospital admissions as hospitals would have more drug- -related violence to deal with 46. Which statement' Is correct? a. b. X d. $1.09“ fa : :_49 Ifthe government were to tax newly legalized drugs, it would: b. .x d. -;_c. . d. 47 Which is correct about the Dutch drug policy versus the US. drug policy? Suppose that prohibition causes the price eof marijuana to' Increase from $5.00 per An 'argUmentu for legalization of drugs" Is that legalization would: England has doubled its resources spent on crime control, and as a result crime rates have fallen. England has substantially increased resources spend on crime control but crime rates have remained stable or increased slightly. - Crime rates have increased In England, and some believe that reduced punishment' Is the reason. England and the U. 8. have had similar experiences with respect to crirn since 1981. - :ntrol Dutch law distinguishes between soft drugs (like marijuana) and hard cocaine) possession and distribution of drugs is not illegal in the Netherlands it is legal to sell drugs to minors under 18 in the Netherlands all of the above are true 2H ounce to $40 00 per ounce. Which of the following is m_ost likely reSponsible for this increase? prohibition causes a decrease In demand for marijuana as a result of prohibition, the purity of the drug bought by consumers is i - questionable 9 prohibition causes a decrease' In supply due to the increased risk associated with selling the drug 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 - increase their supply and decrease price increase their supply and increase price decrease their supply and increasei'pri'ceiifi‘lf3'551‘” ' decrease their supply and decrease price decrease usage of drugs free up prison space for criminals who commit violent crimes increase the price of drugs - all of the above ...
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