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Eco100Carr_PT3solutions - © Prep101...

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© Prep101 http://www.prep101.com/freestuff ECONOMICS 100 (Carr) Practice Term Test 3 Answer ALL of the following multiple-choice questions. 1. The Lorenz Curve presents all of the following information except: a. The percentage of income received by the top 5 percent of families. b. The percentage of income received by the poorest 30% of families. c. The level of inequality for an income distribution. d. The dollar income of the poorest 20% of families. The Lorenz curve graphs the distribution of income for all households in the society by plotting cumulative % of households against cumulative % of income. The more bowed the Lorenz curve the higher the level of inequality. 2. A “ binding minimum wage”… A binding minimum wage is a type of regulation that sets the smallest wage an employer can legally pay an employee. Specifically, a binding minimum wage is set above the equilibrium rate (where supply = demand). 3. Tradable emissions permits… Tradable emissions permits build social costs into profit maximizing decisions. It does not centralize control in the hands of the government, since firms are still free to produce as they please, as long as they can find and afford these emission permits. Moreover, if pollution can be measured and a permissible level identified, the permits can restrict emissions to this level. Only if one can measure pollution levels are tradable permits more effective than pollution taxes.
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