Econ_198_Aut_06_Exam__3 - Introduction to Microeconomics...

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Introduction to Microeconomics Allen R. Sanderson Economics 19800 Autumn 2006 THIRD HOUR EXAMINATION Name (Please Print): ______________________________________ [40 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 20 points total. 1. In Juan drives less carefully after buying insurance, this would illustrate the principle of: a. adverse selection. b. moral hazard. c. the market for lemons. d. declining marginal utility of wealth. e. negative externalities. 2. “The earnings of engineers and lawyers are high because of the education and training required to practice in these fields.” This statement: a. is essentially correct. b. forgets the fact that unionization in these professions will likely hold down salaries. c. doesn’t take into consideration that both supply and demand determine the wage rate. d. ignores the fact that most of the wages paid here are basically economic rent. e. won’t be true if the substitution effect outweighs the income effect. 3. Democrats and Republicans often propose very similar legislation or take similar positions on public policy matters. This can be attributed mainly to: a. the principle of minimum differentiation. b. trying to eliminate or at least discourage free riders. c. the short-sightedness effect. d. an outcome inherent in capture theory. e. the misuse of common property resources. 4. An uncrowded toll road: a. is a pure public good. b. fits the definition of a common-property resource. c. creates free-rider problems. d. is an example of an activity that creates positive consumption externalities. e. is not a pure public good because while it is nonrival it is excludable. 5. The theory that asset prices reflect all publicly available information about them is referred to as: a. present value. b. derived demand. c. the efficient market hypothesis. d. discounting. e. signaling. 6. According to the social (or public) interest theory, regulators will: a. try to maximize their departmental budgets. b. end up being captured by (or the captives of) those they are supposed to be regulating. c. try to eliminate deadweight losses. d. maximize free-riding. e. maximize total benefits of a public good, not net benefits. 1
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7. With respect to economic rent and opportunity cost, which of the following is not correct? a.
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This test prep was uploaded on 04/07/2008 for the course ECON 198 taught by Professor Sanderson during the Spring '08 term at UChicago.

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Econ_198_Aut_06_Exam__3 - Introduction to Microeconomics...

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