Which of the following statements about externality is INCORRECT? A) Pollution of a chemical plant will create negative externalities to the residents living in the neighborhood. B) Trees planted in the backyard of a house could create positive externalities to the pedestrians passing under. C) Extra output sold by a firm that lowers the market […]
In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100 A) the outcome is not normally the Nash equilibrium for the game. B) the winner usually exhibits level-3 reasoning. C) the winner must understand the non-rationality of the players. D) All of the above. ANSWER […]
For an individual concerned with whether or not the Social Security system provides a good rate of return on the money paid into the system, she only needs to look at the return on investment for previous beneficiaries. a. True b. False ANSWER b
In the Baumol model, the total quantity sold will usually be larger than A) if perfect competition prevailed. B) if total costs were minimized. C) if profit were maximized. D) if companies were interdependent. ANSWER C
Changing the price of a good will usually result in a negative externality. Indicate whether the statement is true or false ANSWER False. The effects of a price change are not externalities.
If the marginal tax rate rises above t * = 63%, tax revenue will decrease because A) workers refuse to pay taxes since the tax rate is too high. B) workers are in the downward-sloping portion of labor supply. C) workers reduce working hours in response to the wage loss. D) None of the above. […]
In the presence of no externalities A) social marginal cost exceeds private marginal cost. B) social marginal cost is less than private marginal cost. C) social marginal cost equals private marginal cost. D) social marginal cost and private marginal cost cannot be compared. ANSWER C
In the Baumol model, a change in fixed costs will A) increase total quantity sold. B) have no effect on total quantity sold. C) decrease total quantity sold. D) have an effect on total quantity sold. ANSWER D
Which of the following models results in the greatest deadweight loss, assuming a fixed number of firms with identical costs and a given demand curve? A) Cournot B) Stackelberg C) Monopoly D) Perfect competition ANSWER C
Average weekly claims for unemployment insurance, money supply and the index of stock prices are all examples of A) leading indicators. B) coincident indicators. C) lagging indicators. D) None of the above ANSWER A
