Economics 4300, Government Finance in the American Economy
William J. White – Autumn, 2018
First Homework Assignment – due September 6th
Name and Dot Number ___________________________________
Multiple Choice Questions 40 points total
_____ 1. Which of the following responsibilities of our government derives directly from the U.S. Constitution?
a) federal provision of highways and bridges.
b) the social safety net, including payments for medical care.
c) protection of the environment through regulation of business.
d) Federal Reserve actions to maintain full employment and stable prices.
_____ 2. Total annual expenditures by the U.S. federal government:
a) are more than 40 percent of GDP in most years.
b) have been falling on a per capita basis since the year 2000.
c) are larger than the combined spending of all state and local government.
d) must be less than federal revenue collected, due to balance budget laws.
_____ 3. A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:
a) a budget line.
b) an isoquant.
c) an indifference curve.
d) a demand curve.
_____ 4. Which of the following will decrease a consumer’s purchasing power?
a) A decrease in the consumer’s income
b) An increase in the price of the good on the vertical axis
c) An increase in the price of the good on the horizontal axis
d) all of the above
_____ 5. When a person consumes two goods (A and B), that person’s utility is maximized when the budget is allocated such that:
a) the marginal utility of A equals the marginal utility of B.
b) the marginal utility of A times the price of A equals the marginal utility of B times the price of B
c) the ratio of total utility of A to the price of A equals the ratio of the marginal utility of B to the price of A.
d) the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.
_____ 6. The area below the demand curve and above the price line measures
a) consumer surplus.
b) economic profit.
c) elasticity of demand.
d) the total value obtained from consuming the good or service
_____ 7. Which of the following is true about the income effect of a price decrease?
a) It will lead to an increase in consumption only for a normal good.
b) It always will lead to an increase in consumption.
c) It will lead to an increase in consumption only for an inferior good.
d) It will lead to an increase in consumption only for a low-priced good.
_____ 8. The change in the quantity demanded of a good resulting from a change in relative price with level of satisfaction held constant is called the ____ effect.
a) nominal price
b) real price
_____ 9. If a market basket is changed by adding more of at least one good, then rational consumers will:
a) rank the market basket more highly after the change.
b) more likely prefer a different market basket.
c) rank the market basket as being just as desirable as before.
d) be unable to decide which of the market baskets is preferred.
_____ 10. Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,
a) the budget line will become steeper.
b) the budget line will become flatter.
c) the slope of the budget line will not change.
d) the slope of the budget line will change, but in an indeterminate way.
_____ 11. Consider the following three market baskets:
If preferences satisfy all of the basic assumptions:
a) A is on the same indifference curve as B.
b) B is on the same indifference curve as C.
c) A is preferred to C.
d) B is preferred to A.
_____ 12. When a good is price inelastic, consumer expenditures on the good
a) increase when price increases.
b) decrease when price increases.
c) do not change when price increases.
d) are not related to price elasticity of demand.
_____ 13. Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:
a) the price of steel to fall.
b) the demand curve for steel to shift to the right.
c) the demand curve for plastic to shift to the left.
d) nothing to happen to steel because it is only a substitute for plastic.
_____ 14. When the average product is decreasing, marginal product
a) is increasing.
b) exceeds average product.
c) is decreasing.
d) is less than average product.
_____ 15. A curve showing all combinations of capital and labor that produce the same level of output is called a(n):
a) production function.
b) isocost line.
c) expansion path.
_____ 16. If the marginal benefit of a good exceeds the marginal cost at the current level of output, then:
a) it is not possible to increase total surplus without harming some buyers.
b) it is not possible to increase total surplus without harming some sellers.
c) a reduction in quantity exchanged will increase total surplus.
d) an increase in quantity exchanged will increase total surplus.
_____ 17. Positive economics:
a) makes recommendations designed to achieve certain goals.
b) is based on value judgments.
c) involves statements that can be proven true or false.
d) can never be used to make predictions.
_____ 18. Which of the following is a normative statement?
a) When interest rates rise, the quantity of loanable funds will decline.
b) To improve the functioning of our economy, governments should prevent monopolies and outlaw price discrimination.
c) Unemployment decreases during a recession.
d) When governments increase income tax rates, people work fewer hours.
_____ 19. If an efficient quantity of soybeans are produced and sold in the US market, then the market price of soybeans will be equal to:
a) the marginal social benefit of soybean consumption.
b) the marginal cost of soybean production.
c) the total social benefit of soybean consumption.
d) A and B are both correct.
_____ 20. When the minimum wage increased in Seattle from $11 to $13, which of the following would have happened to Seattle employers?
a) the slope of their isocost lines decreased, inducing them to use more labor and less capital.
b) the slope of their isocost lines increased, inducing them to use more capital and less labor.
c) their isoquants moved further away from the origin.
d) their isoquants moved closer to the origin.
Essay Question 10 points total
Comment briefly on the dilemma between economic efficiency and equity/equality. If you believe efficiency should be the primary motivator of government action, what steps can be taken to address concerns related to equity? If equity should be the primary driver, how can government ensure that markets remain fairly efficient?
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more