Exam 4

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Question 1 (4 points)

Health-care expenditures per capita have risen since the mid 1960s in the United States. Which of the following is not a reason for the increase?

People often perceive health care as a free good
The demand for health care has risen
The supply of health care has risen
Technological change in health care has taken place
The federal government has had such a small role in health care

Question 2 (4 points)

The goal of the social security system is to ensure that the elderly retire with

a better lifestyle than they enjoyed when working
the same lifestyle they enjoyed when working
all health care needs met by the federal government
a slightly reduced income level and a significantly earlier retirement
a lifestyle that is above the poverty level

Question 3 (4 points)

The demand for a good or service rises if at every price people are willing and able to purchase more than they did previously. The reason the demand for health care has risen is

that the price of health care has fallen due to technological change
third party payment system has increased people's willingness to purchase more
that the quality of health care has risen
that the price of health care has fallen while the quality has risen
third party payment system has increased people's ability to purchase more

Question 4 (4 points)

The labor market supply curve is

downward sloping
perfectly elastic
upward sloping
perfectly inelastic
downward sloping at first and then bends backward

Question 5 (4 points)

Which of the following best explains the shape of the individual labor supply curve?

The individual labor supply curve must be vertical since each person can work only eight hours per day
The individual labor supply curve is exactly like any supply curve: it always has a positive slope
The individual labor supply curve slopes downward at all wage rates, because as wages increase people are able to buy more leisure
The individual labor supply curve must be horizontal because labor markets are assumed to be perfectly competitive
The individual labor supply curve slopes upward at lower wage rates and then bends back at higher wage rates

Question 6 (4 points)

If people are separated into different jobs on the basis of sex, this is known as

statistical discrimination
occupational segregation
employer prejudice
worker prejudice
crowding

Question 7 (4 points)

According to the Economic Insight in the text, it is a myth that what people put into the system is exactly what they get out. Why is this a myth?

The system ensures that people won't profit from social security
At least through 2003, retirees receive significantly more in benefits than what they ever pay into the system
Retirees pay in current value dollars and don't receive an equivalent amount in future value dollars
People never live long enough to collect all their benefits
Retirees pay in over 40 years and collect benefits over 20

Question 8 (4 points)

Medicare's prospective payment system is an example of a

price rationing system
tariff
price ceiling
barrier to entry
price floor

Question 9 (4 points)

The supply curve for medical care will shift to the left if

resource prices are falling or if economies of scale are being experienced
the cost of medical care is falling
resource prices are falling or if diseconomies of scale are being experienced
resource prices are rising or if economies of scale are being experienced
resource prices are rising or if diseconomies of scale are being experienced

Question 10 (4 points)

Which of the following is not a trait commonly seen among those who fall below the poverty line?

4 or more years of college
Lack of a job
Being aged 16 and over
Lack of education
Being aged 65 and over

Question 11 (4 points)

Suppose the figure above shows a comparison between workers' compensation and their productivity. At approximately what age does productivity peak and at what age do earnings peak?

35, 55
45, 45
45, 55
35, 65
55, 35

Question 12 (4 points)

If income was equally distributed, the Lorenz Curve would

be a horizontal line
be the same as the 45 degree line of equality
be a vertical line
be just one point on the diagram
be the same as the 90 degree line of equality

Question 13 (4 points)

Which of the following is not an in-kind transfer?

Medical services provided under Medicaid
Legal aid for the poor
School lunch programs
Food stamps
Social security retirement benefits

Question 14 (4 points)

Which of the following statements concerning poverty distribution is true?

The poverty line is a fixed income level that's the same for all countries
Poverty rates rise when per capita GDP increases
Poverty rates increase with economic growth
The incidence of poverty in less developed countries is smaller than in developed countries
Poverty rates rise during periods of economic stagnation

Question 15 (4 points)

For economists, discrimination is difficult to rationalize because

wages will not be allowed to fall below their natural equilibrium rate
it is not costly to discriminate
economists know that in the real world, personal prejudices do not exist
in a freely functioning labor market, there is no such thing as discrimination
it is costly to discriminate

Question 16 (4 points)

If each of the following jobs paid the same wage, which one would we expect most people to pick if given the choice?

A job that requires little human capital but is dangerous
A job that requires excellent skills and has a small amount of nonmonetary benefits
A job with very poor working conditions
A job that requires few skills and has a large amount of nonmonetary benefits
A job that requires large amounts of human capital but is dangerous

Question 17 (4 points)

As the baby boomers come of retirement age, Social Security

becomes a problem for society because social security payments are funded from current taxes and those taxes will be paid by a population that is larger than the baby boom population
becomes a problem for society because social security payments are funded from current taxes and those taxes will force baby boomers to work longer leaving fewer jobs available for the younger workers
becomes a problem for society because social security payments are funded from taxes that the baby boomers can not afford
becomes a problem for society because the baby boomers want higher social security payments
becomes a problem for society because social security payments are funded from current taxes and those taxes will be paid by a population that is smaller than the baby boom population

Question 18 (4 points)

According to the text, what makes health care different from any other good or service is

the supply of health care does not slope up
the demand curve for health care does not slope down
people do not have to make choices when it comes to health care
people feel like they have an inalienable right to health care
there is no scarcity of health care

Question 19 (4 points)

Which of the following would not reduce the problem with the social security system?

Privatizing the system by allowing individuals to decide how to invest their social security taxes
Reducing the benefits paid the retirees
Increasing the age one must be before one can receive retirement benefits
Placing everyone in the Congressional Retirement Program
Paying retirement benefits only to those without any other income

Question 20 (4 points)

Refer to the table above. The best example of a progressive tax is

tax policy Delta
tax policy Beta
tax policy Gamma
tax policy Alpha
not described by the figures above

Question 21 (4 points)

The market system works to ensure that resources

go to those who desire them the most, even if they cannot pay for them
flow to their highest-valued uses
are allocated in the fairest possible manner to members of society
invariably end up going to their lowest-valued uses
are allocated by government fiat

Question 22 (4 points)

One proposal for solving the social security problem is privatization. The countries who have privatized their social security systems have found

that people use so many resources trying to make the correct investment that they lose their jobs
that people are foolish with their investments
that the returns people have received are more than what they would have received from the government
that people find they do not have enough savings to retire
that the returns people have received are less than what they would have received from the government

Question 23 (4 points)

Refer to the figure above. In comparing Country A's income distribution with that of Country B, we can say that

Country B has a substantially greater degree of income equality than Country A
the absolute level of income in Country B must substantially exceed that of Country A
Country B has a substantially greater degree of income inequality than Country A
the absolute level of income in Country A must substantially exceed that of Country B
since both curves are bowed in like fashion, no income inequality exists

Question 24 (4 points)

The concept of comparable worth

has made hiring practices much simpler for employers
is that pay ought to be determined by job characteristics rather than by supply and demand
is easy to implement once a new worker has been hired
is that pay ought to be determined by supply and demand rather than by job characteristics
asserts that market-determined wages are the only appropriate way in which to allocate pay

Question 25 (4 points)

Which of the following explanations for the uneven distribution of income in the world has been argued by economists?

Older countries tend to be richer
People who live in colder countries tend to be more work oriented
Poorer countries tend to have unfounded cultures
The freer the economic and political system, the greater the rate of economic growth
None of these

Question 26 (4 points)

HMOs and PPOs have come about because of the

steady decrease in the number of hospital beds nationwide
increasing shortage of physicians in certain key specialties
perceived lack of quality care provided by many clinics
increased costs of medical care
erosion of standards formerly set by the federal government

Question 27 (4 points)

In the figure above, the initial labor supply is S₁ and the labor demand is D₁. If the wage is $6, which of the following is correct?

There is a shortage of 30 workers
The market is in equilibrium
The actual wage is above the equilibrium wage
There is a shortage of 10 workers
There is a shortage of 20 workers

Question 28 (4 points)

Workers allocate their time between work and leisure such that

when 40 hours are worked, the rest of their time is spent on leisure activity
when their fun is over, they will work
the marginal benefit of an hour spent working will be greater than the marginal benefit of an hour spent on leisure activity
the marginal benefit of an hour spent working will equal the marginal benefit of an hour spent on leisure activity
the marginal benefit of an hour spent working will be smaller than the marginal benefit of an hour spent on leisure activity

Question 29 (4 points)

CEOs may be paid very high salaries regardless of their firm's performance

because their salaries are set by a board comprised of their friends
because of any or all of the other answers
because their pay will raise the productivity of the firm
because owners and managers are separated and owners have little control over the managers
because the pay serves as an incentive to all employees

Question 30 (4 points)

The largest publicly sponsored health-care program is

social security
group care
Medicaid
Medicare
Head Start

Question 31 (4 points)

In a market system, incomes are distributed according to the ownership of resources. Therefore, one of the consequences of a market system is that

equality and efficiency are virtually guaranteed
incomes are distributed equally
even though incomes are distributed unequally, government intervention will always make the necessary adjustment
jobs are distributed unfairly
incomes are distributed unequally

Question 32 (4 points)

One unintended effect of the government welfare system is that it may

improve the health of those living below the poverty line
reduce income inequality
create incentives to further one's education
create disincentives to work
reduce the number of people living below the poverty line

Question 33 (4 points)

In the figure above, the reason for the wage differential could be the fact that

market A consists of workers with more human capital
market A is the market for a risky occupation
market B consists of workers with less human capital
market B is unskilled labor
All of these

Question 34 (4 points)

The highest incidence of poverty by age occurs among those

65 years of age and over
between 21 and 31 years of age
between 41 and 61 years of age
between 31 and 41 years of age
under 21 years of age

Question 35 (4 points)

Unskilled workers as compared to skilled workers

are in greater supply and have lower marginal productivity; for both these reasons they must expect a lower wage rate
are discriminated against; this is the only reason they receive a lower wage
are in smaller supply and have lower marginal productivity; for both these reasons they must expect a lower wage rate
are in greater supply and have higher marginal productivity; for both these reasons they must expect a lower wage rate
are in smaller supply and have higher marginal productivity; for both these reasons they must expect a lower wage rate

Question 36 (4 points)

In comparing income and wealth, we know that

income is the stock of assets, while wealth is the flow of earnings that results from the stock of assets
wealth cannot produce income except in the form of human capital
wealth represents the flow of assets
wealth is the stock of assets, while income is the flow of earnings that results from the stock of assets
income represents the flow of assets

Question 37 (4 points)

A compensating wage differential is a wage difference

that makes up for the high risk or poor working conditions of a job
attributable to different demands for labor
that results because of a monopsony
that leads to more risks taken on the job
due to discrimination

Question 38 (4 points)

A person will invest in human capital until

the total cost of human capital is equal to the total benefit
the marginal cost of human capital is equal to the marginal product of labor
the marginal benefit of human capital is equal to the marginal cost
the marginal benefit of human capital is zero
the marginal benefit of human capital is equal to the marginal product of labor

Question 39 (4 points)

The most unequal distribution of income is found in

less developed countries
OPEC countries
formerly communist countries
developed countries
Pacific Rim countries

Question 40 (4 points)

If the price level actually declined, the official poverty-line income would

rise only if there was sufficient unemployment
would decline by the amount of inflation
decline by the amount of the price decline
rise only by the inflation rate
would remain at its last year's level

Copyright 2008, by the Contributing Authors. Cite/attribute Resource. admin. (2009, January 27). Exam 4. Retrieved November 23, 2009, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-microeconomics-1/exam4.htm. This work is licensed under a Creative Commons License.

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