EC 202 Final Exam (test) AND PRACTICE EXAM QUESTIONS| NEWEST ACTUAL EXAM
COMPLETE EXAM QUESTIONS WITH DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) ALREADY GRADED A+
Tom is a consumer in an imaginary economy with only two consumption goods, pizza
and coke. Tom always spend 50% of the budget on each good. For Tom, what is the
relationship between pizza and coke?
A. They are complements.
B. They are substitutes.
C. They are both substitutes and complements.
D. They are neither substitutes nor complements. D
What is an indifference curve?
A. Something you talked in class.
B. It shows a set of consumption bundles about which the individual is indifferent.
C. Points on the same indifference curve provide the same level of utility.
D. All of above. D
We know that for each person, they have different preference, which means each
person have different Utility function. On the other hand, there are some assumption we
make for all individuals, such as everyone prefers more of each good, the more the
better. The question is, can two Indifference Curves intersect with each other?
,A. For everyone, they can.
B. For everyone, they can't, because otherwise point D has the same utility level as
point E has the same utility level as point C. This violates the more the better
assumption, since C has more of each good.
C. It depends on the preference of the individual person.
D. It is too difficult. B
Refer to the figure. Which of the following would improve economic efficiency in the
market?
A. a subsidy equal to P1 - P3, the size of the marginal external benefit
B. a subsidy equal to P0 - P4, the size of the marginal external benefit
C. a tax equal to P1 - P3, the size of the marginal external cost
D. a tax equal to P0 - P4, the size of the marginal external cost C
The most efficient pollution control system would ensure that
A. regulators decide how much each polluter must reduce its pollution.
B. no new pollution of the environment be allowed.
C. each polluter reduce its pollution an equal amount.
D. those polluters with lowest cost of pollution abatement reduce their pollution most. D
Which of the following is not an example of the free rider problem?
,A. A student working on a group project puts forth minimal effort because the team will
receive a team grade rather than individual grades.
B. A park ranger takes a nap in his car because his boss is working hundreds of miles
away and will never know about the nap.
C. Tim attends a neighborhood party with live music; the other neighbors have paid $5
each to give to the local band members, but Tim does not pay.
D. Shannon catches a ride to a volleyball game with her friends but does not offer to
pay for gas. B
In the 1960s, the lobstering community of Port Lincoln on Australia's southern coast set
a limit on the number of traps that could be set and then sold licenses for those traps.
Since then, any newcomer could enter the business only by buying a license from
another lobsterman. This government intervention in the lobster market caused an
A. increase in economic efficiency because of the existence of a positive externality.
B. increase in economic efficiency because of the existence of a common-resource
problem.
C. decrease in economic efficiency because of the existence of a free-rider problem.
D. decrease in economic efficiency because of the existence of a common-resource
problem. B
Suppose that an MBA degree creates no externality because the benefits of an MBA are
, internalized by the student in the form of higher wages. If there are no government
subsidies for MBAs, then which of the following statements is correct?
A. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of
MBAs.
B. The equilibrium quantity of MBAs will be less than the socially optimal quantity of
MBAs.
C. The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
D. There is not enough information to answer the question C
Refer to Figure. Note that the lines labeled "Demand" and "Social Value"are parallel.
Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and
social value decrease by $1.00 with each additional unit of the good that is consumed,
and (2) private cost increases by $1.40 with each additional unit of the good that is
produced. Thus, when the 59th unit of the good is produced and consumed, social wellbeing
increases by
A. $36.00.
B. $33.60.
C. $31.40.
D. $28.00. B
Refer to Figure. The social optimum can be reached if
A. a tax of $23 is applied to each unit of the good.
COMPLETE EXAM QUESTIONS WITH DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) ALREADY GRADED A+
Tom is a consumer in an imaginary economy with only two consumption goods, pizza
and coke. Tom always spend 50% of the budget on each good. For Tom, what is the
relationship between pizza and coke?
A. They are complements.
B. They are substitutes.
C. They are both substitutes and complements.
D. They are neither substitutes nor complements. D
What is an indifference curve?
A. Something you talked in class.
B. It shows a set of consumption bundles about which the individual is indifferent.
C. Points on the same indifference curve provide the same level of utility.
D. All of above. D
We know that for each person, they have different preference, which means each
person have different Utility function. On the other hand, there are some assumption we
make for all individuals, such as everyone prefers more of each good, the more the
better. The question is, can two Indifference Curves intersect with each other?
,A. For everyone, they can.
B. For everyone, they can't, because otherwise point D has the same utility level as
point E has the same utility level as point C. This violates the more the better
assumption, since C has more of each good.
C. It depends on the preference of the individual person.
D. It is too difficult. B
Refer to the figure. Which of the following would improve economic efficiency in the
market?
A. a subsidy equal to P1 - P3, the size of the marginal external benefit
B. a subsidy equal to P0 - P4, the size of the marginal external benefit
C. a tax equal to P1 - P3, the size of the marginal external cost
D. a tax equal to P0 - P4, the size of the marginal external cost C
The most efficient pollution control system would ensure that
A. regulators decide how much each polluter must reduce its pollution.
B. no new pollution of the environment be allowed.
C. each polluter reduce its pollution an equal amount.
D. those polluters with lowest cost of pollution abatement reduce their pollution most. D
Which of the following is not an example of the free rider problem?
,A. A student working on a group project puts forth minimal effort because the team will
receive a team grade rather than individual grades.
B. A park ranger takes a nap in his car because his boss is working hundreds of miles
away and will never know about the nap.
C. Tim attends a neighborhood party with live music; the other neighbors have paid $5
each to give to the local band members, but Tim does not pay.
D. Shannon catches a ride to a volleyball game with her friends but does not offer to
pay for gas. B
In the 1960s, the lobstering community of Port Lincoln on Australia's southern coast set
a limit on the number of traps that could be set and then sold licenses for those traps.
Since then, any newcomer could enter the business only by buying a license from
another lobsterman. This government intervention in the lobster market caused an
A. increase in economic efficiency because of the existence of a positive externality.
B. increase in economic efficiency because of the existence of a common-resource
problem.
C. decrease in economic efficiency because of the existence of a free-rider problem.
D. decrease in economic efficiency because of the existence of a common-resource
problem. B
Suppose that an MBA degree creates no externality because the benefits of an MBA are
, internalized by the student in the form of higher wages. If there are no government
subsidies for MBAs, then which of the following statements is correct?
A. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of
MBAs.
B. The equilibrium quantity of MBAs will be less than the socially optimal quantity of
MBAs.
C. The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
D. There is not enough information to answer the question C
Refer to Figure. Note that the lines labeled "Demand" and "Social Value"are parallel.
Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and
social value decrease by $1.00 with each additional unit of the good that is consumed,
and (2) private cost increases by $1.40 with each additional unit of the good that is
produced. Thus, when the 59th unit of the good is produced and consumed, social wellbeing
increases by
A. $36.00.
B. $33.60.
C. $31.40.
D. $28.00. B
Refer to Figure. The social optimum can be reached if
A. a tax of $23 is applied to each unit of the good.
