2. Announcements
• Practice final questions now posted on website.
• Today multiple choice review, next time short
answer.
• Exam is Wed June 12, 3pm-6pm, in CENTR 119
• Jake will hold final review Mon June 10 6:30-8pm
in CENTR 105.
3. Extra Office Hours
• Instead of this Friday, I’ll move my OH to
Monday 1:30-4:30 to give you more time to
gather questions.
• Jake will have office hours Tues 4-5 and Wed
1-2.
• Both of us in SEQ 236.
4. 1. What is the role of doing well in college as a
signal to future employers?
A. It shows that your marginal product is higher.
B. It shows that you are willing to work hard.
C. It shows that you do not slack.
D. It is hard to do well in college if you do not work
hard, but easier to do well if you do.
E. It is not a valid signal.
5. 1. What is the role of doing well in college as a
signal to future employers?
A. It shows that your marginal product is higher.
B. It shows that you are willing to work hard.
C. It shows that you do not slack.
D. It is hard to do well in college if you do not work
hard, but easier to do well if you do.
E. It is not a valid signal.
6. 2. If a fish seller were to offer a “money-back
plus 10%” guarantee, this would be an example
of
A. risk neutrality
B. the lemons problem
C. the costly-to fake principle
D. asymmetric information
E. the expected value of a gamble
7. 2. If a fish seller were to offer a “money-back
plus 10%” guarantee, this would be an example
of
A. risk neutrality
B. the lemons problem
C. the costly-to fake principle
D. asymmetric information
E. the expected value of a gamble
8. 3. ________ is the notion that insurance tends
to be purchased disproportionately by those
who are most costly for companies to insure.
A. moral hazard
B. risk neutrality
C. disappearing political discourse
D. political courage
E. adverse selection
9. 3. ________ is the notion that insurance tends
to be purchased disproportionately by those
who are most costly for companies to insure.
A. moral hazard
B. risk neutrality
C. disappearing political discourse
D. political courage
E. adverse selection
10. 4. Suppose that you are offered a low-interest
rate credit card because you live in a high-
income neighborhood. This is an example of
A. adverse selection
B. statistical discrimination
C. conspicuous consumption
D. the costly-to-fake principle
E. the equilibrium principle
11. 4. Suppose that you are offered a low-interest
rate credit card because you live in a high-
income neighborhood. This is an example of
A. adverse selection
B. statistical discrimination
C. conspicuous consumption
D. the costly-to-fake principle
E. the equilibrium principle
12. 5. A mining company hires two women with exactly
the same levels of human capital. One woman is
assigned to work in the mine and the other in the
office. If the miner receives a higher wage, this is an
example of
A. statistical discrimination
B. winner-take-all markets
C. differing value marginal products
D. compensating wage differentials
E. sexism
13. 5. A mining company hires two women with exactly
the same levels of human capital. One woman is
assigned to work in the mine and the other in the
office. If the miner receives a higher wage, this is an
example of
A. statistical discrimination
B. winner-take-all markets
C. differing value marginal products
D. compensating wage differentials
E. sexism
14. 6. Which of the following best describes
changes in the US income distribution between
1945 and 1980?
A. Income in all groups grew at roughly the same rate.
B. Income in the middle quintiles grew at the fastest
rate.
C. Income in the bottom quintiles grew at the fastest
rate.
D. Income among the top 5% of all recipients grew at
the fastest rate.
E. Income in the bottom quintiles fell in absolute
terms.
15. 6. Which of the following best describes
changes in the US income distribution between
1945 and 1980?
A. Income in all groups grew at roughly the same rate.
B. Income in the middle quintiles grew at the fastest
rate.
C. Income in the bottom quintiles grew at the fastest
rate.
D. Income among the top 5% of all recipients grew at
the fastest rate.
E. Income in the bottom quintiles fell in absolute
terms.
16. 7. The Personal Responsibility Act of 1996
A. removed the fiver-year limit on receiving welfare payments
B. shifted responsibility for welfare programs from state
governments to the federal government
C. eliminated all welfare payments
D. reduced incentives to work for pay in order to encourage
women to stay home with their children
E. shifted responsibility for welfare programs from the federal
government to state governments.
17. 7. The Personal Responsibility Act of 1996
A. removed the fiver-year limit on receiving welfare payments
B. shifted responsibility for welfare programs from state
governments to the federal government
C. eliminated all welfare payments
D. reduced incentives to work for pay in order to encourage
women to stay home with their children
E. shifted responsibility for welfare programs from the federal
government to state governments.
18. 7. Why is an EITC typically more efficient than a
minimum wage?
A. Both producers and consumers receive
equilibrium surplus
B. The outcome is the same as in perfect
competition
C. There is no unemployment
D. A transfer results in no loss in surplus
19. 7. Why is an EITC typically more efficient than a
minimum wage?
A. Both producers and consumers receive
equilibrium surplus
B. The outcome is the same as in perfect
competition
C. There is no unemployment
D. A transfer results in no loss in surplus
20. 9. What is the smallest EITC which is preferable
to a minimum wage of m?
w
m
L
A.
B.
C.
D.
w*
L*
-
+
-
+
21. 9. What is the smallest EITC which is preferable
to a minimum wage of m?
w
m
L
A.
B.
C.
D.
w*
L*
-
+
-
+
22. 10. What is the largest EITC which is preferable
to a minimum wage of m?
w
m
L
A.
B.
C.
D.
w*
L*
-
+
-
+
23. 10. What is the largest EITC which is preferable
to a minimum wage of m?
w
m
L
A.
B.
C.
D.
w*
L*
-
+
-
+
24. 11. What is DWL in this market with full health
insurance coverage?
P
Q
A.
B.
C.
D.
Hospital Care
S
D
25. 11. What is DWL in this market with full health
insurance coverage?
P
Q
A.
B.
C.
D.
Hospital Care
S
D
26. 12. When will a firm install safety devices for its
workers, all else equal?
A. When the marginal benefit to the workers of doing so is
very high.
B. When the marginal cost to the firm of doing so is less
than the wage rate.
C. When the marginal benefit to workers is more than the
marginal cost to the firm.
D. When the marginal benefit to the firm is more than the
marginal cost to the workers.
27. 12. When will a firm install safety devices for its
workers, all else equal?
A. When the marginal benefit to the workers of doing so is
very high.
B. When the marginal cost to the firm of doing so is less
than the wage rate.
C. When the marginal benefit to workers is more than the
marginal cost to the firm.
D. When the marginal benefit to the firm is more than the
marginal cost to the workers.
28. 13. What is a good example of a Pigouvian Tax?
A. A tax to restore efficiency in health markets.
B. A tax on firms that do not provide safety to
their workers.
C. A tax on firms that create a negative
externality.
29. 13. What is a good example of a Pigouvian Tax?
A. A tax to restore efficiency in health markets.
B. A tax on firms that do not provide safety to
their workers.
C. A tax on firms that create a negative
externality.
30. 14. Which is a collective good?
Nonexcludable
Excludable
Nonrival Rival
A B
C D
31. 14. Which is a collective good?
Nonexcludable
Excludable
Nonrival Rival
A B
C D
32. 15. Which is a public good?
Nonexcludable
Excludable
Nonrival Rival
A B
C D
33. 15. Which is a public good?
Nonexcludable
Excludable
Nonrival Rival
A B
C D
34. 16. Suppose the government decides to fund a public good
by issuing bonds. “Crowding out,” or firm disincentive to
invests, results by the following mechanism.
A. Money supply increases, interest rates rise
B. Money supply decreases, interest rates rise
C. Money supply increases, interest rates fall
D. Money supply decreases, interest rates fall
35. 16. Suppose the government decides to fund a public good
by issuing bonds. “Crowding out,” or firm disincentive to
invests, results by the following mechanism.
A. Money supply increases, interest rates rise
B. Money supply decreases, interest rates rise
C. Money supply increases, interest rates fall
D. Money supply decreases, interest rates fall
