ECON102 Review MCQs

Health
1. Which of the industrialized countries mentioned in the text has the highest life expectancy?
a. the United States.
b. Japan.
c. Canada.
d. Portugal.

2. What do physicians’ sovereignty and third-party payment have in common?

a. They both lead to greater efficiency in U.S. health care.
b. They both increase the supply of health care.
c. They both increase the demand for health care.
d. They both lead to an under allocation of resources to health care.

3. Which of the following cause an increased demand for healthcare?

a. defensive medicine
b. rapid technological change
c. cost shifting
d. all of the above

4. Defensive medicine:
a. increases the supply of health care.
b. is the same as preventive medicine.
c. increases the demand for health care.
d. occurs because patients are very defensive about their health.

5. Economists believe that privatized hospitals would:

a. would increase efficiency.
b. would reduce competition.
c. would seek to attract uninsured and low-income patients.
d. all of the above

6. Consumers of health care make good individual choices, but only if:
a. their health insurance provides good options.
b. they have access to good hospitals and clinics.
c. their health care providers accept Medicaid patients (if they are such a patient).
d. all of the above

7. Health maintenance organizations and preferred provider organizations both:

a. are forms of managed care.
b. are considered to increase efficiency.
c. are considered to have lower costs.
d. all of the above
Environment

1. Pollution causes:
a. Spillover costs.
b. Inefficient resource allocation.
c. An inequitable burden of costs.
d. All of the above

2. An example of a spillover benefit derives from:

a. childhood vaccinations.
b. education tuition provided by employers.
c. your education.
d. All of the above

3. Which of the following economic term represents a regulation that is more likely to
encourage research into new technologies and lower cost methods of meeting
environmental quality?
a. performance standard
b. design standard
c. technology standard
d. business standard

4. A tax on production that causes air pollution is called:

a. a pollution permit.
b. a specific standard.
c. an effluent fee.
d. an emissions fee.

5. Why is the overallocation of resources to a particular market a problem?

a. Society values other products produced by these scarce resources more than it
values the product produced in the market where the overallocation occurs.
b. Society values other products less than it values the product produced in the market where
the overallocation occurs.
c. Society should balance the overallocation of resources in some markets with
underallocation of resources in others.
d. It is not really a problem.

6. Technology forcing is defined as :

a. allowing firms to choose the type of technology to be used in pollution control.
b. requiring firms to use specific types of technology to be used in pollution control.
c. forcing firms to purchase the technology to be used in pollution control.
d. forcing firms to produce the technology to be used in pollution control.

7. Marketable pollution permits:

a. allow producers to buy and sell permits.
b. minimize the costs of pollution control.
c. utilize the marketplace.
d. all of the above
8. The creation of a market for pollution permits:
a. completely eliminates air and water pollution.
b. causes firms to seek out low-cost pollution-reducing technologies.
c. is only supported by economic liberals.
d. all of the above.

9. Economists and environmentalists differ in that:

a. environmentalists often want to eliminate all pollution, but economists may believe
that some pollution is acceptable if society values the production of the goods that
cause the pollution.
b. environmentalists care about the environment, but economists do not.
c. economists rarely support a cost/benefit approach.
d. all of the above.

10. Two reasons that the environmental movement developed in modern, industrialized
countries are that:
a. there was no pollution prior to the 1900s.
b. pollution control is a luxury good, and the type of pollutants we have in modern
times are more toxic than pollutants used to be.
c. increased population has stressed the environment, and people in the U.S. have greatly
decreased their consumption of goods as a result.
d. This was not discussed in the text.

11. If an emissions fee equal to the spillover cost of pollution is levied on the polluting firm:
a. it will eliminate the overallocation of resources to the product produced by the firm.
b. it will increase the price of the firm’s product.
c. it will decrease the firm’s output.
d. all of the above.

12. Based on data in the slides, which country causes the largest carbon dioxide emissions?
a. China
b. The United States
c. Russia
d. India

13. Based on data in the slides, which country uses the most petroleum?
a. China
b. the United States
c. Russia
d. India

14. The Organization of Petroleum Exporting countries (OPEC) in the past has been able to
keep petroleum prices high by:
a. increasing demand.
b. increasing supply.
c. decreasing demand.
d. decreasing supply.
 15. When performing cost-benefit analysis of environmental protection, we should include:
a. monetary costs such as business firms using less polluting but more expensive inputs.
b. monetary costs such as consumers buying high-efficiency but more expensive
appliances.
c. non-monetary costs such as consumers’ inconvenience associated with recycling.
d. All of the above

16. Which of the following have been relatively more successful in terms of pollution control?
a. global warming
b. ozone depletion
c. deforestation
d. climate change

17. (Appendix 3-2) Assuming that the production of paint results in chemical pollution of the
land and water and that Sp represents the private supply curve and Ss represents the social
supply curve, the socially optimal level of output of paint in the graph below is:

a. a.
b. b.
c. c.
d. 0.

Social Insurance
1. A major difference between social insurance and public assistance programs is that:
a. social insurance covers the entire eligible population, but public assistance covers
only the needy.
b. receiving social insurance benefits is widely regarded as shameful, but this is not so with
public assistance.
c. social insurance is a statutory right, but public assistance is a contractual right.
d. social insurance is financed by general tax revenues, and public assistance is financed by
earmarked payroll taxes.

2. When we say that the Social Security tax is regressive, we mean that:
a. the tax takes a larger percent of the income of high-income than low-income workers.
b. the tax takes the same percent of income from both high- and low-income workers.
c. the tax takes a larger percent of income from low-income than from high-income
workers.
d. none of the above.
3. The long-run problem of Social Security is that:
a. the system is going bankrupt.
b. the ratio of workers to recipients is declining.
c. the trust funds are invested in junk bonds and other risky investments.
d. there are too many young people relative to old people in today’s economy.

4. Most of the revenues for Social Security come from the:

a. general tax revenues of the federal government.
b. payroll taxes paid by workers and their employers.
c. income tax paid on Social Security benefits.
d. interest on the Social Security trust funds.

5. The idea that a taxpayer who pays more Social Security taxes should receive higher
retirement benefits is the:
a. principle of individual equity.
b. principle of social adequacy.
c. basis of capitalism.
d. basis of conservative philosophy.

6. When Social Security is described as a pay-as-you-go system, it means that Social Security:
a. cashes in government bonds each month to pay retirement benefits.
b. pays benefits out of the current taxes collected from people who are working.
c. has to borrow to pay current retirees their benefits.
d. none of the above.

Poverty
1. Public education is an example of:
a. an “investment in human capital.”
b. a “universal entitlement.”
c. a program that improves people’s productivity.
d. all of the above.

2. Businesses produce lower output levels and employment drops during an economic:
a. recession.
b. expansion.
c. recovery.
d. peak.
3. An investment in human capital can:
a. improve the productivity of a worker.
b. improve the income of a poor person.
c. reduce poverty rates.
d. All of the above.

4. Which of the following is a public assistance program?

a. Supplemental Nutrition Assistance Program (SNAP)
b. Medicaid
c. The earned income tax credit
d. All of the above

5. Which of the following has not been a factor contributing to poverty?

a. shift toward the manufacturing sector and away from the service sector. b.
recession.
 c. low labor productivity.
d. personal factors such as unreliable transportation.

6. The benefits of economic growth eventually reach everybody, according to:

a. the author of the text.
b. the economic studies in the text.
c. trickle-down philosophy.
d. the philosophy of all economists.

7. In graphing income distribution,

a. the diagonal line shows hypothetical perfect equality of income.
b. the Lorenz curve shows the actual income distribution.
c. a Lorenz curve closer to the diagonal line shows greater equality of income.
d. d. all of the above

8. The concept of ‘money income’ used in the poverty statistics:

a. is calculated before payment of taxes.
b. includes income transfers.
c. excludes in-kind transfers.
d. all of the above.

10. The composition of GDP refers to:

a. the distribution of income.
b. the distribution of GDP.
c. what GDP consists of.
d. how rapidly GDP increases.

11. Which of the following measurements gives the least accurate indication of the economic
well-being of people?
a. average life expectancy
b. GDP growth
c. distribution of income
d. infant mortality rate

12. The agricultural sector is important in many developing countries because:

a. it is where most of the poor live.
b. it often offers the greatest potential for development.
c. it often offers the greatest potential for employment.
d. all of the above.

13. Price ceilings on food products in developing countries contribute to:

a. shortages of food.
b. reduced incentives for food production.
c. reduced incomes of farmers.
d. all of the above.

14. Women in developing countries often:

a. have much lower literacy rates than men.
b. are primarily responsible for production of subsistence food crops.
c. lack access to extension services and credit opportunities.
d. all of the above.
15. Microenterprise credit for women:
a. involves large loans.
b. is used for small businesses.
c. is rarely repaid.
d. provides income that is used primarily for housing construction.

Unemployment and Inflation

1. Which of the following is a microeconomic topic?

a. inflation.
b. total GDP.
c. the overall economy.
d. an individual market.

2. The unemployment rate is calculated as:

a. the percent of the labor force that is unemployed.
b. the percent of the population that is unemployed.
c. all people without jobs, as a percentage of the labor force.
d. all people without jobs, as a percentage of the population.

3. The labor force participation rate is calculated as:

a. the percent of the population age 16 or older that is unemployed.
b. the percent of the population age 16 or older that is in the labor force.
c. the percent of the entire population that is unemployed.
d. the percent of the labor force age 16 or older that is employed.

4. The unemployment rate understates the true problem of unemployment because of:
a. the limited hours for some part-time workers.
b. the plight of discouraged workers.
c. the plight of people who have given up looking for a job.
d. all of the above.

5. A young woman experiences a short delay in finding a better job after she quits an unsatisfactory
job. This type of unemployment is:
a. frictional.
b. structural.
c. cyclical.
d. none of the above.

6. A middle-aged autoworker is laid off from his job after improved technology (robotics) reduces
the need for workers. This type of unemployment is:
a. frictional.
b. structural.
c. cyclical.
d. none of the above.

7. Which of the following would not be used to reduce structural unemployment?

a. retraining assistance.
b. relocation assistance.
c. policies to expand GDP.
d. policies to expand education.
8. Full employment means:
a. no cyclical unemployment.
b. no frictional unemployment.
c. no structural unemployment.
d. no unemployment at all.

9. Large-scale immigration of low-skill immigrants can result in:

a. a lower wage in low skill labor markets.
b. higher overall employment in low skill labor markets.
c. lower employment of native-born workers in low skill labor markets.
d. all of the above.

10. What is the effect of a minimum wage in a low-skill labor market?

a. a higher wage.
b. a higher quantity of labor supplied.
c. a lower quantity of labor demanded.
d. all of the above.

11. The consumer price index (CPI) is generally assumed by economists to:
a. overstate the inflation rate.
b. understate the inflation rate.
c. measure inflation extremely accurately.
d. none of the above.

12. Inflation may cause:

a. menu costs.
b. uncertainty and inefficiency.
c. redistribution of purchasing power.
d. all of the above.

13. Hyperinflation refers to:

a. extremely low inflation.
b. extremely high inflation.
c. inflation caused by hyperbole.
d. inflation caused by normal, everyday conditions in the economy.

14. Which type of inflation can result from wage rates that cause production cost increases?
a. profit-push inflation.
b. demand-pull inflation.
c. cost-push inflation.
d. none of the above.