Exam 23: Microeconomic Policy, Economic Reasoning, and Beyond

Direct shipment of wine to individuals is illegal. Some wineries want the law revoked. They argue that the ability to ship directly to consumers helps small wineries and that shipping bans unfairly protect home-state wineries, raising prices to consumers. Others argue that the bans allow states to collect tax revenues and to keep wine from being sold to minors. What would most economists say about whether this ban should stay or be eliminated?

Failure of market outcomes can occur even when the market is functioning properly.

If resources are allocated efficiently in a market economy:

If a policy is Pareto optimal:

Many economists, both liberal and conservative, were critical of much of the early environmental legislation. An important reason for the economists' critique was that economists:

If the government imposes a sin tax on alcohol and the demand for alcohol is inelastic, the tax will cause a:

Two economists are debating whether to remove a tariff on luxury vehicles. They agree that consumers will benefit by $5 billion and that the harm done to domestic businesses and workers will be only $4 billion. One argues that these facts make it obvious that the tariff should be removed. The other disagrees. What would be a likely reason for the second economist to disagree?

Economists deduce the value people place on their own lives by looking at what people will pay to reduce the probability of death.

A government airline safety regulation reduces the probability of a fatal airline crash by 0.005. If the costs associated with each airplane crash are equal to $600 million, the regulation has an expected marginal benefit of at least:

The group of economists who believe politicians are subject to the laws of demand and supply and focus on this in their analysis are known as:

The U.S. government does not allow toggle switches for power windows in automobiles. The National Highway Traffic Safety Administration found that the regulation will save about two children every three years and have negligible costs because the industry will have plenty of time to incorporate new switches into future vehicles. Evaluating this rule in terms of costs and benefits, an economist most likely would conclude that:

Describe two types of failures of market outcomes.

Using earnings potential in court cases to place a value on human life implies that a person who earns a high income is more valuable than a person who earns a low income.

Which of the following generalizations is derived from the economist's framework?

Pareto optimal policies will improve life for:

When public choice economists look at labor markets, they:

The long-run market solution to a wage that is so low that workers cannot survive is:

A key assumption of public choice economics is that government officials are:

One reason mainstream economists see the world differently than do noneconomists is that economists tend to stress the importance:

For government to correct for the failure of market outcome, it must do all of the following except: