Exam 1: Introduction

Either Worker A or Worker B will produce $20,000 of output for Employer X (who only needs one worker). Worker A could produce $12,000 worth of goods elsewhere (this is Worker A's best alternative); Worker B could produce $15,000 worth of goods elsewhere (this is Worker B's best alternative). Which of the following (if they occur) is not Pareto Efficient in the sense that gainers cannot compensate losers for their losses?

Economic rationality

Which of the following policies is based upon the type of Pareto efficiency where the gainers gain more than losers lose?

Labor markets differ from most other markets because

Which of the following could NOT be a public good?

Pareto efficiency implies that

A buyer values a good at $60 while the good costs a seller $50 to make and sell. The good is sold for a price of $55. Making the good results in pollution that harms people not directly involved in the transaction. When will this transaction result in a market failure?

If all parties gain from a transaction,

A regression shows how the ________ is affected by the ________.

Omitted variable bias exists if the omitted variable is

Improvements in equity

Economists generally assume that

Redistributional transactions

Nonpecuniary factors do NOT include

A regression of W = a + bX where W is wages and X is hours worked per week yielded a t-statistic of 0.75 for b. Statistically speaking, this result suggests that

An economist creates an economic model describing how wages will respond when the government imposes higher taxes on workers. According to positive economics, this model is a good model if the model