Question 1

Economists' cost/benefit approach to public policy requires them to assign a monetary value to all gains and losses of everything,including life.This is controversial and difficult,and may introduce biases.Explain why.

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Question 2

Why is it unlikely that government will be able to correct a failure of a market outcome?

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Question 3

"People are at war with themselves. Part of them says that they want to quit smoking, but another part says they need a cigarette right now. Or part of them says they want to be healthy, and another part says they need to satisfy their cravings for fatty food and sweets." These statements are suggesting that:

Accepted Answer

A) people have difficulties with self-control. 
B) fairness should be considered in evaluating outcomes. 
C) sometimes inalienable rights are more important than people's desires. 
D) needs should be taken seriously, but wants may be frivolous.

Question 4

"I recognize that the market is effective at getting resources to their most valued uses, but I also recognize that the market can produce results that are grossly unfair." This speaker is implying:

Accepted Answer

A) both market failure and failure of market outcome. 
B) market failure but not failure of market outcome. 
C) failure of market outcome but not market failure. 
D) neither market failure nor failure of market outcome.

Question 5

Why do we say that competitive markets are efficient?

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Question 6

Courts often estimate the value of human life on the basis of a person's earnings over that person's remaining life span.

Accepted Answer

A) True 
 B)False

Question 7

Market equilibrium maximizes the sum of:

Accepted Answer

A) total cost and total benefit. 
B) consumer surplus and producer surplus. 
C) marginal cost and marginal benefit. 
D) excess demand and excess supply.

Question 8

The group of economists that has stressed the idea of government failure is:

Accepted Answer

A) mainstream economists. 
B) Pre-Marxian economists. 
C) public choice economists. 
D) neo-Keynesian economists.

Question 9

Which of the following statements is true?

Accepted Answer

A) Liberal and conservative economists differ less often than laypeople think they do. 
B) Conservative economists focus on incentives, and liberal economists do not. 
C) Liberal economists focus on individual choice, and conservative economists do not. 
D) Most economists discredit individuals' abilities to choose reasonably.

Question 10

A liberal economist would never recommend that policy makers cut union wages.

Accepted Answer

A) True 
 B)False

Question 11

According to work by Amartya Sen, the best way from a society's point of view to deal with inalienable rights is to:

Accepted Answer

A) tax their sale to raise revenue since demand for them is inelastic. 
B) sell them when the marginal benefit exceeds the marginal cost. 
C) purchase them when the marginal benefit exceeds the marginal cost. 
D) disallow any markets for their exchange.

Question 12

If government's goal is to raise tax revenue and limit efficiency loss, taxation is most effective when:

Accepted Answer

A) demand or supply is inelastic. 
B) demand or supply is elastic. 
C) demand is inelastic and supply is elastic. 
D) supply is inelastic and demand is elastic.

Question 13

When Marxist economists look at labor markets, they:

Accepted Answer

A) capture the same aspects of reality that are captured by other economists. 
B) focus on the tensions among social classes and generally see exploitation of workers by capitalists. 
C) generally see supply and demand forces leading to equilibrium. 
D) see individuals using government to protect their monopolies.

Question 14

Most economists believe that:

Accepted Answer

A) government cannot correct failures of market outcome. 
B) a government policy designed to correct the failure of a market outcome is always more desirable than living with the failure. 
C) a policy decision must weigh the costs of market failure against the costs of government failure. 
D) it is always better to change the price structure by subsidizing goods than to openly give money to individuals to achieve distributional goals.

Question 15

Mainstream economists focus on:

Accepted Answer

A) how the invisible hand achieves equilibrium through the market. 
B) the tensions among social classes. 
C) political restrictions that provide rents to various groups. 
D) cultural and historical aspects of the market.

Question 16

Economists are trained to be as:

Accepted Answer

A) subjective as they can be. 
B) objective as they can be. 
C) deconstructionist as they can be. 
D) opinionated as they can be.

Question 17

Assume that running in a marathon increases a person's risk of dying from almost negligible to about 1 in 50,000. If people know this risk and still choose to run marathons, economists would most likely conclude that people:

Accepted Answer

A) are irrational. 
B) place no value on their lives. 
C) place a finite value on their lives. 
D) have self-control problems.

Question 18

Public choice economists believe that:

Accepted Answer

A) incentives encourage government to achieve its goal in the least-cost manner. 
B) incentives encourage government to provide a policy that its voting constituency likes. 
C) government is not subject to the laws of supply and demand. 
D) government does not weigh the costs and benefits of various programs.

Question 19

Despite their different political views,liberal and conservative economists agree on many policy prescriptions.Explain why.

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Question 20

How does the approach used by most economists to analyze regulations differ from that typically used by politicians? Explain.

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Exam 23: Microeconomic Policy, Economic Reasoning, and Beyond