2023 P6 Q3 Economics Test

Communism means no competition in the market, so no competition between stores and no private property. Cuba practiced it.

Fidel Castro in Cuba controlled the market for cigars. Every store was selling cigars at whatever price Fidel Castro said. This meant every shopkeeper selling cigars was paid the government wage for selling cigars and it did not matter how many each person sold.

Brain science is very important in economics because it explores how the brain makes decisions and offers insight into altruism, which can be used to inform economic analysis.

Every aspect of human behavior reacts to cost in some way. For example, there is nothing “free” about concert tickets if you have to stand in line for six hours while it is raining to get them. That takes your time, well-being, and physical ability to stand that long which are things you can’t buy back.

The value of some goods rises with the number of other people using them.

Price discrimination is selling the same product at different prices to different buyers to maximize profits and sales. Airline companies use this concept frequently.

If you ask the person next to you how much they paid for their flight, chances are they didn’t pay what you did, and maybe it isn't even close. This maximizes profits because some people may be willing to pay $1800 while others may be on a tight budget of $200.

They both ration goods. Capitalists do it with their prices and the communists did by making people wait in line.

Anti-globalization protesters often try to make the case that developing countries would be better off if we closed the sweatshops. Nike pays an average Vietnamese sweatshop worker $600 a year, which is double the amount of an average Vietnamese worker’s annual income, $300.

Most people make decisions using intuition or rules of thumb. This leads them to do things that diminish their utility in the long run.

When looking at economic decisions, you have to branch off from just the original economic theory and look at other social sciences and behavioral economics.

It was a battle between capitalism and communism to see which type of government was most beneficial. Communists in the 20th century controlled their economy by controlling citizens and eventually they destroyed both. The Communist government killed over 100 million people in the 20th century by repression or famine. Capitalism won.

Earned Income Tax Credit

A monetary motivation to do certain things.

Tourism

An incentive with unintended results that accidentally rewards the wrong behavior.

Green taxes tax things that hurt the environment. Sin taxes tax “sinful” things like alcohol and gambling.

When there is little to no incentive to get/keep the most talented people working in a given field. This causes them to move over to other fields that they’re proficient in for better incentives.

A benefit granted to the consumer that allows them to purchase shares in a company at a fixed price, regardless of those shares’ future value.

Regressive taxes fall more heavily on the poor, and progressive taxes fall more heavily on the rich.

Deadweight losses occur when something is lost and nothing is gained.

Individuals can make errors of judgment, and society should point you to the correct decision.

They will choose the one that requires nothing; inertia.

It redistributes wealth.

It funds many nonprofit research facilities, such as NASA.

A person or company that gets an advantage from paying members of society without contributing.

It is what happens when the costs of an individual's behavior are different from social costs.

Because the market encourages cutting corners in ways that lead to long-lasting consequences.

Smokers do not have to compensate people who are harem by second hand smoke.

Either be taxiing the problem or banning it.

Yes, in certain situations some form of compromise can be made which leaves both parties better off.

Deadweight Loss

To eliminate competition.

Aggregate quotas encourage fishermen to catch more fish faster, individual quotas allow a fisherman to catch his fish at any time in the season.

They lead to a lack of innovation or companies disregarding consumer needs; no competition.

True

Leads to less competition and less innovation.

It leads to more competition, more innovation, and more room for errors.

More investment.

Higher productivity and higher income.

Fiscal Drag

Adverse selection is when a group that is in a negotiation with another group has some information that the other group doesn’t have.

The Hope Scholarship program.

The idea of the program was that people could pay off their student loans based on their future wages so that people with lower-paying jobs could still pay off their student loans in good time. The thing is, the students know which job they’re about to go into much more than the administrators do, so they could determine for themselves whether this program would be more or less expensive than the regular student loans, which caused this program to fail.

Statistical discrimination is when an individual makes an inference that is defensible based on broad statistical patterns but is either likely to be wrong in the specific case at hand or has a discriminatory effect on some group.

A female might not be hired to work at a corporation because statistically, they are more likely to quit after maternity leave.

Information can become too much information when it starts to have harmful results. For example, a company that has all the information on which buyers are more or less likely to return products could discriminate against buyers who are going to return the products.

The patient wants as much care as possible, the doctor maximizes and minimizes lawsuits by delivering as much care as possible, and the insurance companies maximize profits by paying for as little care as possible.

Technology has introduced expensive options some of which work or don't work, and it is very costly for insurance companies or patients to prove the right course of treatment.

Through deductibles.

Skill and availability.

Pay and incentives.

The sum total of skills embodied within an individual.

Anytime an individual provides a new good or service or finds a better/cheaper way of providing an old one.

According to economists, it is associated with a 5-10% reduction in her child’s likelihood of dying in the first five years of life

The stock of education, training, skills, and human health.

The mistaken belief that there is a fixed amount of work to be done in the economy and every new job must come at the expense of a job lost elsewhere.

It is the efficiency with which we convert inputs into outputs.

Productivity growth.

False

It is the study of the economy as a whole.

Developing countries are poor because they have rapid population growth.