Ecn201 Exam 2 Fall 2015 V1

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ECN201 Exam 2
Fall 2015 V1

1. So you want to be an entrepreneur and start your own company. It is not a bad idea in this "flattening" world, but you need to know how to do it. If you do want to eventually take your company public, you will probably need to raise some initial funds to finance the start-up operations. At this stage of the process who would you be needing to talk to in order to raise those funds?

  1. commercial banks

  2. savings and loans

  3. venture capitalists

  4. head of the New York Stock Exchange

2. Which is not true?

  1. China is “missing” females

  2. Russia is “missing” males

  3. Afghanistan is “missing” the young”

  4. Japan is “missing” foreigners

3. The relationship between the tax rate (taxes/Income) and the level of income is an important feature of any tax and gives us some evidence of how it redistributes income. Which line would best represent a tax that helps redistribute income to those at the lower end of the income distribution?

  1. The flat line

  2. The downward sloping line

  3. The upward sloping line

4.  Smoking is not an easy habit to break, at least that is what I read and see. So how are we going to reduce it? Which of the following would be an example of the use of moral incentives in reducing smoking?

  1. raising the "sin" tax on butts

  2. advertising the negative implications of smoking on others' health

  3. imposition of bans on smoking in public buildings

  4. advertising the link between smoking and lung cancer

5.  What was the surprise that was at the center of the “Why vote?” article?

  1. Why the vote of young people is so low

  2. Why internet voting did not increase voter participation rates

  3. Why the vote of old people is so high

  4. Why rural people are less likely to vote than urban people

6. Based on the economic model of choice, which of the following would help explain the change in the birth rate in this graph in the 1950s?

  1. widespread adoption of birth control

  2. reductions in discrimination against women in the labor force

  3. sustained growth in male earnings

  4. tough economic times in the Great Depression

7. Which of these is one of the dimensions to the international population bomb?

  1. East v West

  2. Foreign v Domestic

  3. Old v Young

  4. Religious v non religious

8. We discussed how a change in our draft policy could explain the very different levels of anti-war demonstrations during the Vietnam & Iraq Wars. This is an example of the power of ____ incentives.

  1. Moral

  2. Social

  3. Economic

  4. Political

9. There are some parallels between individual finances and the finances of government. If you heard your parents complain, “I can’t believe John is borrowing $15,000,” which measure of the government’s finances are they commenting on?

  1. Discretionary spending

  2. Budget deficit

  3. Budget deficit/GDP

  4. National debt

10. Here is a graph of the demographic transition we looked at in class. Based on this graph, in which time periods has the population growth transitioned from minimal growth to rising growth rates?

  1. I

  2. II

  3. III

  4. IV

11. “If taxes are to be raised, then it should be sales taxes because everyone pays the same rate?” Is thesales tax a proportional tax so the burden will fall equally on everyone?

  1. No

  2. Yes

12. Which of the following statements is true?

  1. The progressivity of all federal taxes in the US has increased in the past decade

  2. overall taxes would be less regressive if some of the tax burden was shifted from the sales tax to the income tax

  3. property taxes would be more regressive if the first $200,000 of a property’s value was not taxed

  4. consumption taxes would be less regressive if annual consumption taxes were capped at a certain level

13. Which of the dimensions of the population bomb in the US suggest that it will be increasingly difficult to get political support for funding of education in future years?

  1. Rural v Urban

  2. East v West

  3. Christian v Muslim

  4. White v Nonwhite

14. If a dimension of our lives would not be subject to the “rules” of the rational choice model, many would say it would be our sexual behavior. Which of the following does suggest the rational model sheds light on some of our sexual behaviors?

  1. lower prices charged by prostitutes for unprotected sex

  2. lower rates of oral sex among the post-AIDs generation

  3. lower rates of homosexuality among men who had lost a family member to AIDS

  4. lower rates of teenage sexual diseases in states with no parental notification for abortion

15. Which of these headlines would you not expect based on existing demographic data?

  1. "Japan’s population growth rate inches past that of the US"

  2. "India is set to pass China as the world's most populous country"

  3. “Africa’s share of the world’s population is increasing”

  4. "The poor shall inhabit the earth - or at least they will account for nearly all of the world’s expected population growth"

16. It has been written that "the economic analysis of fertility differs little from the analysis of the market for any consumption good. For example, the demand for children has something to do with prices--if children become more costly, fewer will be demanded."  If you accept this rational decision-making model, then which of the following would lower the birth rate in poor countries?

  1. decrease the value of public pensions

  2. improve health care that reduces infant mortality

  3. increase discrimination against women in the labor market

  4. decrease in women's rights

Given your success as a consultant, let’s try another job. This time your job is to provide help to a local toy manufacturer by answering the following questions.

Times have been tough for Mistell, a local toy manufacturer, which is why it finds itself considering an offer from a potential new customer. has offered to buy 60,000 hula hoops at a fixed price of $3 per hoop that they intend to sell in Africa. What we know is this price is $2 below the price the hoops are currently selling for in the US. We also know Mistell is currently producing 100,000 hoops at a cost of $500,000 and the cost accountants have informed management that if they ramp up production to fill the new order, then production costs would rise by $6,000 for every increase in production of 1000 hoops. Your job is to evaluate Mistell's situation.

17. What is the MR of the deal?

  1. $8

  2. $6

  3. $4

  4. $3

  5. $2

18. Should the firm take the ‘out-of-state deal’ if it wanted to maximize its short-run profit?

  1. no

  2. yes

  3. not enough information

  4. only if the price is above 13

19. Assume you were hired as a consultant to provide advice to a company that is reviewing its strategy for building a large solar energy “farm” to reduce energy costs. To date $45 million has been spent and there is the need for only $5 million more to finish the farm. Since the project was started the cost of oil has dropped substantially so the present value of expected savings in energy costs over the life of the farm are estimated at $7 million. Should we bring the farm to completion?

  1. Yes

  2. No

20. Which of these is true based on US demographic data? (Be careful with the difference between rates and levels)

  1. The fastest growing region in the US is the Midwest

  2. Asians are projected to have the biggest share of growth among racial and ethnic groups

  3. Births have reached all-time highs

  4. The immigration rate has reached an all-time high

21. This is a graph of which measure of the federal government's finances?

  1. Outlays

  2. Budget deficit

  3. Spending/GDP

  4. Federal debt

22. Which of the following would be an example of American exceptionalism with regard to demographics – something where the US is very different from the other rich countries?

  1. The US is on average older

  2. Immigration is an insignificant component of population growth

  3. The US has a higher life-expectancy

  4. The population of the US is growing

23. In the aftermath of hurricane Katrina we saw a dramatic increase in the price of oil that had many people beginning to talk about hybrid automobiles. The problem is that the hybrids are too expensive at the present time, but the optimists believe that once production levels are increased the average costs of the hybrids will come down substantially.  When these people talk about the idea that unit production costs will fall as output rises they are talking about ______

  1. marginal product

  2. economies of scale

  3. average product

  4. marginal cost

24. Given the data in this graph, we would say the excise tax is ____.

  1. Proportional

  2. Progressive

  3. Regressive

  4. Decelerating















































































Use this table to answer the next 2 questions?
25. What is Average Cost at an output level of 66,200?

  1. 11.6

  2. 10.3

  3. 9.5

  4. 10.1

26. What is the level of Fixed Costs?

  1. $120,000

  2. $150,000

  3. $170,000

  4. $200,000

27. Which of the following would be an example of the use of social incentives in designing public policies?

  1. reduce SUV sales by linking gas sales to Middle East terrorism vehicles

  2. charging parents who pick up their kids late from day care

  3. reduce prostitution by posting pictures of convicted "johns" on police web pages

  4. impose a gas guzzler tax where you pay a higher sales tax rate on your car if the gas mileage is low

28. Which of these statements about federal government receipts (revenue) is true?

  1. Taxes, as a share of GDP, have never been larger

  2. The tax rate on booze tends to be lower in the US than the other rich countries

  3. Corporate income taxes represent the single biggest source of revenue

  4. The tax burden (taxes/GDP) are higher in the US than in the other rich countries

Country A

Country B

29. Which of the following statements is correct based on the two population-pyramid diagrams above?

  1. Country A has a lower birth rate

  2. Country B is likely to be a developing (poor) country

  3. Country B is likely have an impending pension crisis

  4. In Country A life expectancies are longer

30. I am putting on a retirement party roast for a colleague cost, and here is what I know at the present time. It will cost $300 for the honorees gift, $100 for her dinner and drinks, $500 for the music, $1,000 to reserve the hall, and $55 for drinks and dinner for each quest. What will be the average costs if there are 150 quests?

  1. $160

  2. $84

  3. $67

  4. $45

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