††††††††††††††††††††††††††††††††† ECON 2510 Practice for Exam 3 with Elaine Peterson

Use separate sheets of paper as needed to answer.Please be sure to put your name on your answer sheets and the part of the exam you are answering and the number of the question you are answering.

 

Part I (30 points):Please explain the following briefly:

1. What determines the demand for a resource?

2.What law governs the collective bargaining process and what are some of its provisions?

3. a) If you borrow $20,000 and are charged $2,000 in interest to be paid at the end of the year when you will also repay the $20,000 whatís the effective interest rate?

b) If you borrow $20,000 and are charged $2,000 in interest to be paid at the end of the year, but you have to pay the $20,000 back in 12 equal installments over the course of the year, whatís the effective interest rate?

4. What are the major principles to consider when designing a tax system?

5. Whatís the difference between a horizontal merger and a vertical merger?

6. What is an externality?

 

Part II (10 points):

Based on the following three individual demand schedules for a particular good, and assuming these three people are the only ones in the society, determine:

(a)    the market demand schedule on the assumption that the good is a private good (fill in the table),

(b)   the collective demand schedule on the assumption that the good is a public good (fill in the table).

(c)    Explain, what is the difference between a private good and a public good?  

 

Individual 1

 

Individual 2

 

Individual 3

Price

Qd

 

Price

Qd

 

Price

Qd

$8

0

 

$8

1

 

$8

0

$7

0

 

$7

2

 

$7

0

$6

0

 

$6

3

 

$6

1

$5

1

 

$5

4

 

$5

2

$4

2

 

$4

5

 

$4

3

$3

3

 

$3

6

 

$3

4

$2

4

 

$2

7

 

$2

5

$1

5

 

$1

8

 

$1

6

Private Good

 

Public Good

Price

Qd

 

Price

Qd

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part III (30 points) :Choose the best answer.

1. All of the following were basically pro-union except the:

††††††††††† A) Taft-Hartley Act††††††††††††††††††††††††††††† ††††††††††† B) Wagner Act†††††††††††† C) Norris-La Guardia Act

††††††††††† D) National Labor Relations Board†††††††††††††††††† E) Samuel Gompers

 

2. U.S. Census Bureau estimates that the net inflow of legal immigrants is now about:

††††††††††† A) 755,000 annually.†† †††††††††††† B) 100,000 annually.†† †††††††††††† C) 350,000 annually.††

††††††††††† D) 925,000 annually.††††††††††††††††††††††††††† E) 2 million annually.

 

3. A scarce resource which is in fixed supply earns payments which economists call:

A) Supranormal profits†††††††††††††††††††††††† B) Profit ††††††††††††††††††††††††††††††††† C) Interest

D) Depreciation †††††††††††††††††††††††††††††††††††††††††††††† E) Rent

 


4. In the absence of clearly defined property rights or liability rules:

††††††††††† A) Public goods would not exist.†††††††††††††††††††††† †††††††††††

B) Environmental problems will be less severe.

††††††††††† C) The Coase Theorem would assist in solving the externality problem.

††††††††††† D) Public bodies of water and air would bear the brunt of environmental pollution.

††††††††††† E) Private lawsuits would be used to discourage pollution

 

5. An inefficient "no" vote in public choice theory means:

A) The costs of elections exceed the benefits to be derived

B) That a majority of voters could vote no even when the total benefits exceed the total costs

C) That less than a majority of total voters turn out for the election

D) That voters have made a mistake

E) That a majority of voters could vote no even when the total costs exceed the total benefits

 

6. The -?- Act prohibits firms from acquiring the stock of another firm when such acquisition tends to lessencompetition, while the -?- Act prohibits firms from acquiring assets if the effect of such acquisition tends to lessen competition.

††††††††††† A) Sherman, Celler-Kefauver B) Sherman, Clayton †††††††††††††††††††††††††† C) Clayton, Celler-Kefauver ††††††††††††††† D) Clayton, Wheeler-Lea †††††††††††† E) Wagner, Taft-Hartley

 

Part IV (30 points) :Choose 2 of the following 4 questions and explain fully, feel free to use examples & graphs.

1. A) What is a monopsony?

††† B) Draw the graphical model for a monopsony.

††† C) What are some ways to reduce the inefficiency (DWL) associated with a monopsony?

2. What are the major potential reasons for government intervention in a market economy?

3. A) Describe unionismís greatest periods of growth in the U.S..

††† B) Why might workers want a union?

††† C) Why might workers not want a union?

4. A) Use a diagram and clearly label the axes and curves to depict the deadweight loss to society from production which causes pollution.

††† B) Explain a policy which could reduce the pollution.