PUP3002 Exam 2 Questions with
Complete Answers
_____ involves taking from the people who have more income an giving to the
people who do not have enough income.
a.) redistribution
b.) monetary policy
c.) income inequality - ANSWER-a.) Redistribution
During a recession, the Keynesian solution is for government spending to
a.) remain the same
b.) increase
c.) decrease - ANSWER-c.) increase.
Most people receive _____ in social security benefits compared to the contributions
that they put in.
a.) more
b.) less - ANSWER-a.) more
During a recession, the Classical solution is for government spending to
a.) remain the same
b.) decrease
c.) increase - ANSWER-b.) decrease
Thousands of experimental studies have put to test the expectations of the
Ultimatum game and reveal that contributions are _____ the model predicts.
a.) less than
b.) more than
c.) exactly what - ANSWER-b.) more than
When herbicides and fertilizers from farms wash off and pollute streams, the
agriculture sector is causing what type of market failure?
a.) positive externality
b.) negative externality
c.) moral hazard - ANSWER-b.) Negative externality
An _____ is an action that a principal takes prior to an agent's action to incentivize a
desired behavior.
, a.) ex-ante tactic
b.) adverse selection
c.) ex-post control - ANSWER-a.) ex-ante tactic
The negative Pigouvian tax is a _____
a.) command and control regulation.
b.) consumption tax.
c.) subsidy. - ANSWER-c.) subsidy.
Pigouvian Tax - ANSWER-a tax imposed on an activity that creates a negative
externality
negative externality - ANSWER-the harm, cost, or inconvenience suffered by a third
party because of actions by others
What is an outright ban or limitation on the amount of a given externality that may be
produced? - ANSWER-output standard
What refers to the level of support that a citizen assigns to a specific policy? -
ANSWER-Direction
What refers to how strongly a citizen feels about a given issue? - ANSWER-Intensity
What refers to the relative importance of a given issue relative to other issues? -
ANSWER-Salience
What refers to the level of information that a citizen possesses on a specific issue? -
ANSWER-Knowledge
What is it called when a principal chooses an agent with different preferences? -
ANSWER-adverse selection
While a citizen may share preferences with a candidate on the environment,
abortion, and health care they may hold opposing positions on foreign policy,
immigration, and taxation. What is this an example of? - ANSWER-cross-cutting
cleavages
cross-cutting cleavages - ANSWER-A division that includes people with differences,
strengthening society
Which of the following best illustrates moral hazard?
a.) a taxi driver takes a longer route in order to receive a higher fare from a tourist.
b.) a family does not install a fire alarm because they have fire insurance
c.) the government prohibits prostitution to prevent the undermining of family
stability. - ANSWER-b.) a family does not install a smoke alarm because they have
fire insurance.
Complete Answers
_____ involves taking from the people who have more income an giving to the
people who do not have enough income.
a.) redistribution
b.) monetary policy
c.) income inequality - ANSWER-a.) Redistribution
During a recession, the Keynesian solution is for government spending to
a.) remain the same
b.) increase
c.) decrease - ANSWER-c.) increase.
Most people receive _____ in social security benefits compared to the contributions
that they put in.
a.) more
b.) less - ANSWER-a.) more
During a recession, the Classical solution is for government spending to
a.) remain the same
b.) decrease
c.) increase - ANSWER-b.) decrease
Thousands of experimental studies have put to test the expectations of the
Ultimatum game and reveal that contributions are _____ the model predicts.
a.) less than
b.) more than
c.) exactly what - ANSWER-b.) more than
When herbicides and fertilizers from farms wash off and pollute streams, the
agriculture sector is causing what type of market failure?
a.) positive externality
b.) negative externality
c.) moral hazard - ANSWER-b.) Negative externality
An _____ is an action that a principal takes prior to an agent's action to incentivize a
desired behavior.
, a.) ex-ante tactic
b.) adverse selection
c.) ex-post control - ANSWER-a.) ex-ante tactic
The negative Pigouvian tax is a _____
a.) command and control regulation.
b.) consumption tax.
c.) subsidy. - ANSWER-c.) subsidy.
Pigouvian Tax - ANSWER-a tax imposed on an activity that creates a negative
externality
negative externality - ANSWER-the harm, cost, or inconvenience suffered by a third
party because of actions by others
What is an outright ban or limitation on the amount of a given externality that may be
produced? - ANSWER-output standard
What refers to the level of support that a citizen assigns to a specific policy? -
ANSWER-Direction
What refers to how strongly a citizen feels about a given issue? - ANSWER-Intensity
What refers to the relative importance of a given issue relative to other issues? -
ANSWER-Salience
What refers to the level of information that a citizen possesses on a specific issue? -
ANSWER-Knowledge
What is it called when a principal chooses an agent with different preferences? -
ANSWER-adverse selection
While a citizen may share preferences with a candidate on the environment,
abortion, and health care they may hold opposing positions on foreign policy,
immigration, and taxation. What is this an example of? - ANSWER-cross-cutting
cleavages
cross-cutting cleavages - ANSWER-A division that includes people with differences,
strengthening society
Which of the following best illustrates moral hazard?
a.) a taxi driver takes a longer route in order to receive a higher fare from a tourist.
b.) a family does not install a fire alarm because they have fire insurance
c.) the government prohibits prostitution to prevent the undermining of family
stability. - ANSWER-b.) a family does not install a smoke alarm because they have
fire insurance.
