BA 4309 – Regulation of
Business, Spring 2004 – Test 1. Peter Lewin.
Please read the
following carefully:
Multiple
Choice – 25 questions. Please use a 50 question scantron with a
pencil. Hand in only the scantron (you
may keep this question paper).
This is a closed book
exam. Cheating will result in a zero
(among other possible sanctions).
Among
the possibilities given in each question select the best
alternative.
Solution
and grade distribution at end.
- In order to determine the share of any simple
excise tax paid by the buyer and by the seller of the product being taxed,
one must know
a.
the size of the
tax
b.
the slope of the
demand and supply curves to the left of the market price
c.
the point at
which the tax is collected
d.
all of the above
e.
a and b of the
above
- A simple excise tax on cigarettes is likely to be
borne
- mostly by the consumers of cigarettes
- mostly by the producers of cigarettes
- equally by both
- by neither producers nor consumers
- A simple excise tax on luxury goods is likely to
be borne
- mostly by the consumers of luxury goods
- mostly by the producers of luxury goods
- equally by both
- by neither producers nor consumers
- An expenditure tax is usually collected from the
a.
buyer, because it
is the buyer who really pays the tax
b.
seller, because
it is the seller who really pays the tax
c.
seller, because
there are fewer sellers than buyers and it is cheaper to collect it that way
d.
none of the above
is relevant; it is collected from either
- The provision of a subsidy per unit of good
produced will result in
- more of that good being produced
- less of that good being produced
- a social loss
- a social gain
- a and c of the above
- According to Milton Friedman’s Capitalism and
Freedom which of the following is true?
a.
democracy is
necessary for (economic) freedom
b.
(economic)
freedom is necessary for democracy
c.
economic freedom
and democracy always occur together
d.
democracy never
leads to dictatorship
- Increasing the time taken by the FDA to decide
whether a drug is safe or not will result in which of the following?
a.
a decrease in
Type I errors
b.
an increase in Type
I errors
c.
an increase in
Type II errors
d.
a and b of the
above
e.
a and c of the
above
- In our current system of criminal justice, which
of the following is a Type II error?
- acquitting a guilty person
- convicting a guilty person
- acquitting an innocent person
- convicting an innocent person
- The current “war on drugs” can best be described
as a
- supply side policy
- demand side policy
- incomes policy
- all of the above
- The most obvious affect of this war on drugs to
date has been which of the following?
- a reduction of the street price
- an increase in the street price
- the elimination of drug use
- an increase in drug use
- Which of the following is a true statement?
- there is a shortage of water in the world
- the amount of water used is greater than it
would otherwise be in the absence of water subsidies
- because water is so special it is not affected
in the same way by supply and demand
- the demand for water is completely inelastic
- The amount of damage caused by the 9-11 terrorist
attacks
- was a large percentage of our GDP
- was a very small percentage of our GDP
- has never been estimated
- was equal to half the GDP
- The largest costs associated with the 9-11
attacks was
- the cost of the physical damage done
- the cost of the airplanes
- the cost of the human capital lost
- the cost of materials lost
- Cigarette smuggling between states exists because
- the population of different states differ in
their addiction to cigarettes
- the demand for cigarettes is inelastic
- different amounts of tax revenue are collected
from each state
- the tax on cigarettes differs across states
- Which of the following statements is false?
- in the absence of mandatory regulation no cars
would have had airbags installed
- the mandating of airbags resulted in unintended
consequences
- the installation of an airbag in a car improves
the chances of a passenger or a driver of surviving a crash
- the installation of an airbag adds to the cost
of the car
- Which of the following statements is true?
- the marginal costs of airline safety do not
increase as more is spent on safety
- the marginal cost of airline safety most
probably exceeds its marginal benefits at current expenditure levels
- in the absence of close regulation the airlines
would spend too little on safety
- the marginal benefits of airline safety do not fall
as more is spent on safety
- If I tell you that there is a shortage of
particular good which of the following can you tell me?
- the price is too high
- the price is too low
- regulation is needed
- a and c of the above
- If I tell you that there is a surplus of
particular good which of the following can you tell me?
- the price is too high
- the price is too low
- regulation is needed
- a and c of the above
- Which of the following can we most plausibly
claim will be a result of abolishing minimum wages?
- unemployment will increase
- more people will find low paying jobs
- poverty will increase
- b and c of the above
- Rent control if it is effective will benefit
- those most in need of housing
- the landlords
- real estate investors
- none of the above
- Which of the following is a defensible statement?
- If we are to conduct rational economic and
social policy we cannot avoid the evaluation of lives lost from
alternative policies
- Economic and social policy cannot use the evaluation
of lives in its assessments because each life is priceless
- For purposes of economic policy a person who
earns more is valued higher than a person who earns less
- a and c of the above
- Every regulator faces
- a knowledge problem
- an incentive problem
- a psychological problem
- a and b of the above
- One of the legitimate problems that a sensible
water-use policy faces is
- that water is very important
- water is transparent
- water can be cold or hot
- it is sometimes difficult to establish enforceable
property rights in water (because it flows from one place to another).
- Victimless crimes are distinguished by the fact
that
- the victims all die
- the victims don’t know they are victims
- the victims have no incentive to reveal the
crime
- they cost more
25.
an advantage of
using the market rather than a regulatory institution to regulate activity is
a.
the market never
results in anyone being cheated
b.
the market always
results in cheaper products
c.
knowledge is
dispersed throughout the economy and cannot be available all at once to
regulators
- all of the above
GRADE DISTRIBUTION:
If you score is greater than or equal to: your grade is
24
|
A+
|
22
|
A
|
21
|
A-
|
20
|
B+
|
18
|
B
|
17
|
B-
|
16
|
C+
|
14
|
C
|
ELSE
|
C-
|
Solution:
- e
- a
- b
- c
- e
- b
- e
- a
- a
- b
- b
- b
- c
- d
- a
- b
- b
- a
- b
- d
- d
- d
- d
- c
- c