For Greg:21) In the Flint Hills area of Kansas, proposals to build wind turbines to generate electricity have pitted environmentalist against environmentalist. Members of the Kansas Sierra Club support the turbines as a way to reduce fossil fuel usage, while local chapters of the Nature Conservancy say they will befoul the landscape. The Sierra Club argues that wind turbinesA. are a source of negative externalitiesB. reduce negative externalities elsewhere in the economyC. create a free-rider problemD. are a way of solving a free-rider problem22) When negative externalities are present, market failure often occurs becauseA. the marginal external cost resulting from the activity is not reflected in the market priceB. the marginal external cost resulting from the activity is reflected in the market priceC. the existence of imports from foreign countries takes jobs and income away from U.S. citizensD. consumers will consume the good at a level where their individual marginal benefits exceed the marginal costs borne by the firm producing the good23) A merger between a textile mill and a clothing manufacturing company would be considered aA. horizontal mergerB. vertical mergerC. conglomerate mergerD. diagonal merger24) A merger between a baby food company and a life insurance company would be considered aA. horizontal mergerB. vertical mergerC. conglomerate mergerD. diagonal merger25) From the point of view of consumer and producer surplus, what problem may be created when a country subsidizes the cost of energy to consumers to help alleviate the burden of higher energy costs?A. It hurts the poor and benefits the rich.B. It leads to less fuel being used than the amount that maximizes consumer surplus.C. It encourages the consumption of too much fuel at the expense of other goods.D. It has no effect; consumers gain a surplus, but taxpayers lose the same amount because they must finance the subsidy.26) Suppose people freely choose to spend 40 percent of their income on health care, but the government decides to tax 40 percent of a person's income to provide the same level of coverage as before. What can be said about deadweight loss in each case?A. Taxing income results in deadweight loss, while purchasing health care on one's own does not result in deadweight loss.B. Taxing income results in less deadweight loss, because government knows better what health care coverage is good for society.C. There is no difference because the goods are purchased in the market in either case.D. There is no difference because the total spending remains the same and the health care purchased remains the same.27) The U.S. textile industry is relatively small because the US imports most of its clothing. A clear result of the importation of clothing isA. there is less variety available than there would be without importsB. the quality of clothing is lower than it would be without importsC. the price of clothing is higher than it would be without importsD. the price of clothing is lower than it would be without imports28) Countries can expect to gain from international trade as long as theyA. keep production diversifiedB. specialize according to their comparative advantageC. produce only those goods for which they have a relatively high opportunity costD. use trade restrictions to reduce competition for domestic producers29) Which of the following is an example of the law of one price?A. Exchange rates tend to have equivalent values. For example, one ItalXXXXX XXXXXre equals one U.S. dollar.B. Because people have essentially the same basic needs wherever they live, they tend to buy the same bundle of goods.C. Because wages are so much lower in China, eventually all U.S. jobs will be outsourced to China, leaving the US to import all goods at one price.D. Because their countries have similar institutions, the price paid for a computer in Germany and the United States are about the same when converted into the same currency.30) The fact that U.S. managers' salaries are substantially greater than those of comparable managers in Japan may be related toA. an increase in the demand for CEOsB. an increase in the supply of CEOsC. the comparatively greater competitive markets in JapanD. the greater number of public goods provided in the United States
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