ECN 101 Economics of Social Issues – FINAL EXAM

Multiple choice part: each question is worth 1 point and has just one correct answer.

1) Gender wage gap refers to:

a) Difference in wages among men and women in general

b) Difference in wages among older men and younger women
c) Difference in wages among male and female teenagers
d) None of the above

2) Walter Williams believes that by watching employers’ actions we can learn very little about their
prejudices against minorities:

a) True
b) False

3) This is so (true or false?) because:

a) Market competition for workers increases the costs of discrimination

b) Some employers are racists
c) Many employers prefer prejudices to profit
d) Workers are helpless against discrimination

4) What is the best way to characterize ‘affirmative action’ programs:

a) Treating every individual equally

b) Punishing people for their beliefs
c) Reverse discrimination
d) Affirmation of discrimination against blacks

5) Price controls in health care lead to increased waitlines:

a) True
b) False

6) Third party payments in health care include:

a) Medicare
b) Medicaid
c) Private insurance
d) All of the above

7) The tendency of people to react to government regulations of risky behavior by increasing risky
behavior in some related area is known as:

a) Stigler effect
b) Peltzman effect
c) Sowell effect
d) Trump effect
8) Which of the following best describes Social Security:

a) Ponzi scheme
b) Income tax
c) Private insurance
d) Financial market regulation

9) The goal of politicians in public choice theory is to:

a) Maximize private profit

b) Work in public interest
c) Impose dictatorship
d) Get reelected

10) Bundled purchase refers to:

a) Voters having to choose many policies in the same time, some of which they may not like
b) Subsidies for public housing
c) Food subsidies

11) Rational ignorance refers to:

a) Lack of information among market participants

b) Lack of motivation for voters to learn about politicians’ programs
c) Ignorance of the public about economics
d) Ignorance of politicians about preferences of the voters

12) Trading votes among legislators to secure the enactment of their respective dubious projects is
known as:

a) Rent-seeking
b) Money for nothing
c) Bootleggers and Baptists
d) Logrolling

13) Earning income not on the market but by lobbying for special privileges is called:

a) Logrolling
b) Rent-seeking
c) Profit-maximization
d) Asset-stripping

14) The goal of bureaucrats is to maximize their budgets:

a) True
b) False

15) It is difficult to eliminate bureaucratic inefficiencies:

a) There is no profit and loss test

b) Twisted incentives for bureaucrats not to solve problems
 c) Expansion of government
d) All of the above

16) Increase in life expectancy and lower birth rate lead to:

a) Better financial situation for Social Security

b) No major effects on Social Security
c) Increased unfunded liabilities for Social Security
d) More willingness of politicians to reform Social Security

17) Economist Thomas Malthus believed that economic growth is faster than the population growth:

a) True
b) False

18) Before the 19th century economic growth was:

a) Practically absent in the long run

b) Fluctuating up and down with fluctuations in population
c) Not connected significantly to technological innovation
d) All of the above

19) Foreign aid is:

a) Private investment in another country

b) Financial help by wealthy governments to poor governments
c) Private charity donations
d) Private transfers of income across national borders

20) Dambisa Moyo argues that foreign aid particularly undermines the economic development of:

a) Western world
b) Asia
c) Africa
d) South America

21) The reasons for this are:

a) Decreased accountability of poor country’s government

b) Corruption of elites
c) Weakening of the incentives for economic reforms
d) All of the above

22) Which of these economic systems emerged historically first:

a) Industrial capitalism
b) Agriculture
c) Hunter-gatherer economy
d) Post-Industrial economy

23) The public choice theory refers to:

 a) Use of the methods of economic science to analyze politics
b) Use of political theory to understand economic laws
c) Study of public opinion
d) Study of the development of constitutional law

24) Divergence in the levels of economic development among countries is caused by different levels of
protection of private property rights:

a) True
b) False

25) The main factor determining the wage rates is:

a) Racial discrimination
b) Taxes on wealthy people
c) Marginal productivity of labor
d) Prices of raw materials

26) Navigable waterways influence economic growth by:

a) Providing more abundant fish catch

b) Connecting countries to international trade
c) Providing opportunities for tourism
d) Exposing people to harmful foreign cultural influences

27) Social corporate responsibility means:

a) Firms should maximize profit

b) Firms should be as efficient as possible
c) Firms should work to maximize government revenue
d) Firms should achieve other goals, in addition to maximizing profit

The main factor leading the world out of the “Malthusian trap” is:

a) Abundant natural resources

b) Technological innovation
c) Increase in population
d) Decrease in population

Minimum wages increase the cost of discrimination in the labor market:

a) True
b) False

The concept that safety should be absolute goal of economic regulation, irrespective of economic costs
is known as:

a) Precautionary principle
b) Peltzman effect
c) Principle of comparative advantage
d) Principle of externality
Essay question (worth 15 points):

“Open borders are good for economic development?”. Comment on this thesis by using ch. 6, as well as
videos by Friedman and Powell (module for week 10) as a basis for your discussion. The length of your
reflections should be about 1 – 1.5 pages.

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