ECON 2100 Midterm: ECON 2100 Kennesaw State ECON2100 Summer2012 Exam4D Key
ECON 2100 (Summer 2012 – Sections 07 and 08)
Exam #4D – Answer Key
Multiple Choice Questions: (3 points each)
1. I am taking ______________ of the exam.
D. Version D
2. __________________ refers to monetary payments made by the government to certain
individuals in society, which directly alter the distribution of income within a society.
A. Progressive Taxation
B. The Free Rider Problem
C. Income Support
D. Redistribution In-Kind
3. Which of the following is NOT one of the “three basic elements of a game”?
A. A Referee.
B. Players.
C. Payoffs.
D. None of the above answers is correct (since each is one of the basic elements of a game).
4. ______________ was the first economist to argue that the problem of externalities could
potentially be solved by simply “internalizing the externality” by “clearly and completely
defining property rights, and then allowing affected parties to negotiate with one another.”
A. John Nash
B. Ronald Coase
C. Arthur Pigou
D. John Stuart Mill
5. Focusing on the “real household income of the household at the 80th percentile” and “real
household income of the household at the 40th percentile” in the U.S. over the past three decades,
over this time period
A. both “the rich and the middle class became poorer” (i.e., the real income cutoff level of
both the 80th percentile and the 40th percentile decreased).
B. both “the rich and the middle class became richer” (i.e., the real income cutoff level of
both the 80th percentile and the 40th percentile increased).
C. “the rich became poorer while the middle class became richer” (i.e., the real income
cutoff level of the 80th percentile decreased while the real income cutoff level for the 40th
percentile increased).
D. “the rich became richer while the middle class became poorer” (i.e., the real income
cutoff level of the 80th percentile increased while the real income cutoff level for the 40th
percentile decreased).
6. _________________ is a parable which illustrates why a “common good” will be used/consumed
by members of society at a level which is more than socially desirable.
A. The Utilitarian argument for Income Redistribution
B. The Tragedy of the Commons
C. The Free Rider Problem
D. Nash’s Existence Theorem
7. The value of the Gini Coefficient for the United States ______________ between 1989 and 1998
and then ______________ by 2007.
A. increased from (.433) to (.456); increased further to (.463).
B. decreased from (.515) to (.438); decreased further to (.374).
C. decreased from (1.178) to (.817); increased dramatically to (1.653).
D. decreased from (.652) to (.298); increased slightly to (.304).
8. ___________________ says that in order for a tax to be “fair,” two individuals of equal economic
capacity should have equal tax burdens.
A. The notion of horizontal equity
B. The notion of vertical equity
C. The “Benefits Principle.”
D. Jeremy Bentham
9. Suppose Richard lives in a country in which he has to pay income taxes according to the
following formula: (taxes owed) = (10% of income) – $5,000. It follows that
A. this country has a “Negative Income Tax.”
B. the dollar amount of taxes that he must pay decreases as his income increases.
C. if he were to earn exactly $100,000, then his “taxes owed” would be exactly equal to $0.
D. More than one (perhaps all) of the above answers is correct.
For questions 10 through 12, consider the two player simultaneous move game below:
Player 2
C D
Player 1 A 55 , 20 45 , 30
B 25 , 50 35 , 40
10. For this game
A. Player 1 has a dominant strategy, but Player 2 does not.
B. Player 2 has a dominant strategy, but Player 1 does not.
C. Both players have a dominant strategy.
D. Neither player has a dominant strategy.
11. If “Player 1” were to “randomize” and choose “Strategy A” with probability 5
1 and choose
“Strategy B” with probability 5
4, then “Player 2”
A. would maximize her own payoff by choosing “Strategy C’ with probability 4
1 and
choosing “Strategy D’ with probability 4
3.
B. would maximize her own payoff by choosing “Strategy C.”
C. would maximize her own payoff by choosing “Strategy D.”
D. has no control over her own payoff (since the value of her expected payoff is the same for
any randomization over her two available strategies).
12. Which of the following “pairs of strategies” is a Nash Equilibrium?
A. Player 1 chooses “Strategy A”; Player 2 chooses “Strategy D.”
B. Player 1 chooses “Strategy A”; Player 2 chooses “Strategy C.”
C. Player 1 chooses “Strategy B”; Player 2 chooses “Strategy C.”
D. More than one (perhaps all) of the above answers is correct.
Document Summary
Econ 2100 (summer 2012 sections 07 and 08) __________________ refers to monetary payments made by the government to certain individuals in society, which directly alter the distribution of income within a society. None of the above answers is correct (since each is one of the basic elements of a game). ______________ was the first economist to argue that the problem of externalities could potentially be solved by simply internalizing the externality by clearly and completely defining property rights, and then allowing affected parties to negotiate with one another. The rich became poorer while the middle class became richer (i. e. , the real income cutoff level of the 80th percentile decreased while the real income cutoff level for the 40th percentile increased). The rich became richer while the middle class became poorer (i. e. , the real income cutoff level of the 80th percentile increased while the real income cutoff level for the 40th percentile decreased).
