Term
Which of the following entitlement programs is known officially as “Old Age, Survivors, and Disability Insurance”?
The Social Safety Net
Medicare
Social Security
Medicaid |
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Definition
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Term
Honduras, a central American country, is currently undergoing demographic transition and has experienced a significant decrease in child mortality rates. Which of the following changes is Honduras also likely to observe?
There is more communicable (contagious) disease
People live longer lives
The birth rate will increase
People live shorter lives |
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Definition
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Term
Suppose that you have decided to complete a degree in engineering. Which of the following would likely NOT have an impact on the labor market for engineers?
Several colleges in the state have just expanded enrollment in their engineering programs
The state has passed a series of policies (mostly tax breaks) that will attract several new engineering firms- many are already advertising for open engineering positions
The occupation has become more attractive to job seekers, due to its reputation for stable employment and potential for salary increases
You have decided to leave your current engineering program and complete your engineering training at another school in the same area |
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Definition
| You have decided to leave your current engineering program and complete your engineering training at another school in the same area |
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Term
Which of the following shifts the supply of labor?
A change in the size of the population
People want more of the output produced by a certain type of laborer
A new technology that displaces a worker in a given labor market
Outsourcing labor to workers in other countries |
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Definition
| A change in the size of the population |
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Term
Which is the most accurate definition of moral hazard?
Jobs that have significant risks pay more in wages or salary
A discrepancy in pay between male employees and female employees
A change in behavior after the purchase of insurance that leads people to consume more services than they would have if they did not have the protection of insurance
A change in behavior that leads people take fewer health-related risks after they purchase health insurance |
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Definition
| A change in behavior after the purchase of insurance that leads people to consume more services than they would have if they did not have the protection of insurance |
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Term
Which of the following is NOT a potential explanation for differences in pay between men and women?
Men tend to work more hours than women
Women are more likely to choose occupations that pay compensating differentials
Men and women tend to choose different types of occupations
Women are more likely to have employment gaps, due to time off for having children |
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Definition
| Women are more likely to choose occupations that pay compensating differentials |
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Term
The result of a binding price floor is:
A quota on price
A surplus
A shortage
Rent control |
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Definition
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Term
Which of the following facts is true about the minimum wage?
Local governments are not permitted to pass minimum wage laws
A state minimum wage trumps federal minimum wage if it is higher than the federal minimum wage
The federal minimum wage is currently $5.15 an hour
The federal minimum wage has not changed within the last 10 years |
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Definition
| A state minimum wage trumps federal minimum wage if it is higher than the federal minimum wage |
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Term
According to the article “Japan, Seeking Trim Waists, Measures Millions”, why are employers measuring the waistlines of their employees?
Because the law requires it. No questions asked.
Waists are measured in an effort to encourage employees to remain thin, and therefore “attractive”.
Waists are measured in an effort to roughly gauge employee physical health. Good physical health means lower healthcare costs to employers.
Waists are measured in an effort to roughly gauge employee physical health. Those employees with large waists will likely lose their jobs. |
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Definition
| Waists are measured in an effort to roughly gauge employee physical health. Good physical health means lower healthcare costs to employers. |
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Term
The author of the article “The better solution for pre-existing conditions”, suggests that the current health insurance system should handle customers with pre-existing conditions in which of the following ways?
Customers with pre-existing conditions should be denied private health insurance coverage.
Customers with pre-existing conditions should be given “free” taxpayer-funded health insurance coverage.
Customers with pre-existing conditions should purchase “insurance on becoming uninsurable” before they get diagnosed with expensive illnesses or injuries.
Customers with pre-existing conditions should pay for health expenses in cash, rather than attempting to purchase insurance. |
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Definition
| Customers with pre-existing conditions should purchase “insurance on becoming uninsurable” before they get diagnosed with expensive illnesses or injuries. |
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Term
| When a drug is legalized, both supply and demand become more elastic |
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Definition
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Term
| The U.S. federal income tax structure is NOT consistent with the ability-to-pay principle of taxation |
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Definition
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Term
| Suppose that the price of gasoline rises to $6 per gallon but people continue to buy the same amount of gas. This would imply the gasoline consumers are very elastic to the price change. |
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Definition
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Term
| If consumers are still buying the same amount of gas, this means that they are not responsive to the price increases and are thus inelastic. |
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Definition
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Term
| The two graphs above represent supply curves. One shows the supply of land in Lexington and one shows the supply of UK Women’s Basketball t-shirts. It is most likely that supply curve A is the supply of land and curve B represents the supply of UK Women’s Basketball t-shirts. |
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Definition
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Term
Federal alcohol excise taxes are assessed at the wholesale level.
This was discussed in class. |
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Definition
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Term
Income taxes can only be assessed at the federal level. In other words, state and local governments cannot impose a tax on income.
Both state and local governments also have the authority to impose income taxes in the U.S. |
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Definition
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Term
| According to the article “Teenagers use pot more than cigarettes”, high school students were said to be using more marijuana due to lower prices, easy availability, and decreased risk perception. |
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Definition
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Term
| Suppose that you own a business in another country that has just made a 1 billion dollar investment in the country’s infrastructure. This will decrease the elasticity of supply for your product. |
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Definition
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Term
9) The policies devised by the panel of economists interviewed in the article “Six Policies Economists Love (and Politicians Hate)”, included all of the following proposals EXCEPT:
A. Keep marijuana illegal.
B. Eliminate all income and payroll taxes.
C. Eliminate the popular tax deduction known as the mortgage deduction.
D. Tax carbon emissions. |
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Definition
| A. Keep marijuana illegal. |
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Term
10) Which of the following statements is NOT true with regard to taxes?
A. Kentucky has the lowest state cigarette tax.
B. There are state and federal excise taxes on cigarettes.
C. Kentucky’s current state cigarette tax is 60 cents per pack.
D. The federal excise tax on a pack of cigarettes is $1.01 per pack. |
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Definition
| A. Kentucky has the lowest state cigarette tax. |
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Term
11) The government imposes a $50 excise tax on refrigerators causing the market price to rise from $600 to $640. This implies that
A. consumers are relatively more elastic than producers.
B. producers are relatively more elastic than consumers.
C. government is relatively more elastic than consumers.
D. government is relatively more elastic than producers. |
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Definition
| B. producers are relatively more elastic than consumers. |
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Term
12) The demand for textbooks is price inelastic. Which of the following will explain this?
A. Many alternative textbooks can be used as substitutes.
B. Students have a lot of time to adjust to price changes.
C. Textbook purchases constitute a large portion of most students’ income.
D. The good is a necessity. |
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Definition
| D. The good is a necessity. |
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Term
14) In general, the greater the elasticity,
A. the smaller the responsiveness of price to changes in quantity.
B. the smaller the responsiveness of quantity to changes in price.
C. the larger the responsiveness of price to changes in quantity.
D. the larger the responsiveness of quantity to changes in price. |
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Definition
| D. the larger the responsiveness of quantity to changes in price. |
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Term
19) When you took your family out to breakfast, everyone ordered the same thing- the “pancake super stack”. Grandma’s bill was cheaper than everyone else’s and the waiter said that she was charged less because of the restaurant’s senior citizen discount. Which of the following terms describes this situation?
A. Cross-price elasticity
B. Price discrimination
C. Multi-tiered substitution
D. Elasticity of complements |
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Definition
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Term
20) Which of the following is NOT an example of “demand side enforcement” of drug or substance policies?
A. Restrictions on advertising of tobacco and alcohol products
B. The D.A.R.E. program
C. Fines, citations, and prison time for individuals caught using illegal substances
D. Monitoring activities such police patrols to catch underage drinkers |
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Definition
| A. Restrictions on advertising of tobacco and alcohol products |
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Term
21) For which of the following taxes is the LEGAL burden of tax collection placed on the seller rather than the owner or buyer?
A. Individual federal income tax
B. Property tax
C. Sales tax
D. Capital gains tax |
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Definition
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Term
22) Which of the following taxes is the primary source of funding for local public schools?
A. Sales tax
B. Local income tax
C. Corporate income tax
D. Property tax |
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Definition
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Term
23) According to the article “Cartels flood U.S. with cheap meth”, why have Mexican cartels replaced larger U.S. meth producers?
A. The major ingredient in meth, a cold and allergy medicine called pseudoephedrine, is getting harder to buy in large quantities in the U.S. due to increasing restrictions
B. Mexican meth manufacturers are better at producing meth than U.S. meth manufacturers
C. The major ingredient in meth, a cold and allergy medicine called pseudoephedrine, has recently been made illegal in the U.S. due to its use in meth manufacturing
D. U.S. meth users are traveling to Mexico to obtain cheaper meth, rather than buy more expensive U.S. manufactured meth |
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Definition
| A. The major ingredient in meth, a cold and allergy medicine called pseudoephedrine, is getting harder to buy in large quantities in the U.S. due to increasing restrictions |
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Term
24) According to the article “Lexington council approves $1 million loan for 21c museum hotel”, which of the following reasons were NOT offered by local officials for providing this loan to a private business?
A. The museum hotel was granted the loan under the conditions that the business will hire local low-to-moderate income workers.
B. The city will lose the loan money if the museum hotel goes out of business before the loan is repaid.
C. The loan funds will not come out of Lexington’s general revenues, but instead out of a special public infrastructure grant fund.
D. The city will not lose the loan money if the museum hotel goes out of business before the loan is repaid, because funds come from waived future property taxes on the museum hotel. |
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Definition
| B. The city will lose the loan money if the museum hotel goes out of business before the loan is repaid. |
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Term
25) “Generic” products offer consumers more choices. For example, generic store-brand cereal made with identical ingredients is often shelved next to brand-name cereal. Which of the following most likely describes the impact of generic products on consumer behavior?
A. Consumers often become addicted to cereal, therefore generic cereal will increase the elasticity of demand.
B. Consumers spend a large share of their budgets on cereal, therefore generic cereal will increase the elasticity of demand.
C. Generic cereal is a substitute for name brand cereal, so an increase in available substitutes will increase the elasticity of demand.
D. Generic cereal purchase is a time intensive decision, so an increase in cereal choices will increase the elasticity of demand. |
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Definition
| C. Generic cereal is a substitute for name brand cereal, so an increase in available substitutes will increase the elasticity of demand. |
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Term
26) Which of the following is NOT an unintended consequence of the criminalization of prostitution?
A. Increase in tax revenues from taxing prostitution activities
B. Public health problems involving the spread of HIV and other diseases
C. Sex trafficking, or non-voluntary participation in prostitution
D. Loss of tax revenues from taxing prostitution activities |
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Definition
| A. Increase in tax revenues from taxing prostitution activities |
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Term
27) Which of the following product pairs are consumers most likely to treat as “complements?”
A. Name brand beer and generic beer
B. Cheeseburgers and French fries
C. Cars and bicycles
D. Pepsi and Ugg Boots |
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Definition
| B. Cheeseburgers and French fries |
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Term
| Suppose you have learned that there are fake prescription drugs sold in the market. You explain that this is a problem with positive externalities from society’s point of view because prescriptions drugs are under-provided, due to their external costs. |
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Definition
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Term
| The FDA (Food and Drug Administration) is the primary government agency that deals with market failures related to a lack of competition in markets. |
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Definition
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Term
The elderly are more likely to experience poverty than any other age group in the U.S.
Children are more likely to experience poverty than any other age group in the U.S. |
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Definition
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Term
| Food stamps, housing vouchers, and Medicaid are examples of “in-kind” aid transfer programs. |
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Definition
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Term
| The United States is an example of a country with neither a purely market-oriented economic structure nor a purely command-oriented economic structure. It is “mixed”. |
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Definition
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Term
| Consumer surplus represents the difference between what a consumer was willing to pay for a good or service and what the consumer actually had to pay for a good or service. |
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Definition
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Term
6) Which of the following activities is LEAST likely to give rise to EXTERNAL COSTS or BENEFITS?
A. spraying to control mosquitoes in your backyard
B. driving one's car during rush hour
C. inoculating your children during a flu epidemic
D. buying a hamburger and eating it for lunch |
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Definition
| D. buying a hamburger and eating it for lunch |
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Term
7) When economists say that an activity meets the criterion for economic efficiency, they mean
A. a majority of citizens favor the activity.
B. the benefits that result from the activity exceed the costs.
C. the number of people who gain from the activity exceeds the number on whom costs are imposed.
D. the costs that result from the activity exceed the benefits. |
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Definition
| B. the benefits that result from the activity exceed the costs. |
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Term
8) There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the
A. protection of the rights of individuals to their person and property and the provision of goods that cannot easily be provided through markets.
B. redistribution of income from some individuals to others and the waging of war to expand the nation's territory.
C. production of postal services and cable television.
D. taxation of goods that are generally considered immoral or bad and the regulation of large corporations. |
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Definition
| A. protection of the rights of individuals to their person and property and the provision of goods that cannot easily be provided through markets. |
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Term
9) Suppose the actions of the producers of a good impose an EXTERNAL COST which results in the actual market price of $25 and market output of 1,000 units. How does this outcome compare to the efficient, ideal equilibrium?
A. The efficient price would higher than $25 while the efficient output would be less than 1,000 units.
B. The efficient price would be higher than $25 while the efficient output would be greater than 1,000 units.
C. The efficient price would be lower than $25 while the efficient output would be less than 1,000 units.
D. The efficient price would be lower than $25 while the efficient output would be greater than 1,000 units. |
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Definition
| C. The efficient price would be lower than $25 while the efficient output would be less than 1,000 units. |
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Term
10) The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?
A. Cows can be privately owned while in many countries elephants cannot.
B. The demand for ivory far exceeds the demand for beef.
C. Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses.
D. People tend to protest more every year to prevent cow extinction than they do for elephant extinction. |
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Definition
| A. Cows can be privately owned while in many countries elephants cannot. |
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Term
11) “Laissez-Faire” policies are more likely to be found in
A. Market-oriented economies
B. Command-oriented economies
C. Common law countries
D. Countries that do not enforce property rights |
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Definition
| A. Market-oriented economies |
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Term
16) Which is NOT a role of prices in the market?
A. Motivate economic agents
B. Communicate information
C. Coordinate actions of economic agents
D. Generate profit for economic agents |
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Definition
| D. Generate profit for economic agents |
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Term
17) Which of the following is NOT an incentive-based policy?
A. An alcohol tax on consumers to reduce drunk driving
B. Government funds for libraries and museums
C. Loans for higher education
D. A smoking ban inside public buildings |
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Definition
| D. A smoking ban inside public buildings |
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Term
18) Adverse selection and moral hazard are two problems that are typically faced by which of the following industries?
A. The insurance industry
B. The car manufacturing industry
C. The natural gas industry
D. The fishing industry |
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Definition
| A. The insurance industry |
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Term
19) As Cuba tries to continue the transition from command economy toward a market economy, all of the following are necessary except
A. the government must let business fail if they are inefficient.
B. the government must establish a broadly obeyed legal system and a climate of trust.
C. the government must control and limit price movement in markets.
D. the government must continue to privatize land and other resources. |
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Definition
| C. the government must control and limit price movement in markets. |
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Term
20) Which of the following is an example of a positive externality?
A. An increase in educational attainment decreases criminal activity and increases voting participation
B. Your neighbor plants flowers in his backyard, but no one can see them but him
C. A power plant releases pollution into the air and water as a by-product of power production
D. The state government decides to require auto mechanics to obtain licenses to operate their businesses, due to complaints from consumers about being “ripped off” |
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Definition
| A. An increase in educational attainment decreases criminal activity and increases voting participation |
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Term
21) The Welfare Reform Act of 1996 contains elements of which theory of poverty?
A. Big Brother
B. Restricted Opportunity
C. Flawed Character
D. Social Safety Net |
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Definition
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Term
22) Which of the following observations on poverty and income inequality in the U.S. is NOT supported by evidence?
A. Median family income has decreased since 2010 for every level of income with the exception of the wealthiest 20% of families, who have experienced an increase in median family income since 2010
B. The overall poverty rate has experienced a decline since the 1960s, but there are more people in poverty today
C. The current absolute income mobility of U.S. citizens is “good” compared to previous generations
D. The current relative income mobility of U.S. citizens is “good” compared to previous generations |
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Definition
| D. The current relative income mobility of U.S. citizens is “good” compared to previous generations |
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Term
25) Which of the following is NOT a policy strategy that governments have adopted to combat the negative externalities associated with pollution?
A. Incentive-based policies called effluent fees, which are often called ‘pollution taxes’
B. Market-based strategies like the “cap and trade” program that allows producers to trade or sell their carbon dioxide output permits
C. Command-and-control policies that forbids all types of pollution and prohibits lawsuits against producers that impose external costs on third parties
D. Command-and-control policies that set quotas or limits on pollution (e.g., setting higher standards through pollution abatement technologies) |
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Definition
| C. Command-and-control policies that forbids all types of pollution and prohibits lawsuits against producers that impose external costs on third parties |
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