ECO 365 Exam Guide: Government and Society

ECO 365 Final Exam Answer Guide for Government and Society Topics

The economy is driven by the actions of society, while the government works as an active influencer. Regulation, taxation, and subsidies are some of the most common tools used by government to control the economic actions of an otherwise free capitalist society. 

The Rhodes and Samson families

The Rhodes and Samson families, with annual incomes of $100,000 and $120,000, respectively, live in a society where the primary objective of the government is to maximize the sum of the utility attained by everyone in the Society. Which of the following is likely to be true in such a society?

The government will redistribute income between the two families in such away that the Welfare of the Rhodes family improves

Explanation: This problem refers to the social welfare function, specifically the utilitarian paradigm, which measures of a society’s welfare is the sum of all individual utilities.

Which of the following is a difference between liberalism and libertarianism?

Libertarians believe that equality of opportunities is more important than the equality of incomes, while liberals believe in policies that equalize the distribution of income.

The state government of Dalmatia

The state government of Dalmatia noticed that whenever its baseball team played a match in any of the local stadiums, the prices of tickets became too high. It decided to impose a price ceiling on the ticket prices. The exhibit given below shows the demand curve for and the supply curve of baseball game.

The exhibit given below shows the demand curve for and the supply curve of baseball game

The exhibit given below shows the demand curve for and the supply curve of baseball game

$120 per ticket, which would give rise to a shortage of 10,000 tickets

Explanation: A price ceiling will always create a shortage. In this case, a ceiling at $120 would create a shortage of 10,000, represented by the triangle in the upper left of the chart.

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Demand Curve for and the Supply Curve of Laptops

The exhibit given below shows the demand curve for and the supply curve of laptops, D and S. The government decides to impose a price ceiling on the price of laptops. At the same time, the price of inverter boards that provide power to backlight lamps inside laptop screens increases. identify the correct statement:

The exhibit given below shows the demand curve for and the supply curve of laptops, D and S

The exhibit given below shows the demand curve for and the supply curve of laptops, D and S

At a price ceiling of P1, the quantity demand and supplied in the market will be Q2.

Explanation: If you follow the dotted lines from P1 and Q2, they converge directly on the diagonal demand curve. Therefore, a price ceiling would at P1 would equal P2.

Color Mate Inc

Color Mate Inc., a company that produces interior and wall paints, dumps its chemical waste in a river. Which of the following is likely to be true in this case?

The social cost of the company is higher than the private cost, and the equilibrium quantity of paints produced is less than the social optimum.

Explanation: The social cost of the company is higher because it is polluting surrounding resources, while the quantity of paints produced must be lower because better competitors would have already replaced the polluting offender Color Mate, Inc.

 
  • Student: Sandy Lopez
  • Textbook:  Principles of Microeconomics
  • Course: ECO 365 Microeconomics 2017 Final Exam
 

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