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Question 01

Examples of non-distortionary taxes are:

a) those levied unexpectedly after economic decisions have taken place.

b) ad valorem taxes.

c) those consistent with the Ramsey principle of public finance.

d) proportional income taxes.

Question 02

The gain in profit income from an increase in immigration according to this diagram is:

a) the area BDL´L.

b) the area of WBDW´.

c) the areas WBFW´ and FDL´L together.

d) the areas WBDW´ and FDL´L together.

Question 03

S and D are the supply and demand curves for a good before the introduction of a sales tax on the good. The supply curve after the tax is S´. Select one of the following statements which best interprets what this figure shows.

a) Government tax revenue is equal to the area of ABCD.

b) Producer surplus lost by the introduction of the tax is equal to the area of BCFG.

c) Consumer surplus lost by the introduction of the tax is equal to the area of AGFD.

d) All of the above.

Question 04

A drawback found to the state ownership and conduct of natural monopolies has been what?

a) Information asymmetries between management and consumers.

b) Poor economic performance with the monopoly rent taken out in the form of poor service and comfortable pay rather than in profit per se.

c) Negative externalities.

d) All of the above.

Question 05

Passive labour market policies include:

a) increasing number of job agencies, employment offices.

b) training low-skill workers.

c) unemployment compensation to smooth household disposable income during a spell of unemployment.

d) subsidies for unemployed to move from regions with high unemployment to regions with better job prospects.

Question 06

A consequence of strict job severance regulations is that:

a) they delay new hires in good times until firms are really sure that the economy has improved.

b) they increase the effective cost of labour to firms.

c) firms will make increased use of temporary work agencies.

d) all of the above.

Question 07

In the diagram opposite we have the budget constraint for someone who has income from work and an income entitlement from a social safety net that would be reduced euro for euro for the wage income earned. Assuming a rising marginal rate of substitution between leisure and consumption, we would observe a utility maximizing household:

a) at point A in the welfare trap.

b) at some point on the line segment DE.

c) either along the segment DE or at point A.

d) along the segment EA in the welfare trap.

Question 08

Unlike Germany, real wages were brought back into line with productivity growth in the U.K. and the Netherlands during the last 20-25 years of the 20 th century by:

a) a weakening of union power in both the U.K. and the Netherlands.

b) a weakening of union power in the U.K. and .a broad agreement between employer associations and unions in the Netherlands for wage growth to slow down.

c) a broad agreement between employer associations and unions in the U.K. for wage growth to slow down and a weakening of union power in the Netherlands.

d) a broad agreement between employer associations and unions in both countries for wage growth to slow down significantly.

Oxford University Press, Online Resource Centre, Chapter 17.

Chapter 17

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