Question

One advantage of having a market-clearing price for water in all uses is

Select one:

a. water can be moved to areas where the price is the lowest

b. since prices anticipate the future, possible droughts will be reflected in today's prices encouraging water conservation now before the drought actually hits the supply

c. low income water users will have to pay more than high income users for water even without a drought

d. the rich can get all the water they want regardless of the price

The authors claim that some thinking about water is a myth. Their myth arguments do not include the statement that

Select one:

a. the planet is drying up

b. water is special and is different from other goods

c. there are ways to use ocean water for drinking or irrigation

d. we can save water by using less of it

How do price controls on water impact people?

Select one:

a. it reduces the amount supplied and makes the poor worse off

b. it avoids rationing schemes

c. it makes water less scarce

d. it makes water abundant for all users

What is meant by rent control?

Select one:

a. setting a rental rate below the market rate to make it more affordable

b. letting the rental rate change with market conditions

c. matching supply of housing to the demand for housing

d. paying rent every other month for two years

Which of the following is not an impact of rent control?

Select one:

a. maintenance of rent control housing is first-rate

b. there is a reduction in construction of new rental space

c. residents in rent control apartments prefer to stay in place even if the space is no longer suitable to them

d. the supply of rent control housing deteriorates

CBO data over the past few decades indicate that among the five income groups (low to high)

Select one:

a. all income groups have shown a rise in income over this period

b. low income groups have suffered a decline in income

c. middle income people have the highest rate of income growth over this period

d. low income people have the lowest rate of income

growth historically

With regard to income mobility, studies indicate that over ten years

Select one:

a. typically show that incomes fall with work experience from ages 25 to 55

b. about half of lowest income people rise to higher levels

c. over 90% of high income people stay at that level

d. it is not possible to "boot strap" from poor to richer in the American economy

Women who stop working after having children and eventually return to work,

Select one:

a. are smart enough to take jobs before they leave that allows them to come back to work at higher pay

b. are rewarded with better jobs at higher pay because of their sacrifice

c. often see their duties curtailed and make less money

d. easily return to the work they were doing at higher pay

Data show that women who work make 80 cents on the dollar that males make and this fact is indicative of

Select one:

a. this data is influenced by the fact that men work more hours than women

b. widespread discrimination against women equivalent to $.20 out of a dollar men earn

c. evidence that shows men completely understand the value of women in the worikplace

d. indicates a low level of education women attain so they are not as productive as men

It appears that women dentists make $.74 for every dollar a male dentist makes and it has been reported that women business owners make 50% of what male business owners make. How would an analyst explain these differences?

Select one:

a. Female patients and shoppers prefer male dentists and male-run businesses

b. Women prefer flexible hours so they can live a valued life outside of work

c. Women dentists devote more time to each patient thus reducing their income

d. Men are far more productive than women as studies show

Answer 1

The right answer is part (b) since prices anticipate the future, possible droughts will be reflected in today's prices encouraging water conservation now before the drought actually hits the supply. Market clearing price leads to minimize wastege of water. As water is a necessity and scarce resouce, optimal allocation of water is required. This is only possible by seting market clearing prices.

WHY OTHER OPTIONS ARE INCORRECT?

(a)  water can be moved to areas where the price is the lowest: Water is necessity and it is required at all areas. So, this is not the reason for setting market clearing price.

(c) low income water users will have to pay more than high income users for water even without a drought: There is never a motive of charging higher price from low income users. So, this is not the reason for market clearing price.

(d) the rich can get all the water they want regardless of the price: All the water cannot be supplied to rich only. Water is a basic requirement of everybody. equitable and efficient allocation of water is always the main aim. So, this is not the correct answer for market clearing price.