1) The marginal rate of substitution is the slope of the indifference curve.
a.True
b.False
2) Figure 7-10
Which area represents producer surplus when the price is P1?
a.BCG
b.ACH
c.ABGD
d.DGH
3) Suppose that Angelo and Sonia each win $500 in a charity raffle. Angelo spends his
winnings on a new ipad. Sonia saves her winnings. Which of the following is correct?
a.Both Angelo’s and Sonia’s behavior suggest that they base their purchasing decisions
on transitory income.
b.Angelo’s behavior suggests that he bases his purchasing decisions on transitory
income rather than permanent income. Sonia’s behavior suggest that she bases her
purchasing decisions on permanent income rather than transitory income.
c.Angelo’s behavior suggests that he bases his purchasing decisions on permanent
income rather than transitory income. Sonia’s behavior suggests that she bases her
purchasing decisions on transitory income rather than permanent income.
d.Both Angelo’s and Sonia’s behavior suggest that they base their purchasing decisions
on permanent income.
4) When comparing average wages for male and female workers in the United States,
wages paid to females have been about 40 percent less than those paid to male workers.
a.True
b.False
5) Consider the town of Springfield with only three residents, Sophia, Amber, and
Cedric. The three residents are trying to determine how large, in acres, they should
build the public park. The table below shows each resident’s willingness to pay for each
acre of the park.
Suppose the cost to build the park is $24 per acre. How many acres should the park be
to maximize total surplus from the park in Springfield?
a.1 acres
b.2 acres
c.3 acres
d.4 acres
6) Which of the following is an example of screening?
a.A lender checks a loan applicants credit history.
b.When an employee purchases group life insurance without taking a physical exam,
she knows more about her health than does the insurance company.
c.When someone is considering buying a used car from a dealership, the seller knows
the repair history of the car but the potential buyer does not.
d.All of the above are correct.
7) In January the price of widgets was $1.00, and Wendy’s Widgets produced 80
widgets. In February the price of widgets was $1.50, and Wendy’s Widgets produced
110 widgets. In March the price of widgets was $2.00, and Wendy’s Widgets produced
140 widgets. The price elasticity of supply of Wendy’s Widgets was about
a.0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased
from $1.50 to $2.00.
b.1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased
from $1.50 to $2.00.
c.0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased
from $1.50 to $2.00.
d.1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased
from $1.50 to $2.00.
8) Organizers of an outdoor concert in a park surrounded by residential neighborhoods
are likely to consider the noise and traffic cost to residential neighborhoods when they
assess the financial viability of the concert venture.
a.True
b.False
9) The government of Italy will not allow any Hard Rock Cafe restaurants to open in
Italy. Defenders of the efficiency of brand-name markets would argue that this has
hindered restaurant market efficiency in Italy.
a.True
b.False
10) If the for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil
will increase the quantity demanded of aluminum foil by
a.1.66%, and aluminum foil sellers’ total revenue will increase as a result.
b.1.66%, and aluminum foil sellers’ total revenue will decrease as a result.
c.3.48%, and aluminum foil sellers’ total revenue will increase as a result.
d.3.48%, and aluminum foil sellers’ total revenue will decrease as a result.
11) Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With
trade and a tariff, total surplus is
a. $1,700.
b. $1,800.
c. $1,900.
d. $2,000.