1) Bill would like to buy a gift for Ann to convey his love for her. Which of the
following areas of economics would most likely study this type of decision?
a.asymmetric information
b.political economy
c.behavioral economics
d.industrial organization
2) In 2010, the cochairmen of President Obama’s deficit reduction commission
proposed curtailing or eliminating many tax deductions such as the one for mortgage
interest. Economists who favor the proposal argue that it would
(i)correct a misallocation of resources because too much of the economy’s capital stock
is tied up in residential housing and too little is invested in corporate capital.
(ii)cut both spending and taxes.
(iii) encourage private philanthropy.
a.(i) only
b.(ii) only
c.(i) and (ii) only
d.(i), (ii), and (iii)
3) Consider the market for university economics professors. Suppose the opportunity
cost of going to graduate school to get a Ph.D. in economics increases for many
individuals. Suppose it generally takes about five years to get a Ph.D. in economics.
Holding all else constant, in five years the equilibrium wage for university economics
professors will
a.increase.
b.decrease.
c.not change.
d.It is not possible to determine what will happen to the equilibrium wage.
4) Table 22-6
Refer to Table 22-6. The table shows the preferences of 100 voters over three possible
outcomes: A, B, and C. Which of the following statements is true?
a.In pairwise majority voting, B is preferred to A, A is preferred to C, and B is preferred
to C.
b.In pairwise majority voting, C is preferred to B, B is preferred to A, and C is preferred
to A.
c.In pairwise majority voting, B is preferred to A, A is preferred to C, and C is preferred
to B.
d.In pairwise majority voting, A is preferred to C, C is preferred to B, and A is preferred
to B.
5) Table 18-1
Refer to Table 18-1. Suppose that the firm pays its workers $45 per day. Each unit of
output sells for $10. How many days of labor should the firm hire?
a.1
b.2
c.3
d.4
6) Taxes are costly to market participants because they
a.transfer resources from market participants to the government.
b.alter incentives.
c.distort market outcomes.
d.All of the above are correct.
7) A value-added tax or VAT is a tax on
a.retail purchases only.
b.wholesale purchases only.
c.pollution.
d.all stages of production of a good.
8) Most markets are not monopolies in the real world because
a.firms usually face downward-sloping demand curves.
b.supply curves slope upward.
c.firms usually equate price with marginal cost.
d.there are reasonable substitutes for most goods.
9) If the government imposes a binding price ceiling in a market, then the producer
surplus in that market will increase.
a.True
b.False
10) Private markets fail to reach a socially optimal equilibrium when positive
externalities are present because the
a.private benefit equals the social benefit at the private market solution.
b.private cost exceeds the private benefit at the private market solution.
c.social value exceeds the private value at the private market solution.
d.private cost exceeds the social benefit at the private market solution.
11) A production function describes
a.how a firm maximizes profits.
b.how a firm turns inputs into output.
c.the minimal cost of producing a given level of output.
d.the relationship between cost and output.
12) On a vacation to China, you find yourself eating every meal at the local Burger
King rather than buying a meal from one of the street vendors. Your traveling
companion claims that you are irrational, since you never eat Burger King hamburgers
when you are home, and Burger King’s hamburgers cost more than the meals prepared
and sold by China’s street vendors. An economist would most likely explain your
behavior by suggesting that
a.your behavior is rational, but your friend’s behavior is clearly irrational.
b.you are clearly irrational, but your friend’s behavior is rational.
c.the Burger King brand name suggests consistent quality.
d.the advertising by Burger King in China is more persuasive than the advertising by
Burger King in your home town.
13) Table 12-25
Do any of the plans achieve vertical equity?
14) Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a
market.
With no trade allowed, what are the
equilibrium price and equilibrium quantity in this market?
15) Most of the time, a profit motive eliminates discriminatory behavior from a market;
however, a discriminatory wage gap can persist even if the firm owners only care about
profit if there is
16) Which market structure(s) include(s) many firms with differentiated products who
can enter and exit the market freely?
17) Figure 8-26
Suppose the government places a $3 tax per unit on this good. What price will
consumers pay for the good after the tax is imposed?
18) Does an upward-sloping labor-supply curve mean that people respond to a decrease
in the wage by enjoying more leisure or less leisure?
19) Briefly describe the three prominent schools of thought in political philosophy.
Identify one of the most well-known philosophers in each school.