1) After a country goes from disallowing trade in coffee with other countries to
allowing trade in coffee with other countries,
a.the domestic price of coffee will be greater than the world price of coffee.
b.the domestic price of coffee will be lower than the world price of coffee.
c.the domestic price of coffee will equal the world price of coffee.
d.The world price of coffee does not matter; the domestic price of coffee prevails.
2) The language of economics is
a.needlessly arcane.
b.valuable because it provides a new and useful way of learning about the world.
c.easy to learn within a day.
d.unnecessary to learn for a thorough understanding of economics.
3) Suppose that installing an overhead pedestrian walkway would cost a college town
$150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the
cost of a human life is estimated at $10 million. The town should
a.install the walkway because the estimated benefit is twice the cost.
b.install the walkway because the estimated benefit equals the cost.
c.not install the walkway, since the cost is twice the estimated benefit.
d.install the walkway, since the cost of even a single life is too great not to take action.
4) The problem that arises when one person performs a task on behalf of another person
is called the lemons problem.
a.True
b.False
5) Figure 10-5
Which of the following statements is correct?
a.The marginal benefit of the positive externality is measured by P3 – P1.
b.The marginal cost of the negative externality is measured by P3 – P2.
c.The marginal cost of the negative externality is measured by P3 – P1.
d.The marginal cost of the negative externality is measured by P3 – P0.
6) Scenario 19-2
Travis, a student at a community college, is considering what he should do for summer
employment. Two recruiters show up at his school in search of summer workers.
Recruiter A is looking for workers to help a disaster relief agency distribute food aid in
Africa. Recruiter B is looking for custodial help to clean motel rooms in a motel located
near the entrance to a famous national park.
Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter
presents. On the basis of knowledge obtained in his economics class, Travis concludes
that
a.if the motel job also requires an ability to do general plumbing repairs, the wage offer
will be higher than otherwise.
b.if the food distribution job has a requirement for special training or certification, the
wage offer will be lower than otherwise.
c.if the food distribution job exposes him to the Ebola virus, the wage will be lower.
d.if the motel job involves substantial amounts of driving for supplies, the wage offer
will be lower than otherwise.
7) The impact of one person’s actions on the well-being of a bystander is called
a.an economic dilemma.
b.deadweight loss.
c.a multi-party problem.
d.an externality.
8) Incentives to work and save are reduced when
a.income taxes are higher.
b.consumption taxes replace income taxes.
c.corrective taxes are implemented.
d.All of the above are correct.
9) Total income in the United States is comprised of
a.wages only.
b.wages and fringe benefits only.
c.rents, profits, and interest payments only.
d.wages, fringe benefits, rents, profits, and interest payments.
10) An assumption of the production possibilities frontier model is that technology is
fixed.
a.True
b.False
11) The Condorcet paradox
a.demonstrates that the order in which one votes on options may influence the outcome.
b.demonstrates that majority voting by itself may not reveal the outcome that society
wants.
c.disproves Arrow’s impossibility theorem.
d.Both a and b are correct.
12) A cheeseburger is a
a.common resource, because it is rival in consumption but not excludable.
b.public good, because it is rival in consumption but not excludable.
c.public good, because it is excludable and rival in consumption.
d.private good, because it is excludable and rival in consumption.
13) At a price of $20, which of the following
statements is not correct?
a.The market is in equilibrium.
b.Equilibrium price is equal to equilibrium quantity.
c.There is no pressure for price to change.
d.The quantity of the good that is bought and sold is 600 units.
14) Demand is inelastic if the is
a.less than 1
b.equal to 1
c.greater than 1
d.equal to 0
15) Examples of monopolistically competitive markets include the markets for
a.restaurants and furniture.
b.wheat and corn.
c.postage stamps and wooden pencils.
d.All of the above are correct.
16) The market demand curve for a monopolist is typically
a.unit price elastic.
b.downward sloping.
c.horizontal.
d.vertical.
17) Market power refers to the
a.power of a single person or small group to influence market prices.
b.ability of a person or small group to successfully market new products.
c.power of the government to regulate a market.
d.importance of a certain market in relation to the overall economy.
18) Figure 15-15
To maximize its profit, a monopolist would choose which of the following outcomes?
a.Q = 30 and P = 30
b.Q = 30 and P = 60
c.Q = 45 and P = 45
d.Q = 60 and P = 30
19) Suppose a market has the demand function Qd=20-0.5P. At what price will total
revenue be maximized?
20) d.
21) Define comparative advantage.
22) Describe how an accounting firm could experience diseconomies of scale.
23) Which political philosophy concludes that equality of opportunities is more
important than equality of outcomes?
24) Economists use the term to refer to the ability to produce a good using fewer inputs
than another producer.