1) Measures of elasticity enhance our ability to study the magnitudes of changes in
quantities in response to changes in prices or income.
a.True
b.False
2) Relationship Between Years of Education and Annual Income
The graph above is a
a.bar graph
b.scatterplot
c.pie chart
d.time series analysis
3) Assume that the government proposes a negative income tax that calculates taxes
owed by the following formula, Taxes Owed = (1/3 x Income) – $10,000.
Compute the tax that would be owed given each level of income.
a.$120,000
b.$90,000
c.$60,000
d.$30,000
e.$0
4) According to the benefits principle, it is fair for people to pay taxes based on their
ability to shoulder the tax burden.
a.True
b.False
5) If a firm in a perfectly competitive market triples the quantity of output sold, then
total revenue will
a.more than triple.
b.less than triple.
c.exactly triple.
d.Any of the above may be true depending on the firm‘s labor productivity.
6) For most students, the largest single cost of a college education is
a.the wages given up to attend school.
b.tuition, fees, and books.
c.room and board.
d.transportation, parking, and entertainment.
7) Which of the following will cause a decrease in producer surplus?
a.the imposition of a nonbinding price ceiling in the market
b.buyers expect the price of a good to be higher next month
c.the price of a substitute increases
d.income increases and buyers consider the good to be inferior
8) As the number of firms in the oligopoly grows very large, the
a.output effect disappears.
b.price effect disappears.
c.output effect equals the price effect.
d.price of the product greatly exceeds marginal cost.
9) Suppose the number of buyers in a market decreases and a technological
advancement occurs also. What would we expect to happen in the market?
a.Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b.Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c.Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d.None of the above is correct.
10) Figure 8-13
Suppose the government places a $5 per-unit tax on this good. The consumer surplus
after this tax is
a.$80.
b.$40.
c.$30.
d.$10.
11) The single largest expenditure by state and local governments is on
a.highways.
b.police.
c.public welfare.
d.education.
12) When a market is monopolistically competitive, the typical firm in the market can
earn
a.losses in the short run and profits in the long run.
b.profits in the short run and the long run.
c.losses in the short run and zero profit in the long run.
d.zero profit in the short run and losses in the long run.
13) Under a regressive tax system, the marginal tax rate for high income taxpayers is
a.higher than the marginal tax rate for low income taxpayers.
b.the same as the marginal tax rate for low income taxpayers.
c.lower than the marginal tax rate for low income taxpayers.
d.Any of the above could be true under a regressive tax system.
14) A signaling theory of education suggests that
a.people who attend college are more likely to capture a “beauty premium.”
b.education is a signal of social status.
c.education does not necessarily increase productivity.
d.education will sever the link between innate ability and compensation.
15) Table 22-8
The citizens of Mayville are having a severe budget shortage and are faced with
eliminating athletics from the town high school. The town administrator has determined
that the town can afford to maintain one sport. Exactly one of the three choices will
prevail, and the choice will be made by way of pairwise voting, with the majority
determining the outcome on each vote. The preferences of the voters are summarized in
the table below.
Voter Type
Refer to Table 22-8. If the town administrator first asks the citizens to vote for hockey
or basketball and then asks them to choose between the winner of the first vote and
football, what will be the outcome?
a.Hockey will win the first vote and hockey will win the second vote.
b.Hockey will win the first vote and football will win the second vote.
c.Basketball will win the first vote and basketball will win the second vote.
d.Basketball will win the first vote and football will win the second vote.
16) In the short run for a particular market, there are 300 firms. Each firm has a
marginal cost of $30 when it produces 200 units of output. One point on the market
supply curve is
a.quantity = 300; price = $30.
b. quantity = 600,000; price = $90,000.
c.quantity = 100,000; price = $30.
d.quantity = 600,000; price = $30.
17) A typical worker’s normal or average income is called
a.the life cycle.
b.permanent income.
c.transitory income.
d.in-kind transfers.
18) If the current allocation of resources in the market for wallpaper is efficient, then it
must be the case that
a.producer surplus equals consumer surplus in the market for wallpaper.
b.the market for wallpaper is in equilibrium.
c.on the last unit of wallpaper that was produced and sold, the value to buyers exceeded
the cost to sellers.
d.All of the above are correct.