1) Deciding that A causes B when in fact B causes A is a mistake called omitted
variable bias.
a.True
b.False
2) At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per
day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls
per day. Using the midpoint method, the price elasticity of supply is about
a.0.15
b. 0.375
c.2.5
d.2.60
3) Which of the following is not an advantage to congestion charges for motorists who
wish to drive on busy streets?
a.reduced travel time during peak hours
b.reduced need for public transportation
c.improved environmental quality
d.improved valuation of a common resource
4) The free-rider problem makes it unlikely that poverty will be entirely eliminated
through private charity.
a.True
b.False
5) Government intervention that aims to promote technology-enhancing industries is
called
a.assisted technology.
b.intervention policy.
c.industrial technology assistance.
d.industrial policy.
6) Holding all other forces constant, if increasing the price of a good leads to an
increase in total revenue, then the demand for the good must be
a.unit elastic.
b.inelastic.
c.elastic.
d.None of the above is correct because a price increase always leads to an increase in
total revenue.
7) Table 13-17
Consider the following table of long-run total cost for four different firms:
Which firm has diseconomies of scale over the entire range of output?
a.Firm 1 only
b.Firm 2 only
c.Firms 1 and 2 only
d.Firm 3 only
8) Sales taxes generate nearly 50% of the tax revenue for state and local governments.
a.True
b.False
9) Figure 15-9
To maximize total surplus, a benevolent social planner would choose which of the
following outcomes?
a.100 units of output and a price of $20 per unit
b.150 units of output and a price of $20 per unit
c.150 units of output and a price of $30 per unit
d.200 units of output and a price of $20 per unit
10) Suppose an excise tax is imposed on luxury boats and yachts. Economists argue that
such a tax
a.is sure to be vertically equitable, since buyers of luxury boats and yachts are wealthy.
b.entails no deadweight loss as long as buyers of boats and yachts can easily substitute
one luxury good for another.
c.violates the benefits principle of taxation.
d.may burden workers in the luxury-boat-and-yacht industry more than it burdens the
buyers of luxury boats and yachts.
11) Briefly describe the two arguments that economists make to defend the practice of
resale price maintenance.
12) Table 7-7
You are selling extra tickets to the Midwest Regional Sweet 16 game in the men’s
NCAA basketball tournament. The table shows the willingness to pay of the four
potential buyers in the market for a ticket to the game. Which of the following graphs
represents the market demand curve?
13) Figure 7-33
Refer to Figure 7-33. How much is total producer surplus in this market at the
equilibrium price?
14) You have the afternoon free. You have a choice between going to the movies with a
friend or studying economics for three hours. If you go to the movies, you will spend
$12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three
hours, you will raise your exam grade by 15 points.
What is your opportunity cost of going to the movies?
15) Your friend tells you that her dad just suffered from a stroke because his blood
pressure and cholesterol were too high. You know that your own father also has high
blood pressure so you become worried that he will also have a stroke. This is an
example of which systematic mistake that people make?
16) In 2011, the top 20% of US families had more than times as much income as the
bottom 20%.