1) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities
Frontier
If the production possibilities frontier shown for Merve is for 8 hours of work, then how
long does it take Merve to make one purse?
a.1/2 hour
b.2 hours
c.4 hours
d.8 hours
2) When we derive the demand curve for a good, we should remember that the
a.income effect must be greater than the substitution effect.
b.substitution effect must be greater than the income effect.
c.substitution effect must be in the same direction as the income effect.
d.income effect and the substitution effect may work in the same or in opposite
directions.
3) A small island off the coast of Cape Cod contains two restaurants and two retail
stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown
in the economy, tourists are less willing to pay for the boat ride to visit the island. The
owners of the restaurants and stores on the island – Restaurants 1 and 2, and Stores A
and B – think that if tourists could ride the ferry for free, they would be happy to visit
the island, eat and shop. The business owners are considering contributing to a pool of
money that will be used to pay for roundtrip ferry service each day. The table represents
their willingness to pay, that is, the maximum amount that each business owner is
willing to contribute, per day, to pay for each ferry trip.
Suppose the cost to run the ferry for each roundtrip is $1,000 per day and the 4 business
owners have agreed to split the costs of the ferry trips equally. How many ferry trips
would the owner of Store A prefer to have?
a.0
b.1
c.2
d.3
5)
Figure 8-16
Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to
Panel (b), Panel (a) illustrates which of the following statements?
a.When demand is relatively inelastic, the deadweight loss of a tax is smaller than when
demand is relatively elastic.
b.When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c.When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d.When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
6) The table below shows the marginal tax rates for an unmarried taxpayer for various
levels of taxable income.
For this tax schedule, what is the total income tax due for an individual with $49,000 in
taxable income?
a. $12,650
b. $14,370
c. $15,960
d. $16,220
7) The theory of consumer choice examines
a.the determination of output in competitive markets.
b.the tradeoffs inherent in decisions made by consumers.
c.how consumers select inputs into manufacturing production processes.
d.the determination of prices in competitive markets.
8) Other things equal, when the supply of workers is low, one would predict that market
wages would be
a.relatively high.
b.relatively low.
c.determined solely by factors that affect demand.
d.determined outside the domain of economic theory.
9) For a profit-maximizing, competitive firm, the value of the marginal product of labor
a.increases when the price of output decreases.
b.is the firm’s demand for labor.
c.equals the marginal product of labor divided by the wage rate.
d.All of the above are correct.
10) Figure 21-17
Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is
$48, Paul’s optimal choice is point C. Then the price of Y decreases to $8. Paul’s new
optimal choice is point
a.A.
b.B.
c.D.
d.E.
11) If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175,
the price of the tickets is $625.
a.True
b.False
12) Table 22-10
The town of Franklin is facing a severe budget shortage. The town administrator has
proposed four options to balance the budget: increase property taxes (taxes), cut the
school arts budget (arts), turn off half of the streetlights in the town (streetlights),
reduce police patrols (police). Exactly one of the four 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 22-10. If a Borda count is used, which option will win?
a.arts
b.police
c.streetlights
d.taxes
13) Assume that Brad and Theresa can switch between producing wheat and producing
beef at a constant rate.
Assume that Brad and Theresa each has 60 minutes available. If each person spends all
his or her time producing the good in which he or she has a comparative advantage,
then total production is
a.6 bushels of wheat and 6 pounds of beef.
b.10 bushels of wheat and 5 pounds of beef.
c.10 bushels of wheat and 6 pounds of beef.
d.6 bushels of wheat and 5 pounds of beef.
14) There are four homes along Belmont Circle, which surrounds a small plot of land.
The land currently has no trees, and the 4 homeowners — Adams, Benitez, Chen, and
Davis — are considering the idea of contributing to a pool of money that will be used to
plant up to 4 trees. The table represents their willingness to pay, that is, the maximum
amount that each homeowner is willing to contribute toward each tree.
Suppose the cost to plant each tree is $220 and the 4 homeowners have agreed to split
all tree-planting costs equally. Which homeowner(s) would be in favor of planting at
least 3 trees?
a.only Benitez
b.only Benitez and Chen
c.only Benitez, Chen, and Davis
d.Adams, Benitez, Chen, and Davis
15) Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer
named Hannah. When young, Hannah works and earns income. When old, she is retired
and earns no income.
Refer to Figure 21-32. If Hannah chose to spend $30,000 on consumption when young,
then how much could she spend on consumption when old?
16) Table 20-15
Income Inequality in 2010 in the United States by Race
The values in the table reflect the percentages of pre-tax-and-transfer income.
Source: US Census Bureau
Refer to Table 20-15. In percentage point terms, how much more did the top 5% of the
Asian population earn than it would have if income were distributed equally?
17) Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car
accident. She earns $20,000 per year working as a cashier at a grocery store. The
government uses a negative income tax system in which Taxes owed = (1/4 of income)
– $15,000.
Refer to Scenario 20-7. Does Zooey owe or receive money from the government?
How much?
18) A key difference between accountants and economists is their different treatment of
the cost of capital. Does this cause an accountant’s estimate of total costs to be higher or
lower than an economist’s estimate? Explain.
19) Evaluate the following statement: “Advertisements that use celebrity endorsements
are devoid of any value and do not enhance the efficient functioning of markets.”
20) Which two types of goods are rival in consumption?
21) Suppose the government used the following formula to compute a family’s tax
liability:
Taxes owed = 28% of income – $8,000. How much would a family that earned $18,000
owe?
22) It costs a company $35,000 to produce 700 graphing calculators. The company’s
cost will be $35,070 if it produces an additional graphing calculator. The company is
currently producing 700 graphing calculators.
What is the company’s average cost?
23) Tom’s opportunity cost of mowing a lawn is 2 loads of laundry. Jen’s opportunity
cost of mowing a lawn is 1.5 loads of laundry. What is the range of prices for mowing a
lawn at which Tom and Jen could both benefit from trade?