1) Economists disagree on whether labor taxes cause small or large deadweight losses.
This disagreement arises primarily because economists hold different views about
a.the size of labor taxes.
b.the importance of labor taxes imposed by the federal government relative to the
importance of labor taxes imposed by the various states.
c.the elasticity of labor supply.
d.the elasticity of labor demand.
2) In the markets for goods and services in the circular-flow diagram, households are
buyers and firms are sellers.
a.True
b.False
3) Table 17-19
Consider a small town that has two grocery stores from which residents can choose to
buy a loaf of bread. The store owners each must make a decision to set a high bread
price or a low bread price. The payoff table, showing profit per week, is provided
below. The profit in each cell is shown as (Store 1, Store 2).
Refer to Table 17-19. If grocery store 2 sets a low price, what price should grocery
store 1 set? And what will grocery store 1’s payoff equal?
a.Low price, $250
b.High price, $400
c.Low price, $50
d.High price, $50
4) Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of
$7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
What is total consumer surplus for Bob and Lisa?
a.$0
b.$2
c.$5
d.$7
5)
The opportunity cost of obtaining 20 additional dryers by moving from point D to point
A is
a.0 washers.
b.20 washers.
c.40 washers.
d.None of the above; the economy cannot move from point D to point A.
6) When a nation first begins to trade with other countries and the nation becomes an
exporter of soybeans,
a.this is an indication that the world price of soybeans exceeds the nation’s domestic
price of soybeans in the absence of trade.
b.this is an indication that the nation has a comparative advantage in producing
soybeans.
c.the nation’s consumers of soybeans become worse off and the nation’s producers of
soybeans become better off.
d.All of the above are correct.
7) Consider a small town with only three families, the Greene family, the Brown family,
and the Black family. The town does not currently have any streetlights so it is very
dark at night. The three families are considering putting in streetlights on Main Street
and are trying to determine how many lights to install. The table below shows each
family’s willingness to pay for each streetlight.
Suppose the cost to install each streetlight is $360 and the families have agreed to split
the cost of the streetlights equally. If the families vote to determine the number of
streetlights to install, basing their decision solely on their own willingness to pay (and
trying to maximize their own surplus), what is the greatest number of streetlights for
which the majority of families would vote “yes?”
a.1 streetlight
b.2 streetlights
c.3 streetlights
d.4 streetlights
8) If the demand for a good falls when income falls, then the good is called a(n)
a.normal good.
b.regular good.
c.luxury good.
d.inferior good.
9) According to the Coase theorem, if private parties can bargain without cost, then the
private market will solve the problem of externalities.
a.True
b.False
10) Which of the following claims is consistent with the views of mainstream
economists?
a.If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily fall.
b.If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily rise.
c.If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently fall.
d.If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently rise.
11) Which scenario describes the market for oil in the short run in comparison to the
long run?
a.Scenario A describes both the short run and the long run.
b.Scenario D describes both the short run and the long run.
c.Scenario D describes the short run, whereas scenario A describes the long run.
d.Scenario C describes the short run, whereas scenario B describes the long run.
12) The average American pays a higher percent of his income in taxes today than he
would have in the late 18th century.
a.True
b.False