1) Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie’s
opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan’s opportunity
cost of one apple pie is 1/4 gallon of ice cream, a mutually advantageous trade can be
struck at a price of one apple pie for 1/3 gallon of ice cream.
a.True
b.False
2) A common criticism of welfare programs is that they
a.create self-reliant individuals.
b.encourage strong family values.
c.encourage illegitimate births.
d.have increasing benefits over time, in real terms.
3) All points on a demand curve are optimal consumption points.
a.True
b.False
4) Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that
produce safe drinking water. Each week Abby and Brad work together to decide how
many gallons of water to pump. They bring water to town and sell it at whatever price
the market will bear. To keep things simple, suppose that Abby and Brad can pump as
much water as they want without cost so that the marginal cost is zero. The weekly
town demand schedule and total revenue schedule for water is shown in the table
below:
Refer to Table 17-2. Suppose that Abby and Brad work together to operate as a
profit-maximizing monopolist. What price will they charge for water?
a.$8
b.$7
c.$6
d.$4
5) Consumer surplus
a.is closely related to the supply curve for a product.
b.is represented by a rectangle on a supply-demand graph when the demand curve is a
straight, downward- sloping line.
c.is measured using the demand curve for a product.
d.does not reflect economic well-being in most markets.
6) Table 13-3
The marginal product of the third worker is
a.230 units.
b.100 units.
c.77 units.
d.60 units.
7) An economic outcome is said to be efficient if the economy is
a.using all of the scarce resources it has available.
b.conserving on resources, rather than using all available resources.
c.getting all it can get from the scarce resources it has available.
d.able to produce more than what is currently being produced without additional
resources.
8) The Black Death in fourteenth-century Europe resulted in
a.a lower marginal product of labor of surviving workers.
b.a higher marginal product of land.
c.economic hardship for surviving peasants.
d.economic hardship for surviving landowners.
9) When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly
sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is
a.$11.
b.$22.
c.$33.
d.$44.
10) Philip is an average contractor in town, and he earns $40,000 a year. Billy is the
best contractor in town, and he earns $480,000 a year. Philip’s contracting services
a.are valued more by the market relative to Billy’s and that explains why his income is
higher than Billy’s.
b.are valued less by the market relative to Billy’s and that explains why his income is
higher than Billy’s.
c.are valued less by the market relative to Billy’s and that explains why his income is
lower than Billy’s.
d.are more expensive because he receives a compensating differential.
11) Firms that spend a large amount of money on advertising a particular product are
likely to be providing consumers with
a.information about the availability of the product.
b.information about product price.
c.a signal of product quality.
d.a good example of wasted resources.
12) Table 12-10
If Si has $100,000 in taxable income, his tax liability will be
a. $838.
b. $3,844.
c. $12,100.
d. $21,709.
13) Which of the following statements illustrates diminishing marginal utility?
a.An extra dollar of income to a poor person provides that person with more additional
utility than does an extra dollar to a rich person.
b.An extra dollar of income to a poor person provides that person with less additional
utility than does an extra dollar to a rich person.
c.An extra dollar of income to a poor person provides that person with the same
additional utility as does an extra dollar to a rich person.
d.An extra dollar of income to a poor person provides that person with the same total
utility as does an extra dollar to a rich person.
14) It is increasingly clear that technological change is the only explanation for an
expanding wage gap between high- skill and low-skill workers.
a.True
b.False
15) A difference in wages that arises to offset the nonmonetary characteristics of
different jobs is known as
a.a compensating differential.
b.an inefficiency wage.
c.the equilibrium difference.
d.a union wage.
16) Jill is the best eye surgeon in town, and she earns $350,000 a year. Susan is an
average eye surgeon in town, and she earns $100,000 a year. Jill’s skills as a surgeon
a.are valued more by the market relative to Susan’s and that explains why her income is
higher than Susan’s.
b.are valued less by the market relative to Susan’s and that explains why her income is
higher than Susan’s.
c.are valued less by the market relative to Susan’s and that explains why her income is
lower than Susan’s.
d.are more expensive because she receives a compensating differential.
17) The principle that trade can make everyone better off applies to
a.individuals.
b.families.
c.countries.
d.All of the above
18) Figure 9-1
The figure illustrates the market for coffee in Guatemala.
When trade in coffee is allowed, producer surplus in Guatemala
a.increases by the area B + D.
b.increases by the area B + D + G.
c.decreases by the area C + F.
d.decreases by the area G.
19) In which of the following cases should the United States produce more noodles than
it wants for its own use and trade some of those noodles to Italy in exchange for wine?
a.Americans know less than Italians know about cooking noodles.
b.The United States has an absolute advantage over Italy in producing noodles.
c.Italy has a comparative advantage over the United States in producing wine.
d.The opportunity cost of producing a gallon of wine is the same for Italy as it is for the
United States.