1) Wages of doctors tend to be higher than wages of bankers. Which of the following is
a compensating differential explaining the difference in wages?
a.Doctors have the stress of being responsible for other peoples’ lives while bankers do
not.
b.Doctors are on call to work nights and weekends, while bankers work traditional
business hours.
c.Doctors must pay for malpractice insurance in case they are sued for a mistake on the
job.
d.All of the above are compensating differentials.
2) Suppose a gardener produces both tomatoes and squash in his garden. If the
opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity
cost of 1 bushel of tomatoes is
a.2/5 bushel of squash.
b.5/2 bushels of squash.
c.2 bushels of squash.
d.5 bushels of squash.
3) A prestigious private high school requires each of its teachers to have a Ph.D. in the
subject they teach. This requirement is likely to
a.increase the supply of teachers to this school.
b.increase wages for teachers at the private school relative to those at public schools.
c.decrease the marginal product of teachers at the private school.
d.All of the above are correct.
4) If the for a good is 0.8, then a 12 percent increase in the quantity demanded must be
the result of
a.a 0.06 percent decrease in the price.
b.a 1.5 percent decrease in the price.
c.a 9.6 percent decrease in the price.
d.a 15 percent decrease in the price.
5) For a particular good, a 5 percent increase in price causes a 15 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a.There are many substitutes for this good.
b.The good is a necessity.
c.The market for the good is broadly defined.
d.The relevant time horizon is short.
6) If “too much choice” is a problem for consumers, it would occur in which market
structure(s)?
a.perfect competition
b.monopoly
c.monopolistic competition
d.perfect competition and monopolistic competition
7) Which of the following statements is not valid when the market supply curve is
vertical?
a.Market quantity supplied does not change when the price changes.
b.Supply is perfectly inelastic.
c.An increase in market demand will increase the equilibrium quantity.
d.An increase in market demand will increase the equilibrium price.
8) When a new firm enters a monopolistically competitive market, the individual
demand curves faced by all existing firms in that market will
a.shift to the left.
b.shift to the right.
c.shift in a direction that is unpredictable without further information.
d.remain unchanged. It is the supply curve that will shift.
9) Which of the following is not correct?
a.High-skilled immigration has many economic benefits.
b.Each year in the United States, about one-third of the people earning a PhD. in
science or engineering are foreign born.
c.Low-skilled immigration lowers the earnings of native-born workers by 10-20
percent.
d.Illegal immigrants may pay less in taxes, but they also are ineligible for many
government benefits.
10) Economies of scale arise when
a.an economy is self-sufficient in production.
b.individuals in a society are self-sufficient.
c.fixed costs are large relative to variable costs.
d.workers are able to specialize in a particular task.
11) For a competitive firm,
a.total revenue equals average revenue.
b.total revenue equals marginal revenue.
c.total cost equals marginal revenue.
d.average revenue equals marginal revenue.
12) Which of the following statements is correct?
a.Equity is more important than efficiency as a goal of the tax system.
b.Efficiency is more important than equity as a goal of the tax system.
c.Both equity and efficiency are important goals of the tax system.
d.Neither equity nor efficiency is an important goal of the tax system.
13) When a country takes a unilateral approach to free trade, it
a.removes trade restrictions on its own.
b.reduces its trade restrictions while other countries do the same.
c.does not remove trade restrictions no matter what other countries do.
d.is willing to trade with multiple countries at once.
14) Which political philosophy believes that the government should equalize the
incomes of all members of society?
a.Utilitarianism.
b.Liberalism.
c.Libertarianism.
d.None of the above is correct.
15) Figure 7-10
Which area represents the increase in producer surplus when the price rises from P1 to
P2?
a.BCG
b.ACH
c.ABGD
d.AHGB
16) If a supply curve is horizontal, then supply is said to be perfectly elastic, and the
price elasticity of supply approaches infinity.
a.True
b.False
17) Figure 21-6
Refer to Figure 21-6. Suppose the price of popcorn is $2, the price of Mt. Dew is $4,
the value of A is 30, and the value of B is 15. How much income does the consumer
have?
a.$120
b.$80
c.$60
d.$30