1) In the employer-worker relationship, the employer is regarded as the “principal” and
the worker is regarded as the “agent.”
a.True
b.False
2) When a relevant variable that is not named on either axis changes,
a.there will be a movement along the curve.
b.the curve will rotate clockwise.
c.the curve will be unaffected since only the variables on the axis affect the curve.
d.the curve will shift.
3) Suppose that large-scale pork production has the potential to create ground water
pollution. Why might this type of pollution be considered an externality?
a.The groundwater pollution reduces the cost of large-scale pork production.
b.The economic impact of a large-scale pork production facility is localized in a small
geographic area.
c.The pollution has the potential for creating a health risk for water users in the region
surrounding the pork production facility.
d.Consumers will not reap the benefits of lower production cost from large-scale pork
production.
4) Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
If the market price falls below $4.50, the firm will earn
a.positive economic profits in the short run.
b.negative economic profits in the short run but remain in business.
c.negative economic profits in the short run and shut down.
d.zero economic profits in the short run.
5) The failure of communism in a large number of countries is at least partly explained
by
a.the fact that those countries relied absolutely on the invisible hand.
b.the fact that those countries did little or nothing to restrict trade with other countries.
c.the lack of information, on the part of central planners in those countries, about tastes
and preferences in their economies.
d.the lack of information, on the part of central planners in those countries, about how
much authority the government had in affecting economic outcomes.
6) What happens when the prisoners’ dilemma game is repeated numerous times in an
oligopoly market?
(i)The firms may well reach the monopoly outcome.
(ii)The firms may well reach the competitive outcome.
(iii)Buyers of the oligopolists’ product will likely be worse off as a result.
a.(i) and (ii)
b.(ii) and (iii)
c.(i) and (iii)
d.(i), (ii), and (iii)
7) If your income is $40,000 and your income tax liability is $5,000, your marginal tax
rate is
a.8 percent.
b.12.5 percent.
c.20 percent.
d.unknown. We do not have enough information to answer this question.
8) Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
After the tax goes into effect, consumer surplus is the area
a.A.
b.B+C.
c.A+B+C.
d.A+B+D+J+K.
9) On holiday weekends thousands of people picnic in state parks. Some picnic areas
become so overcrowded the benefit or value of picnicking diminishes to zero. An
overcrowded picnic area is an example of
a.a private good.
b.a club good.
c.a Tragedy of the Commons.
d.public good.
10) Scenario 13-6
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional
organizing consultant. As a consultant, Ziva helps people organize their houses. Due to
the popularity of her home-organization services, Farmer Ziva has more clients
requesting her services than she has time to help if she maintains her farming business.
Farmer Ziva charges $25 an hour for her home-organization services. One spring day,
Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She
expects that the seeds she planted will yield $300 worth of lettuce.
Ziva’s accountant would calculate the total cost of farming to equal
a. $25.
b. $130.
c. $300.
d. $380.
11) It takes Ross 6 hours to produce a bushel of corn and 2 hours to wash and polish a
car. It takes Courtney 6 hours to produce a bushel of corn and 1 hour to wash and polish
a car. Courtney and Ross cannot gain from specialization and trade, since it takes each
of them 6 hours to produce 1 bushel of corn.
a.True
b.False
12) If the government imposes a $3 tax in a market, the buyers and sellers will share an
equal burden of the tax.
a.True
b.False
13) Consider two goods: peanuts and crackers. The slope of the consumer’s budget
constraint is measured by the
a.consumer’s income divided by the price of crackers.
b.relative price of peanuts and crackers.
c.consumer’s marginal rate of substitution.
d.number of peanuts purchased divided by the number of crackers purchased.
14) Which famous economist developed the principle of comparative advantage as we
know it today?
a.Adam Smith
b.David Ricardo
c.John Maynard Keynes
d.Milton Friedman
15) What happens to the labor supply curves in both countries when Mexican workers
leave Mexico and move to the United States?
a.Labor supply decreases in Mexico and decreases in the United States.
b.Labor supply increases in the United States and increases in Mexico.
c.Labor supply increases in the United States and decreases in Mexico.
d.Labor supply increases in Mexico and decreases in United States.
16) The for bacon and eggs likely would be negative because bacon and eggs are
complements for many people.
a.True
b.False
17) A monopolist earns higher profits by charging one price than by practicing price
discrimination.
a.True
b.False
18)
The movement from Point A to Point B represents a(n)
a.shift in the supply curve.
b.decrease in the quantity supplied.
c.increase in the quantity supplied.
d.Both a and b are correct.
19) The welfare of sellers is measured by
a.consumer surplus.
b.producer surplus.
c.total surplus.
d.price.
20) What is England’s opportunity cost of one compass?
21) What is one argument made by proponents of in-kind transfers over cash payments
to the needy?
22) What particular characteristic do private goods and club goods have in common?
23) Figure 15-22
If the monopolist uses perfect price discrimination, how much output does the firm
produce?
24) Studies show that white women earn approximately 25% less than white men. From
this data alone, one should not conclude that white women are victims of
discrimination. Name two other factors that could explain the difference in wages.
25) Define horizontal equity and briefly describe some features of the U.S. federal
income tax system that may interfere with achieving it.
26) Figure 8-27
Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is
characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market,
the tax will create a larger deadweight loss in which market? Explain.
27) Why do college graduates earn more in wages than workers with only a high school
diploma?
28) Recall the four types of goods. Are national defense and a patented invention the
same type of good? Briefly explain.
29) The table below shows the quantities demanded of milk per month by four families
at various prices.
If the four families listed are the only demanders in this market and the price of a gallon
of milk is $4.00, what is the market quantity demanded?