1) A decrease in a consumer’s income
a.increases the slope of the consumer’s budget constraint.
b.has no effect on the consumer’s budget constraint.
c.decreases the slope of the consumer’s budget constraint.
d.has no effect on the slope of the consumer’s budget constraint.
2) Which of the following is one of the basic reasons why economists often appear to
give conflicting advice to policymakers?
a.similar opinions about the validity of economic theories
b.significant differences in education
c.differences in personal values
d.a reliance on normative statement for research theories
3) A ‘satisficer” is a person whose decision making is the same as that predicted by
mainstream economic models.
a.True
b.False
4) Consider the budget constraint between ‘spending today” on the horizontal axis and
‘spending a year from today” on the vertical axis. Suppose that you have $100 today and
expect to receive $100 one year from today. Your money market account pays an annual
interest rate of 25%, and you may borrow money at that interest rate. Suppose now that
the interest rate increases to 40%. What happens to the slope of your budget constraint
relative to when the interest rate was 25%? The slope
a.becomes steeper.
b.becomes flatter.
c.doesn’t change because the budget constraint shifts in parallel to the original budget
constraint.
d.doesn’t change because the budget constraint shifts out parallel to the original budget
constraint.
5) Assume that Samorola has entered into an enforceable resale price maintenance
agreement with Trint and U- Mobile. Which of the following will always be true?
a.The wholesale price of Samorolas will be different for Trint than it is for U-Mobile.
b.U-Mobile will benefit from customers who go to Trint for information about different
mobile phones.
c.Trint will sell Samorolas at a lower price than U-Mobile.
d.U-Mobile and Trint will always sell Samorolas for exactly the same price.
6) One of the problems with calculating the true amount of discrimination that takes
place in the market for labor is
a.the inability to calculate wage differentials.
b.the inability to see changes in the wage differentials over a period of time.
c.the difficulty in measuring productivity differences between workers.
d.the difficulty in measuring female labor-force participation.
7) Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they
agree to work together as a monopolist, charging the monopoly price for their music
and producing the monopoly quantity of songs. By June, each singer is considering
breaking the agreement. What would you expect to happen next?
a.Bieber and Rihanna will determine that it is in each singer’s self interest to maintain
the agreement.
b.Bieber and Rihanna will each break the agreement. Both singers’ profits will decrease.
c.Bieber and Rihanna will each break the agreement. Both singers’ profits will increase.
d.Bieber and Rihanna will each break the agreement. The new equilibrium quantity of
songs will increase, and the new equilibrium price also will increase.
8) It is possible for this economy to produce 30 doghouses
and 20 dishwashers.
a.True
b.False
9) If a firm produces nothing, it still incurs its fixed costs.
a.True
b.False
10) Which of the following is not correct?
a.Economists are generally united in their support of free trade.
b.The conclusions of Adam Smith and David Ricardo on the gains from trade have held
up well over time.
c.David Ricardo argued that Britain should not restrict imports of grain.
d.Economists’ opposition to trade restrictions is still based largely on the principle of
absolute advantage.
11) Because the goods offered for sale in a competitive market are largely the same,
a.there will be few sellers in the market.
b.there will be few buyers in the market.
c.only a few buyers will have market power.
d.sellers will have little reason to charge less than the going market price.
12) If good x is available free of charge, then
a.good x must be provided by nature.
b.good x must be provided by the government.
c.the private market cannot ensure an efficient allocation of resources in the market for
good x.
d.government policy is incapable of increasing total surplus in the market for good x.
13) If the relative price of a concert ticket is three times the price of a meal at a good
restaurant, then the opportunity cost of a concert ticket can be measured by the
a.slope of the budget constraint.
b.slope of an indifference curve.
c.marginal rate of substitution.
d.income effect.
14) Airlines often separate their customers into business travelers and personal travelers
by giving a discount to those travelers who stay over a Saturday night.
a.True
b.False
15) If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.
a.True
b.False
16) The invisible hand’s ability to coordinate the decisions of the firms and households
in the economy can be hindered by
a.government actions that distort prices.
b.increased competition in markets.
c.enforcement of property rights.
d.too much attention paid to efficiency.
17) Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their
Sunday afternoon. They all agree that they should do one of three things: go to a movie,
play golf, or go to a baseball game. They also agree that they will have two pairwise
votes to determine how to spend their afternoon, with the majority determining the
outcome on each vote. The first, second, and third choices for each person are as
indicated in the table below.
Refer to Table 22-2. If (1) the first vote pits “baseball game” against “movie,” and (2)
the second vote pits “golf” against the winner of the first vote, then the outcome is as
follows:
a.”Baseball game” wins the first vote and “baseball game” wins the second vote, so they
go to a baseball game.
b.”Baseball game” wins the first vote and “golf” wins the second vote, so they go to the
golf.
c.”Movie” wins the first vote and “movie” wins the second vote, so they go to a movie.
d.”Movie” wins the first vote and “golf” wins the second vote, so they play golf.