1) Table 20-6
Refer to Table 20-6. A person who is concerned that income inequality has worsened
between 2011 and 2012 would cite which of the following statistics to support her
position?
a.The percentage of people earning less than $25,000 decreased from 2011 to 2012
b.The percentage of people earning more than $100,000 increased from 2011 to 2012
c.The percentage of people earning between $50,000 and $100,000 stayed virtually
constant from 2011 to 2012
d.Both a and b are correct
2) Economies of scale occur when a firm’s
a.marginal costs are constant as output increases.
b.long-run average total costs are decreasing as output increases.
c.long-run average total costs are increasing as output increases.
d.marginal costs are equal to average total costs for all levels of output.
3) Table 13-20
Listed in the table are the long-run total costs for three different firms.
Refer to Table 13-20. Firm B is experiencing diseconomies of scale.
a.True
b.False
4) Economists often find it worthwhile to make assumptions that do not necessarily
describe the real world.
a.True
b.False
5) Which of the following statements best reflects a price-taking firm?
a.The firm can sell only a limited amount of output at the market price before the
market price will fall.
b.If the firm were to charge less than the going price, it would maximize its profits and
revenues.
c.If the firm were to charge more than the going price, it would sell none of its goods.
d.Both b and c are correct.
6) Which of the following is not correct?
a.Markets allocate scarce resources with the forces of supply and demand.
b.The equilibrium of supply and demand is typically an efficient allocation of resources.
c.Governments can sometimes improve market outcomes.
d.Externalities cannot be positive.
7) Economists acting as scientists make positive statements, while economists acting as
policy advisers make normative statements.
a.True
b.False
8) When a country abandons no-trade policies in favor of free-trade policies and
becomes an importer of steel, then the domestic price of steel will increase as a result.
a.True
b.False
9) Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
If England and Spain each spends all its time producing the good in which it has a
comparative advantage and the countries agree to trade 2 units of bread for 6 units of
cheese, then England will consume
a.34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3
units of bread.
b.34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese and
3 units of bread.
c.34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and
3 units of bread.
d.34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese
and 3 units of bread.
10) Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can
build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware
store. He can sell a birdhouse for $20 each.
An accountant would calculate the total cost for one birdhouse to be a. $5.
b.$8.
c.$9.
d.$13.
11) Figure 8-3
The vertical distance between points A and C represents a tax in the market.
The amount of tax revenue received by the government is equal to the area
a.P3ACP1.
b.ABC.
c.P2DAP3.
d.P1CDP2.
12) The theory of consumer choice
a.underlies the concept of the demand for a particular good.
b.underlies the concept of the supply of a particular good.
c.ignores, for the sake of simplicity, the trade-offs that consumers face.
d.can be applied to many questions about household decisions, but it cannot be applied
to questions concerning wages and labor supply.
13) Tomato sauce and spaghetti noodles are complementary goods. A decrease in the
price of tomatoes will
a.increase consumer surplus in the market for tomato sauce and decrease producer
surplus in the market for spaghetti noodles.
b.increase consumer surplus in the market for tomato sauce and increase producer
surplus in the market for spaghetti noodles.
c.decrease consumer surplus in the market for tomato sauce and increase producer
surplus in the market for spaghetti noodles.
d.decrease consumer surplus in the market for tomato sauce and decrease producer
surplus in the market for spaghetti noodles.
14) Figure 21-8
Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE,
what is the price of good Y?
a. $10
b. $5
c. $2.50
d. $1.67
15) The wage is to the labor market as the
a.rental price of capital is to the capital market.
b.purchase price of capital is to the capital market.
c.supply of land is to the land market.
d.demand for land is to the land market.
16) Employers may choose to pay their workers a wage that exceeds the equilibrium
wage according to
a.efficiency-wage theories.
b.equilibrium wage theories.
c.screening theories.
d.signaling theories.
17) Suppose that you have received $300 as a birthday gift. You can spend it today or
you can put the money in a bank account for a year and earn 5 percent interest. The
opportunity cost of spending the money today, in terms of what you could have after
one year, is
a.$0.
b.$15.
c.$305.
d.$315.
18) Which of the following is most likely to face extinction?
a.dogs living as pets in households
b.dairy cows living on farms and producing milk
c.bald eagles living in zoos
d.tigers living in the wild
19) Immigration of workers into the United States is often an important source of
a.increases in the demand for labor in the United States.
b.decreases in the demand for labor in the United States.
c.increases in the supply of labor in the United States.
d.decreases in the supply of labor in the United States.
20) As the number of firms in an oligopoly industry decreases, the market moves closer
to a _________ market.
21) Explain the Condorcet paradox. To which type of voting system does it apply?
22) Microsoft’s governmentgranted exclusive right to make and sell the Windows
operating system is called a _________.
23) Table 13-19
What is the average fixed cost of producing 430 units of output?
24) Define the average tax rate.
25) The problem that results from an agent, who is imperfectly monitored by the
principal, engaging in dishonest or otherwise undesirable behavior is called
26) Aniella believes that the demand for unskilled labor is relatively inelastic. Carmella
believes that the demand for unskilled labor is relatively elastic. Which believes that a
minimum-wage law will result in significant unemployment?
27) Explain the concept of market failure.
28) In the short run, an increase in the money supply is likely to lead to inflation and
unemployment.