1) Since measurable factors such as years of experience and years of education explain
less than half of the variation in wages, ability, effort, and chance must play a
significant role in determining wages.
a.True
b.False
2) The study by economists Cox and Alm found
a.inequality in consumption is much smaller than inequality in annual income.
b.inequality in consumption is slightly smaller than inequality in annual income.
c.inequality in consumption is slightly larger than inequality in annual income.
d.inequality in consumption is much larger than inequality in annual income.
3) Scenario 12-5
Senator Filch argues that a tax must be paid by people who benefit from government
services. Senator Fudge argues that a tax must be paid in accordance with a person’s
ability to bear the tax burden. Senator Malfoy argues that people with a greater ability
to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with
similar abilities to pay should contribute the same amount.
Which Senator is advocating taxes based on the benefits principle?
a.Senator Filch
b.Senator Fudge
c.Senator Malfoy
d.Senator Moody
4) Which of the following would likely be studied by a macroeconomist rather than a
microeconomist?
a.the effect of an increase in the alcohol tax on the market for beer
b.the effect of foreign competition on the domestic auto industry
c.the effect of a price war in the airline industry
d.the effect of an increase in the minimum wage on an economy’s overall rate of
unemployment
5) For a monopoly,
a.average revenue exceeds marginal revenue.
b.average revenue equals marginal revenue.
c.average revenue is less than marginal revenue.
d.price equals marginal revenue.
6) When society requires that firms reduce pollution, there is
a.a tradeoff because of reduced incomes to the firms’ owners and workers.
b.a tradeoff only if some firms are forced to close.
c.no tradeoff, since the cost of reducing pollution falls only on the firms affected by the
requirements.
d.no tradeoff, since everyone benefits from reduced pollution.
7) Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Without trade, England produced and consumed 32 units of cheese and 2 units of bread
and Spain produced and consumed 6 units of cheese and 2 units of bread. Then, each
country agreed to specialize in the production of the good in which it has a comparative
advantage and trade 7 units of cheese for 2.5 units of bread. As a result, England gained
a.0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
b.1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
c.7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
d.33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
8) Figure 16-3
This figure depicts a situation in a monopolistically competitive market.
How much consumer surplus will be derived from the purchase of this product at the
monopolistically competitive price?
a.$200
b. $312.50
c. $4000
d. $800
9) Which of the following policies is an example of a command-and-control policy?
a.subsidies to education
b.maximum levels of pollution that factories may emit
c.tradable pollution permits
d.None of the above is an example of a command-and-control policy.
10) US and French Production Opportunities
The opportunity costs for the US and France are as follows:
a.In the US 1 million gallons of wine costs 1/2 million pounds of cheese and in France
1 million gallons of wine costs 2 million pounds of cheese.
b.In the US 1 million gallons of wine costs 2 million pounds of cheese and in France 1
million gallons of wine costs 1/2 million pounds of cheese.
c.In the US 1 million pounds of cheese costs 1/2 million gallons of wine and in France
1 million pounds of cheese costs 2 million gallons of wine.
d.In the US 1 million pounds of cheese costs 16 million gallons of wine and in France 1
million pounds of cheese costs 8 million gallons of wine.
11) Which of these situations produces the largest profits for oligopolists?
a.The firms reach a Nash equilibrium.
b.The firms reach the monopoly outcome.
c.The firms reach the competitive outcome.
d.The firms produce a quantity of output that lies between the competitive outcome and
the monopoly outcome.
12) Which of the following is correct regarding road tolls as a way to reduce traffic?
a.They can vary based on the amount of traffic that is present.
b.They reduce drivers’ explicit cost of driving but increase drivers’ implicit cost.
c.Some drivers can be made better off, but some drivers will inevitably made worse off.
d.They are the solution to the free rider problem that occurs on roads.