1) Capital owners are compensated according to the value of the marginal product of
that capital.
a.True
b.False
2) You know an economist has crossed the line from policy adviser to scientist when he
or she
a.claims that the problem at hand is widely misunderstood by non-economists.
b.makes positive statements.
c.talks about values.
d.makes a claim about how the world should be.
3) A local playground equipment company plans to operate out of its current factory,
which is estimated to last 30 years. All cost decisions it makes during the 30-year
period
a.are long-run decisions.
b.are short-run decisions.
c.involve only maintenance of the factory.
d.are zero because the cost decisions were made at the beginning of the business.
4) Which of the following statements is correct?
a.The distribution of annual income accurately reflects the distribution of living
standards.
b.Permanent incomes are more equally distributed than annual incomes.
c.Transitory changes in income generally have a significant impact on a family’s
standard of living.
d.Annual income is more equally distributed than permanent income.
5) Suppose the government places a per-unit tax on a good. The smaller the price
elasticities of demand and supply for the good, the
a.smaller the deadweight loss from the tax.
b.greater the deadweight loss from the tax.
c.less efficient is the tax.
d.more equitable is the distribution of the tax burden between buyers and sellers.
6) The study by economists Cox and Alm found that the 2006 pre-tax income of the
richest fifth of U.S. households is
a.5 times the pre-tax income of the poorest fifth.
b.10 times the pre-tax income of the poorest fifth.
c.15 times the pre-tax income of the poorest fifth.
d.20 times the pre-tax income of the poorest fifth.
7) A movement downward and to the left along a supply curve is called a(n)
a.increase in supply.
b.decrease in supply.
c.decrease in quantity supplied.
d.increase in quantity supplied.
8) Typically, as a firm hires additional workers, the marginal product of labor
a.decreases, and the value of the marginal product of labor decreases.
b.stays constant, and the value of the marginal product of labor decreases.
c.decreases, and the value of the marginal product of labor stays constant.
d.decreases, and the value of the marginal product of labor increases.
9) In order to conclude that markets are efficient, we assume that they are perfectly
competitive.
a.True
b.False
10) If firms in a monopolistically competitive market are incurring economic losses,
which of the following statements describes the changes that occur as the market
adjusts to the long-run equilibrium?
a.Each existing firm’s demand curve shifts to the left.
b.More firms enter the market.
c.Each firm eliminates its excess capacity.
d.Both a and b are correct.
11) Which of the following statements best expresses a firm‘s profitmaximizing
decision rule?
a.If marginal revenue is greater than marginal cost, the firm should increase its output.
b.If marginal revenue is less than marginal cost, the firm should shut down in the short
run.
c.If marginal revenue equals marginal cost, the firm should produce exactly one more
unit of output.
d.All of the above are correct.
12) Figure 18-4
The graph below illustrates the market for nurses who work in doctors’ offices.
Refer to Figure 18-4. If the supply of medical supplies that nurses use when
performing sports physicals decreases, what happens in the market for nurses?
a.Demand increases from D1 to D2.
b.Demand decreases from D2 to D1.
c.Supply increases from S1 to S2.
d.Supply decreases from S2 to S1.
13) For a firm, marginal revenue minus marginal cost is equal to
a.profit.
b.average total cost.
c.change in profit.
d.change in average revenue.
14) Which of the following might explain the beauty premium found by labor
economists Hamermesh and Biddle?
a.Good looks are an innate ability for some jobs, which results in higher productivity
and higher wages.
b.Good looks may be an indirect measure of other types of ability such as attention to
detail.
c.If better-looking people earn more than average-looking people, employers may be
discriminating based on personal appearance.
d.All of the above could explain the beauty premium.
15) Most lighthouses are operated by the government because
a.of the free-rider problem.
b.lighthouses are no longer valued by society.
c.most lighthouses are only tourist attractions in state and national parks.
d.shipping companies would not be able to afford maintenance fees for lighthouses.
16) The substitution effect of an increase in the interest rate will result in an increase in
a.consumption when young and increase in savings when young.
b.consumption when old and an increase in savings when young.
c.consumption when young and an increase in savings when old.
d.savings when old and an increase in consumption when old.
17) The marginal-cost curve intersects the average-total-cost curve at the minimum
point of the average-total-cost curve.
a.True
b.False