1) Which of the following does not affect an individual’s demand curve?
a.expectations
b.income
c.prices of related goods
d.the number of buyers
2) As an alternative to pairwise majority voting, each voter could be asked to rank the
possible outcomes, giving 1 point to her lowest choice, 2 points to her second-lowest
choice, 3 points to her third-lowest choice, and so on. This voting method is called a(n)
a.median vote.
b.pairwise minority vote.
c.Borda count.
d.Arrow count.
3) Assume Jack received all As in his classes last semester. If Jack gets all Bs in his
classes this semester, his GPA may or may not fall.
a.True
b.False
4) Two firms, A and B, each currently dump 50 tons of chemicals into the local river.
The government has decided to reduce the pollution and from now on will require a
pollution permit for each ton of pollution dumped into the river. The government will
sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution
that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of
pollution that it eliminates before it reaches the river. Neither firm produces any less
output, but they both conform to the law. It is likely that between the cost of permits
and the cost of additional pollution abatement,
a.Firm B will spend $3,500.
b.Firm A will spend $4,000.
c.Firm A will spend $4,500.
d.Firm B will spend $3,000.
5)
The box labeled C represents
a.private goods.
b.club goods.
c.common resources.
d.public goods.
6) In principle, we can
a.ignore positive statements when choosing among various public policy alternatives.
b.ignore normative statements when choosing among various public policy alternatives.
c.confirm or refute positive statements by examining evidence.
d.confirm or refute normative statements by examining evidence.
7) All goods that are excludable are also rival in consumption, but not all goods that are
rival in consumption are excludable.
a.True
b.False
8) The gasoline tax
a.is similar to most other taxes in that it causes deadweight losses.
b.produces the unfortunate side-effect of making the roads more dangerous.
c.can be viewed as a corrective tax aimed at multiple negative externalities associated
with driving.
d.can be viewed as a command-and-control policy aimed at discouraging people from
driving.
9) When a country that imports a particular good imposes a tariff on that good,
a.consumer surplus increases and total surplus increases in the market for that good.
b.consumer surplus increases and total surplus decreases in the market for that good.
c.consumer surplus decreases and total surplus increases in the market for that good.
d.consumer surplus decreases and total surplus decreases in the market for that good.
10) Which of the following statements is correct about a market in which pollution is
emitted?
a.Both corrective taxes and pollution permits internalize the externality of pollution.
b.Corrective taxes internalize the externality of pollution, but pollution permits do not
internalize that externality.
c.Corrective taxes fail to internalize the externality of pollution, but corrective taxes
internalize that externality.
d.Neither corrective taxes nor pollution permits internalize the externality of pollution.
11) Scenario 13-2
Chelsea wants to start her own Christmas ornament business. She can purchase a
suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning
3 percent interest per year.
Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000
borrowed from a bank at an interest rate of 6 percent. What is Chelsea’s annual
opportunity cost of purchasing the factory?
a. $2,000
b. $3,000
c. $4,500
d. $5,000
12) Dick owns a dog whose barking annoys Dick’s neighbor Jane. Dick receives
personal benefit from owning the dog, and Jane bears a cost of Dick’s ownership of the
dog. Assuming Jane has the legal right to peace and quiet, which of the following
statements is correct?
a.If Dick’s benefit exceeds Jane’s cost, government intervention is necessary.
b.Dick will pay to keep his dog if his benefit exceeds Jane’s cost.
c.If Jane’s cost exceeds Dick’s benefit, Dick will pay Jane to keep his dog.
d.If Jane has the legal right to peace and quiet, no further transactions will be mutually
beneficial.
13) Table 18-5
Refer to Table 18-5. How many workers should the firm hire?
a.1
b.2
c.3
d.4
14) The long-run equilibrium in a competitive market characterized by firms with
identical costs is generally characterized by firms operating at efficient scale.
a.True
b.False