1) Two countries can achieve gains from trade even if one country has an absolute
advantage in the production of both goods.
a.True
b.False
2) Television advertisements aired during major sporting events are very expensive. A
theory asserting that people buy a product simply because it is advertised would suggest
that information on the high cost of advertising
a.enhances the effectiveness of the advertisement.
b.reduces people’s willingness to purchase advertised products.
c.is leaked to discredit the firms that spend so much on advertising.
d.reduces the effective staying power of a product.
3) When economists make
a.positive statements, they are speaking not as scientists but as policy advisers.
b.positive statements, they are speaking not as scientists but as forecasters.
c.normative statements, they are speaking not as scientists but as policy advisers.
d.normative statements, they are speaking not as policy advisers but as model-builders.
4) Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities
Frontier
Production Possibilities Frontier
If the production possibilities frontier shown is for two months of production, then
which of the following combinations of peanuts and cashews could Brazil produce in
two months?
a.7 peanuts and 35 cashews
b.5 peanuts and 100 cashews
c.2 peanuts and 190 cashews
d.3 peanuts and 150 cashews
6) A budget deficit occurs when government receipts fall short of government spending.
a.True
b.False
7) According to the Coase theorem, private parties can solve the problem of
externalities if
a.the cost of bargaining is small.
b.the initial distribution of legal rights favors the person being adversely affected by the
externality.
c.the number of parties involved is sufficiently large.
d.All of the above are correct.
8) The Condorcet voting paradox shows that outcomes based on dictatorial preferences
do not always obey the property of transitivity.
a.True
b.False
9) Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned.
Ernesto’s opportunity cost of cleaning Erin’s house is $70 per week.
Assume Erin is required to pay a tax of $40 when she hires someone to clean her house
for a week. Which of the following is correct?
a.Erin will now clean her own house.
b.Ernesto will continue to clean Erin’s house, but his producer surplus will decline.
c.Total economic welfare (consumer surplus plus producer surplus plus tax revenue)
will increase.
d.Erin will continue to hire Ernesto to clean her house, but her consumer surplus will
decline.
10) Park rangers at Yellowstone National Park are known to have low wages. This is
probably because
a.park rangers are required to be college graduates.
b.park rangers don’t need much money to live.
c.park ranger jobs are perceived to be dangerous.
d.park ranger jobs are perceived to be “fun.”
11) Which of the following is not correct?
a.Some economists believe that business owners who emphasize profit maximization
will hire the most productive workers regardless of the personal characteristics of the
worker; hence, these firms will drive discriminating firms out of business.
b.Two economists found that employers in Boston and Chicago were about 50 percent
more likely to interview job applicants named Emily and Greg than those named
Lakisha and Jamal.
c.Two economists found that women were less likely to participate in an experiment
where they were paid based on math skills but more likely to participate when they
were paid based on reading skills; men were more likely to participate when they were
paid based on math skills and less likely to participate when they were paid based on
reading skills.
d.Economists found that the prices of older baseball cards were about 10 percent lower
when the player was black rather than white.
12) If the output price of a product rises, the demand for capital will increase, raising
the rental price of capital.
a.True
b.False
13) ‘The U.S. tax code gives preferential treatment to investors in municipal bonds. This
is an example of
a.a tax loophole.
b.tax evasion.
c.an administrative burden.
d.tax enforcement.
14) Table 12-10
If Willie has $170,000 in taxable income, his average tax rate is
a. 23.8%.
b. 24.3%.
c. 25.9%.
d. 28.0%.
15) What type of statement is a descriptive statement about how the world is?
16) Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following
equations:
Suppose the world price in this market is $8 per unit, and suppose the country imposes
a $1 per unit tariff. If the country allows trade with a tariff, how much is the deadweight
loss caused by the tariff?
17) Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats.
The price of a shirt is $40 and the price of a hat is $30.
Refer to Scenario 21-4. If Frank buys 3 shirts during a certain month, then how many
hats does he buy during that month?
18) Does history suggest that most technological progress is labor-saving or
labor-augmenting?
19) A competitive, profit-maximizing pays its workers a wage of $200 per day and it
sells its output for $10 per unit. Determine the marginal product, on a daily basis, of the
last worker hired.
20) Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-14. In percentage terms, how much less income did the bottom 40%
of families have in 2010 than in 1980?
21) Figure 8-26
Suppose the government places a $3 tax per unit on this good. How much tax revenue is
collected after the tax is imposed?