1) Evidence from a 1988 study of the market for professional basketball players
a.found no evidence of consumer-driven wage discrimination.
b.found some evidence of consumer-driven wage discrimination.
c.found that measurement of marginal productivity was very difficult for basketball
players.
d.indicated that sports with strong player associations are unlikely to experience wage
discrimination.
2) A tariff
a.lowers the domestic price of the exported good below the world price.
b.keeps the domestic price of the exported good the same as the world price.
c.raises the domestic price of the imported good above the world price.
d.lowers the domestic price of the imported good below the world price.
3) According to the signaling theory of education, better-educated workers
a.are likely to be high-ability workers.
b.improve their marginal productivity through education.
c.are in scarce supply in less developed countries.
d.can only find low-skilled jobs due to technology.
4) The income tax requires that taxpayers pay 10 percent on the first $50,000 of income
and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his
marginal and average tax rates?
a.20 percent and 13 percent, respectively
b.20 percent and 15 percent, respectively
c.10 percent and 13 percent respectively
d.10 percent and 15 percent respectively
5) At a price of $4, there is a
a.surplus of 1 unit.
b.surplus of 3 units.
c.shortage of 1 unit.
d.shortage of 3 units.
6) People with hidden health problems are more likely to buy health insurance than are
other people. This is an example of
a.moral hazard and makes the cost of health insurance higher than otherwise.
b.moral hazard and makes the cost of health insurance lower than otherwise.
c.adverse selection and makes the cost of health insurance higher than otherwise.
d.adverse selection and makes the cost of health insurance lower than otherwise.
7) Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the
good, other things equal, the
a.smaller is the response of quantity supplied to the tax.
b.larger is the tax burden on sellers relative to the tax burden on buyers.
c.larger is the deadweight loss of the tax.
d.All of the above are correct.
8) The two words most often used by economists are
a.prices and quantities.
b.resources and allocation.
c.supply and demand.
d.efficiency and equity.
9) Suppose roses are currently selling for $40 per dozen, but the equilibrium price of
roses is $30 per dozen. We would expect a
a.shortage to exist and the market price of roses to increase.
b.shortage to exist and the market price of roses to decrease.
c.surplus to exist and the market price of roses to increase.
d.surplus to exist and the market price of roses to decrease.
10) Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast
cereals, and dog food, typically spend what percent of their revenues on advertising?
a.0-1
b.2-4
c.10-20
d. over 50
11) Table 12-10
If Si has $100,000 in taxable income, his average tax rate is
a. 13.7%.
b. 15.2%.
c. 21.7%.
d. 28.3%.
12) Which of the following is a reason to think that government action may not be
valuable to improve market outcomes with asymmetric information?
a.The private market can sometimes deal with information asymmetries using signaling
and screening.
b.The government rarely has more information than the private parties.
c.Government actions have their own imperfections.
d.All of the above are correct.
13) A mortgage interest deduction would be considered
a.tax evasion.
b.a subsidy to the poor.
c.a deduction that benefits all members of society equally.
d.a tax loophole.
14) Drug companies are allowed to be monopolists in the drugs they discover in order
to
a.allow drug companies to charge a price that is equal to their marginal cost.
b.discourage new firms from entering the drug market.
c.encourage research.
d.allow the government to earn patent revenue.
15) In order to determine tax incidence, one must
a.consider issues of equity.
b.also determine the legal liability of the tax.
c.evaluate where the tax burden eventually falls.
d.use the “flypaper theory” of taxation.
16) The following table shows the number of cases of water each seller is willing to sell
at the prices listed.
If only Brook Mountain and Cascade Waters operate in this market, what is the market
quantity supplied when the price is $3.00 per case?
17) It costs a company $30,000 to produce 600 heart rate monitors. The company’s cost
will be $30,070 if it produces an additional heart rate monitor. The company is currently
producing 600 heart rate monitors.
What is the company’s marginal cost?
18) Entry of firms in a monopolistically competitive industry is characterized by two
externalities. List them and briefly describe how consumers and existing firms are
influenced by them.
19)
The movement from S1 to S2 is a
20) The proposal to place a tax on soda is intended to address what insight about human
behavior?
21) If corn is an input into the production of ethanol, will a decrease in the price of corn
increase the supply of ethanol or decrease the supply of ethanol?
22) Figure 15-23
What type of monopoly is shown in the figure?