1) Consumer surplus is the amount a buyer is willing to pay for a good minus the
amount the buyer actually has to pay for it.
a.True
b.False
2) The wage difference between jobs that require education and those that don’t
a.is not likely to be related to productivity differences.
b.is a barrier to obtaining an education.
c.does not affect the supply of workers in the different labor markets.
d.encourages workers to bear the cost of acquiring education.
3)
As price falls from Pa to Pb, we could use the three demand curves to calculate three
different values of the . Which of the three demand curves would produce the smallest
elasticity?
a.D1
b.D2
c.D3
d.All of the above are equally elastic.
4) Equilibrium price and quantity are,
respectively,
a.$15 and 200 units.
b.$25 and 600 units.
c.$25 and 400 units.
d.$35 and 200 units.
5) If a poor family has three children in public school and a rich family has two children
in private school, the ability-to- pay principle would suggest that
a.the poor family should pay more in taxes to pay for public education than the rich
family.
b.the rich family should pay more in taxes to pay for public education than the poor
family.
c.the benefits of private school exceed those of public school.
d.public schools should be financed by property taxes.
6) When studying how some event or policy affects a market, elasticity provides
information on the
a.equity effects on the market by identifying the winners and losers.
b.magnitude of the effect on the market.
c.speed of adjustment of the market in response to the event or policy.
d.number of market participants who are directly affected by the event or policy.
7) Most wage differences can be understood while maintaining the assumption of
equilibrium in the labor market. We deviate from that assumption, however, when we
consider
a.the superstar phenomenon.
b.the theory of efficiency wages.
c.compensating differentials.
d.differences in educational attainment.
8) The tax on gasoline causes deadweight losses, as is the case with all taxes.
a.True
b.False
9) The rental price of capital is the price a person pays to own the capital indefinitely.
a.True
b.False
10) Suppose the state of Illinois passes a law that bans smoking in restaurants. As a
result, residents of Wisconsin who do not like breathing second-hand smoke begin
driving across the border to Illinois to eat at restaurants there. Which of the following
principles does this best illustrate?
a.People respond to incentives
b.Rational people think at the margin
c.Trade can make everyone better off
d.Markets are usually a good way to organize economic activity
11) If Faith attends college, it will take her four years, during which time she will earn
no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000
for books. If she spends the four years working rather than attending college, she will
pay $18,000 for room and board, pay no intuition, and buy no books. Based on this
information, Faith’s economic cost of attending college would be $67,000 if, over the
four years, she could earn
a.$12,000 instead of attending college.
b.$14,000 instead of attending college.
c.$16,000 instead of attending college.
d.$18,000 instead of attending college.
12) Suppose that you want to build a community garden for your neighborhood, which
has 500 residents. The cost of the garden is $2,000, and each person values the garden
at $3. After a month, you have only received 75 donations at $3 each. The result is that
a.the local government should build the garden, but you should not.
b.you should still build the garden, but the local government should not.
c.neither you nor the local government should build the garden.
d.either you or the local government should build the garden.
13) Which of the following in not a reason that a lump-sum tax imposes a minimal
administrative burden on taxpayers?
a.Everyone can easily compute the amount of tax owed.
b.There is no benefit to hiring an accountant to do your taxes.
c.Everyone owes the same amount of tax, regardless of earnings.
d.The government can easily forecast tax revenues.
14) Table 22-18
The following table shows the preferences of four types of voters over four possible
alternatives as well as the percentage of the electorate with the given preferences.
Refer to Table 22-18. Suppose before any voting takes place that alternative W is
eliminated as an option. If the voters first choose between alternatives X and Y in a
majority vote, with the winner of that vote going against option Z in a majority vote,
which alternative would win?
a.X
b.Y
c.Z
d.There would be no clear winner – alternatives X and Y would tie.
15) Two firms, A and B, each currently dump 20 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 gives
each firm 10 pollution permits, which it can either use or sell to the other firm. 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.
After the two firms buy or sell pollution permits from each other, we would expect that
a.Firm A will no longer pollute, and Firm B will not reduce its pollution at all.
b.Firm B will no longer pollute, and Firm A will not reduce its pollution at all.
c.Firm A will dump 10 tons of pollution into the river, and Firm B will dump 10 tons of
pollution into the river.
d.Firm A will increase its pollution and Firm B will reduce its pollution.