1) Assume that Falda and Varick can switch between producing wheat and producing
cloth at a constant rate.
Varick has a comparative advantage in the production of
a.wheat.
b.cloth.
c.both goods.
d.neither good.
2) You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes
into the show you realize that it is not a very good show and place only a $10 value on
seeing the remainder of the show. Alternatively you could leave the theater and go
home and watch TV or read a book. You place an $8 value on watching TV and a $6
value on reading a book.
a.You should leave the theater since the net benefit from seeing the remainder of the
show is -$20, while going home will earn you at least $8 of satisfaction.
b.You should stay and watch the remainder of the show.
c.You should go home and watch TV.
d.You should go home and read a book.
3) Table 18-7
Refer to Table 18-7. What is the value for the cell labeled BB?
a.80 units
b.100 units
c.180 units
d.200 units
4) Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various
levels of taxable income.
For this tax schedule, what is the average tax rate for an individual with $49,000 in
taxable income?
a. 25.8%
b. 27.5%.
c. 40.0%
d. 43.7%
5) Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
Consumer surplus before the tax was
levied is represented by area
a.A.
b.A+B+C.
c.D+H+F.
d.F.
6) Good X is an inferior good but not a Giffen good. When the price of X increases, the
consumer will consume
a.more X.
b.the same amount of X.
c.less X.
d.more or less X depending on the size of the income effect relative to the size of the
substitution effect.
7) A plumber who specializes in cleaning plugged sewer lines is typically paid a higher
wage than a plumber who works on installing water systems in new residential housing.
Which of the following would push the wages of plumbers who work on sewer lines
higher?
a.Plumbers who work on new residential housing require more training than plumbers
working on sewer lines.
b.Plumbing jobs that involve sewer lines are likely to have a high element of personal
satisfaction.
c.Plumbers who work with sewer lines are more likely to work the day shift.
d.plumbers who work with sewer lines are likely to be perceived as having a “dirty”
job.
8)
A movement from point H to point K could be caused by
a.unemployment.
b.a decrease in society’s preference for pillows.
c.fewer resources available for production of pillows.
d.All of the above are correct.
9) Which of the following movements
would illustrate the effect in the market for wedding cakes resulting from a decrease in
the number of pastry chefs?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
10) Allen and Ellen both work at Burger Ranch. Allen is paid more than Ellen. Which
of the following could explain why Allen is paid more?
a.The manager discriminates against women.
b.Allen works the undesirable early morning shift.
c.Allen has more experience and so more human capital.
d.All of the above could be correct.
11) A monopolistically competitive firm chooses the quantity to produce where
a.price equals marginal cost.
b.demand equals marginal cost.
c.marginal revenue equals marginal cost.
d.Both a and c are correct.
12) Figure 18-5
The figure shows a particular profitmaximizing, competitive firm’s valueofmarginal-
product (VMP) curve. On the horizontal axis, L represents the number of workers. The
time frame is daily.
Refer to Figure 18-5. The valueofmarginalproduct curve that is drawn could be
relabeled as the firm’s
a.production function.
b.total revenue curve.
c.labor supply curve.
d.labor demand curve.
13) If a firm experiences diminishing marginal productivity of labor, the marginal
product
a.increases as total product increases.
b.decreases as total product increases.
c.increases as total product decreases.
d.decreases as total product decreases.
14) Common resources and public goods have in common that they are not excludable
and they are not rival in consumption.
a.True
b.False
15) An individual’s demand curve for a good is derived by varying the
a.income level and observing the resulting total utility derived from both goods.
b.price of one good and observing the resulting quantities of the other good.
c.budget line to the left and calculating the loss in total utility.
d.price of one good and observing the resulting quantities demanded of that good.
16) Suppose the number of buyers in a market increases and a technological
advancement occurs also. What would we expect to happen in the market?
a.Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b.Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c.Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d.Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
17) As more units of an item are purchased, everything else equal, marginal satisfaction
from consuming additional units will tend to
a.decrease at the same rate for all consumers.
b.decrease but at different rates for different people.
c.increase at the same rate for all consumers.
d.increase but at a decreasing rate for all consumers.
18) Entry and exit drive each firm in a monopolistically competitive market to a point
of tangency between its
a.marginal revenue curve and its total cost curve.
b.marginal revenue curve and its average total cost curve.
c.demand curve and its total cost curve.
d.demand curve and its average total cost curve.
19) When designing public policies, which income group would philosopher John
Rawls argue needs the most attention?
a.Individuals located in the bottom fifth of the income distribution.
b.Individuals located at the average income level.
c.Individuals located in the top fifth of the income distribution.
d.Individuals located in the top five percent of the income distribution.
20) Assume that Indonesia and India can switch between producing rice and bananas at
a constant rate.
Indonesia’s opportunity cost of producing bananas is
a.2.5 units of rice. This is higher than India’s opportunity cost of producing bananas.
b.2.5 units of rice. This is lower than India’s opportunity cost of producing bananas.
c.2/5 units of rice. This is higher than India’s opportunity cost of producing bananas.
d.2/5 units of rice. This is lower than India’s opportunity cost of producing bananas.