1) According to evidence provided by the U.S. government, the median black
a.woman is paid roughly the same as the median white woman.
b.woman is paid roughly the same as the median black man.
c.man is paid 21 percent less than the median white man.
d.All of the above are correct.
2) Diminishing marginal product occurs when
a.the marginal product of an input increases as the quantity of the input increases.
b.the marginal product of an input decreases as the quantity of the input increases.
c.total output increases as the quantity of an input increases.
d.total output decreases as the quantity of an input increases.
3) Chris and Tony’s Production Opportunities
Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible
production per month if both work the same number of 8 hour days. Given this
information, Chris’s opportunity cost of 1 lb. of tomatoes is
a.2 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 3 jars of sauce.
b.3 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 2 jars of sauce.
c.20 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 30 jars of sauce.
d.30 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 20 jars of sauce.
4) Consumer surplus is the
a.amount of a good consumers get without paying anything.
b.amount a consumer pays minus the amount the consumer is willing to pay.
c.amount a consumer is willing to pay minus the amount the consumer actually pays.
d.value of a good to a consumer.
5) Figure 7-34
Refer to Figure 7-34. Suppose there is initially a price ceiling set at $4 in this market. If
the government removed the price ceiling, by how much would total producer surplus
change?
6) Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
Given this firm’s cost curves, if the firm were perfectly competitive rather than
monopolistically competitive, then in a long-run equilibrium it would produce
a.less than 100 units of output.
b.between 100 and 133.33 units of output.
c.133.33 units of output.
d.more than 133.33 units of output.
7) Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
The farmer has an absolute advantage in the production of
a.pork.
b.tomatoes.
c.both goods.
d.neither good.
8) Walter used to work as a high school teacher for $40,000 per year but quit in order to
start his own painting business. To invest in his painting business, he withdrew $20,000
from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle,
whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies
and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist
to calculate his painting business’s costs.
a.Tyler says his costs are $25,900, and Greg says his costs are $66,500.
b.Tyler says his costs are $25,000, and Greg says his costs are $65,000.
c.Tyler says his costs are $66,500, and Greg says his costs are $66,500.
d.Tyler says his costs are $75,000, and Greg says his costs are $41,500.
9) Economic theory predicts that an increase in wages
a.will cause a wage earner to work more.
b.will cause a wage earner to work less.
c.will cause a wage earner to be more productive.
d.might cause a wage earner to work more or work less.
10) Which of the following statements accurately characterizes the effects of
minimum-wage laws?
a.Some workers who might have been employed at a lower wage become unemployed.
b.Those workers who remain employed benefit from a higher wage.
c.The effects of minimum-wage laws depend strongly on the elasticity of demand.
d.All of the above accurately characterize the effects of minimum-wage laws.
11)
Figure 8-4
The vertical distance between points A and B represents a tax in the market.
The tax results in a loss
of consumer surplus that amounts to
a. $105.
b. $140.
c. $170.
d. $210.
12) Which of the following is an example of a firm’s derived demand?
a.Workers with higher levels of education earn more, on average, than workers with
lower levels of education.
b.Factors that decrease the demand for labor will decrease the equilibrium wage.
c.A tractor manufacturer’s demand for assemblyline workers is inseparably linked to the
supply of tractors.
d.All of the above are correct.
13) Why can’t private individuals always internalize an externality without the help of
government?
a.Legal restrictions prevent side payments between individuals.
b.Transactions costs may be too high.
c.Side payments between individuals are inefficient.
d.Side payments between individuals are insufficient.
14) Scenario 17-3.
Consider two countries, Kinglandia and Rovinastan, that are engaged in an arms race.
Each country must decide whether to build new weapons or to disarm existing
weapons. Each country prefers to have more arms than the other because a large arsenal
gives it more influence in world affairs. But each country also prefers to live in a world
safe from the other country’s weapons. The following table shows the possible
outcomes for each decision combination. The numbers in each cell represent the
country’s ranking of the outcome (10 = best outcome, 1 = worst outcome).
Refer to Scenario 17-3. Which of these statements is correct?
(i)Kinglandia is better off building new weapons if Rovinastan builds new weapons.
(ii)Kinglandia is better off building new weapons if Rovinastan disarms existing
weapons.
(iii)Rovinastan is only better off building new weapons if Kinglandia builds new
weapons.
a.(i) and (ii)
b.(ii) and (iii)
c.(i) and (iii)
d.(i), (ii), and (iii)
15) Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for
the good, other things equal,
a.the larger is the decrease in quantity demanded as a result of the tax.
b.the smaller is the tax burden on buyers relative to the tax burden on sellers.
c.the larger is the deadweight loss of the tax.
d.All of the above are correct.
16) The Sherman Antitrust Act prohibits price-fixing in the sense that
a.competing executives cannot even talk about fixing prices.
b.competing executives can talk about fixing prices, but they cannot take action to fix
prices.
c.a price-fixing agreement can lead to prosecution provided the government can show
that the public was not well-served by the agreement.
d.None of the above is correct. The Sherman Act did not address the matter of
price-fixing.
17)
When the price is $15, total revenue is a. $1,500.
b. $2,500.
c. $3,500.
d. $4,500.
18) Alice and Betty’s Production Possibilities in one 8hour day.
Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier