1) Scenario 20-2
The government is proposing switching from a progressive tax system, in which
families pay 15% of the first $40,000 earned, 30% of the next $40,000 earned, and 45%
of any income over $80,000 to a tax system in which every family pays 1/4 of its
income regardless of how much they earn and all income redistribution is eliminated.
That is, the tax revenue generated is used only for infrastructure, public administration,
and national defense.
Refer to Scenario 20-2. Which philosopher would be most in favor of the proposed
change in tax policy?
a.Jeremy Bentham
b.John Stuart Mill
c.John Rawls
d.Robert Nozick
2) Figure 18-11
Refer to Figure 18-11. Suppose the intersection of the supply and demand curves
matches with a value of $200 on the vertical axis. Then
a.the marginal product of capital is 200.
b.the value of the marginal product of capital is $200.
c.a unit of capital can be purchased for $200.
d.each worker in markets that produce capital goods earns a wage of $200.
3) Table 10-5
The following table shows the marginal costs for each of four firms (A, B, C, and D) to
eliminate units of pollution from their production processes. For example, for Firm A to
eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second
unit of pollution it would cost an additional $67.
If the government charged a fee of $69 per unit of pollution, how many units of
pollution would the firms eliminate altogether?
a.7
b.8
c.9
d.10
4) In recent years, the ratio of earnings of the typical U.S. college graduate to the
earnings of the typical high school graduate without additional education has
a.risen as the demand for skilled labor has increased relative to the demand for
unskilled labor.
b.risen as the demand for skilled labor has decreased relative to the demand for
unskilled labor.
c.fallen as the demand for skilled labor has increased relative to the demand for
unskilled labor.
d.fallen as the demand for skilled labor has decreased relative to the demand for
unskilled labor.
5) Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities
Frontier
c.can affect today’s supply.
d.cannot affect either today’s supply or future supply.
7) The Asian Development Bank has been investing in education and training programs
in the developing economies of Asia over the last five years. As a result of this
investment, economists who adhere to the human capital view of education would
predict
a.rising wages as labor productivity is enhanced.
b.falling wages as the labor market is saturated with too many educated workers.
c.the marginal productivity of capital would not be affected.
d.the marginal productivity of labor would not be affected.
8) When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units
of good B. After Jamar’s income decreases to $1,500, he consumes 33 units of good A
and 45 units of good B. Which of the following statements is correct?
a.Both goods A and B are normal goods.
b.Both goods A and B are inferior goods.
c.Good A is a normal good, and good B is an inferior good.
d.Good A is an inferior good, and good B is a normal good.
9) Wilma values a decorative garden rock at $15, while Fred values it at $10. The price
of a decorative garden rock is $9. If the government imposes a $2 tax per decorative
garden rock and the price of the rock rises to $11, what part of the deadweight loss
comes from Wilma, and what part comes from Fred?
a.none comes from Wilma; $1 comes from Fred
b.none comes from Wilma; $3 comes from Fred
c.$2 comes from Wilma; $1 comes from Fred
d.$4 comes from Wilma; $3 comes from Fred
10) Which of the following statements about market economies is correct?
a.In a market economy, no one is looking out for the economic well-being of society as
a whole.
b.Market economies are characterized by decentralized decision making and
self-interested decision makers.
c.Market economies have proven remarkably successful in promoting overall economic
well-being.
d.All of the above are correct.
11) Which of the following statements is not correct?
a.A gasoline tax can be an example of a tax that uses the benefits principle.
b.A progressive tax attempts to achieve vertical equity.
c.A progressive tax can be an example of the ability-to-pay principle.
d.A regressive tax attempts to achieve vertical equity.
12) Liberals believe
a.that the government should choose just policies as evaluated by an impartial observer
behind a “veil of ignorance.”
b.in the assumption of diminishing marginal utility.
c.that everyone in society should have equal utility.
d.that the government should not redistribute income.
13) Which of the following would not shift the demand curve for mp3 players?
a.a decrease in the price of mp3 players
b.a fad that makes mp3 players more popular among 12-25 year olds
c.an increase in the price of digital music downloads, a complement for mp3 players
d.a decrease in the price of satellite radio, a substitute for mp3 players
14) Tom, the manager and owner of a small company, believes in the signaling theory
of education, not the human capital theory. As such, Tom would be most likely to agree
with which of the following quotes?
a.”We encourage our employees to enroll in night classes to improve their onthejob
productivity.”
b.”We encourage our employees to participate in online seminars to learn new skills.”
c.”We pay higher wages to employees who have MBAs because, on average, their job
performance is better than similar employees who do not have MBAs.”
d.”When we interview prospective employees at job fairs, we are looking for college
graduates because they have the determination and followthrough to finish what they
start.”
15) Which of the following
movements would illustrate the effect in the market for orange juice of an
announcement by the American Dental Association that orange juice erodes tooth
enamel?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
16) Assume that Brad and Theresa can switch between producing wheat and producing
beef at a constant rate.
Brad has a comparative advantage in the production of
a.wheat and Theresa has a comparative advantage in the production of beef.
b.beef and Theresa has a comparative advantage in the production of wheat.
c.both goods and Theresa has a comparative advantage in the production of neither
good.
d.neither good and Theresa has a comparative advantage in the production of both
goods.
17) Table 18-3
Refer to Table 18-3. Which firm’s production function exhibits negative marginal
product?
a.Firm A
b.Firm B
c.Firm C
d.Firm D