1) Barb’s aunt gave her $100 for her birthday with the condition that Barb buy herself
something. In deciding how to spend the money, Barb narrows her options down to four
choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally
she decides on Option B. The opportunity cost of this decision is
a.the value to Barb of the option she would have chosen had Option B not been
available.
b.the value to Barb of Options A, C and D combined.
c.the average of the values to Barb of Options A, C, and D. d. $100.
2) In the context of decisionmaking, the word marginal is most closely associated with
the word
a.unimportant.
b.slow.
c.edge.
d.irrational.
3) Which two groups of decision makers are included in the simple circular-flow
diagram?
a.markets and government
b.households and government
c.firms and government
d.households and firms
4) Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Which of the following points would be on Shantala’s production possibilities frontier,
based on a 40-hour week?
a.(120 cellular phones programmed, 250 cellular phones tested)
b.(180 cellular phones programmed, 150 cellular phones tested)
c.(240 cellular phones programmed, 600 cellular phones tested)
d.More than one of the above would be on Shantala’s production possibilities frontier.
5) Assume a firm in a competitive industry is producing 800 units of output, and it sells
each unit for $6. Its average total cost is $4. Its profit is
a. -$1,600.
b. $1,600.
c. $3,200.
d. $8,000.
6) Figure 9-10. The figure applies to Mexico and the good is rifles.
When trade takes place, the quantity Q2 – Q1 is
a.the number of rifles bought and sold in Mexico.
b.the number of rifles produced in Mexico.
c.the number of rifles exported by Mexico.
d.the number of rifles imported by Mexico.
7) Scenario 14-5
A study sponsored by the Food Consumer Safety Board found that consumption of
irradiated tomatoes increased the health of laboratory rats. As a result of national press
coverage of the report, the demand for irradiated tomatoes increased dramatically.
Organic farmers were able to switch from organic production of tomatoes to irradiated
production with no additional cost. Assume that the tomato market satisfies all of the
assumptions of perfect competition.
If the increased production of irradiated tomatoes caused a rise in the marginal
transportation costs of moving irradiated tomatoes to market, the
a.short-run market supply curve for irradiated tomatoes would be affected but not the
long-run market supply.
b.long-run market supply curve for irradiated tomatoes would be perfectly elastic.
c.long-run market supply of irradiated tomatoes would be downward sloping.
d.long-run market supply of irradiated tomatoes would be upward sloping.
8) Figure 8-3
The vertical distance between points A and C represents a tax in the market.
The price that buyers effectively pay after the tax is imposed is
a.P1
b.P2
c.P3
d.P4
9) Governments enact policies to
a.make the distribution of income more efficient.
b.make the distribution of income more equal.
c.maximize the use of the welfare system.
d.minimize the use of in-kind transfers.
10) Economists compute the as the
a.percentage change in price divided by the percentage change in quantity demanded.
b.change in quantity demanded divided by the change in the price.
c.percentage change in quantity demanded divided by the percentage change in price.
d.percentage change in quantity demanded divided by the percentage change in income.
11) Behavioral economics
a.integrates psychological insights into economic models.
b.relies on the assumption that homo economicus describes economic decision-making.
c.assumes that economic agents have full information about the conditions surrounding
their decisions.
d.All of the above are correct.
12) Splitting up a monopoly is often justified on the grounds that
a.consumers prefer dealing with small firms.
b.small firms have lower costs.
c.competition is inherently efficient.
d.small firms produce higher quality products.
13) Suppose that flu shots create a positive externality equal to $12 per shot. What is
the relationship between the equilibrium quantity and the socially optimal quantity of
flu shots produced?
a.They are equal.
b.The equilibrium quantity is greater than the socially optimal quantity.
c.The equilibrium quantity is less than the socially optimal quantity.
d.There is not enough information to answer the question.
14) When an industry is characterized by technology spillover, what should the
government do to ensure that the market equilibrium equals the socially optimal
equilibrium?
a.Impose a tax greater than the value of the technology spillover.
b.Not allow production of any product that causes a technology spillover.
c.Provide a subsidy equal to the value of the technology spillover.
d.Require producers to “clean up” any spillover that results from their production
process.
15) When Ukraine trades with Italy,
a.both countries are likely made better off.
b.only Italy benefits since Ukraine can produce all goods at a higher level of quality
than Italy.
c.only Ukraine benefits since Italy’s low wages guarantee that Italian firms will be
profitable regardless of trade.
d.neither country will benefit since Ukraine is more efficient than Italy in the
production of all goods.
16) In which of the following decades was there both high inflation and rapid money
supply growth in the US?
a.the 1970’s and the 1990’s
b.the 1970’s but not the 1990’s
c.the 1990’s but not the 1970’s
d.neither the 1970’s nor the 1990’s
17) There is general agreement among economists that the long-run time period exceeds
one year.
a.True
b.False