1) Economists try to address their subject with a scientist’s objectivity.
a.True
b.False
2) If a consumer experiences a decrease in income, the new budget constraint will have
the same slope as the old budget constraint.
a.True
b.False
3) Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving
straight at each other. John and Paul have a common interest to avoid crashing into each
other, but they also have a personal, competing interest to not turn first to demonstrate
their courage to those observing the contest. The payoff table for this situation is
provided below. The payoffs are shown as (John, Paul).
Refer to Table 17-21. If John chooses Drive Straight, what will Paul choose to do and
what will Paul’s payoff equal?
a.Turn, 5
b.Drive Straight, 0
c.Turn, 10
d.Drive Straight, 200
4) Which of the following describes a situation where tax laws give preferential
treatment to specific types of behavior?
a.tax evasion
b.a political payoff
c.a tax loophole
d.compensation for the benefit of society
5) Daryn earns a higher salary than his friend Nick because Daryn is willing to work on
the loading dock, whereas Nick prefers to work in an air-conditioned office. The
difference in salary could illustrate a compensating differential.
a.True
b.False
6) An event that changes the supply of any factor of production can alter the earnings of
all the factors.
a.True
b.False
7) A recent law school graduate is considering two offers to practice law, one in New
York and one in Illinois. The New York bar exam is very difficult to pass compared
with Illinois’s exam. Assuming all other things equal, the attorney would expect
a.to be unable to predict the wage difference between Illinois and New York.
b.to make a lower wage in New York.
c.to make a lower wage in Illinois.
d.wages in Illinois and New York to be identical.
8) If an increase in the interest rate lowers savings, then
a.the substitution effect is greater than the income effect.
b.the income effect is greater than the substitution effect.
c.the income effect and the substitution effect move in the same direction.
d.we are unable to determine the sizes of the income and substitution effects without
more information.
9) Ms. Spring currently earns $100,000 a year, while her junior partner, Mr. Fall, earns
$55,000 a year. From the perspective of a utilitarian, if both of their incomes are subject
to diminishing marginal utility, taking a dollar from Ms. Spring and giving it to Mr. Fall
will
a.increase society’s total utility.
b.lower Ms. Spring’s marginal utility of income.
c.increase Mr. Fall’s marginal utility of income.
d.lower society’s total utility.
10) Table 12-14
The tax system is
a.progressive.
b.regressive.
c.proportional.
d.lump sum.
11) Table 13-2
What is the marginal product of the third worker?
a.300 units
b.200 units
c.100 units
d.50 units
12) As a group, oligopolists earn the highest profit when they
a.achieve a Nash equilibrium.
b.produce a total quantity of output that falls short of the Nash-equilibrium total
quantity.
c.produce a total quantity of output that exceeds the Nash-equilibrium total quantity.
d.charge a price that falls short of the Nash-equilibrium price.
13) Which of the following goods is rival and excludable?
a.an uncongested toll road
b.an uncongested nontoll road
c.a congested nontoll road
d.a congested toll road
14) Which of the following is a subject that economists study?
a.the growth in average income
b.the fraction of the population that cannot find work
c.the rate at which prices are rising
d.All of the above are correct.
15) If a determinant of demand other than price changes, the demand curve shifts.
a.True
b.False
16) Figure 15-18
If the monopoly firm is not allowed to price discriminate, then the deadweight loss
amounts to
a.$0.
b. $1,000.
c. $2,000.
d. $4,000.
17) The marginal rate of substitution is the slope of the budget constraint.
a.True
b.False
18) When an oligopoly market reaches a Nash equilibrium,
a.the market price will be different for each firm.
b.the firms will not have behaved as profit maximizers.
c.a firm will have chosen its best strategy, given the strategies chosen by other firms in
the market.
d.a firm will not take into account the strategies of competing firms.
19) Figure 10-13. On the graph, Q represents the quantity of plastics and P represents
the price of plastics.
In order to reach the social optimum, the government could
a.impose a tax of $2 per unit on plastics.
b.impose a tax of $6 per unit on plastics.
c.impose a tax of $8 per unit on plastics.
d.offer a subsidy of $6 per unit on plastics.
20) Workers who work the night shift are often paid more than those who do identical
work on the day shift. This is referred to as a
a.discriminatory wage practice.
b.compensating differential.
c.wage inequity.
d.a market inefficiency.