1) Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production
Possibilities Frontier
Sup
pose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan
makes and sends to Azerbaijan. Which of the following combinations of bolts and nails
could Uzbekistan then consume, assuming Uzbekistan specializes in making bolts and
Azerbaijan specializes in making nails?
a.7 bolts and 70 nails
b.12 bolts and 56 nails
c.17 bolts and 40 nails
d.25 bolts and 15 nails
2) A family’s tax liability is the amount of money it owes in taxes.
a.True
b.False
3) Which of the following is not correct?
a.Toys for Tots, a program that collects new toys to distribute to poor children at
Christmas, is an example of an in-kind transfer.
b.Supporters advocate the use of in-kind transfers because they restrict the ability of
recipients to purchase alcohol and drugs.
c.Critics argue that in-kind transfers are inefficient and disrespectful.
d.For a program to qualify as an in-kind transfer, it must have government approval.
4) An agreement between two duopolists to function as a monopolist usually breaks
down because
a.they cannot agree on the price that a monopolist would charge.
b.they cannot agree on the output that a monopolist would produce.
c.each duopolist wants a larger share of the market to capture more profit.
d.each duopolist wants to charge a higher price than the monopoly price.
5) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. This particular game
a.features a dominant strategy for the U.S.
b.features a dominant strategy for Farland.
c.is a version of the prisoners’ dilemma game.
d.All of the above are correct.
6) An increase in supply is represented by a
a.movement downward and to the left along a supply curve.
b.movement upward and to the right along a supply curve.
c.rightward shift of a supply curve.
d.leftward shift of a supply curve.
7) If the price elasticity of supply for a window manufacturer is 1.5,
a.a 10% increase in the price of windows results in a 15% increase in the quantity of
windows supplied.
b.supply is considered to be inelastic.
c.the manufacturer is likely operating very near capacity.
d.All of the above are correct.
8) Assume that consumption when young and consumption when old are both normal
goods. The income effect of an increase in the interest rate will result in
a.an increase in saving when young.
b.an increase in saving when old.
c.a decrease in saving when young.
d.a decrease in saving when old.
9) Knowledge is an example of a
a.public good.
b.private good.
c.common resource.
d.club good.
10) Most people agree that the tax system
a.should be both efficient and equitable.
b.cannot raise enough revenue to cover government expenditures.
c.would raise more revenue if tax rates were lowered.
d.should be rewritten to require everyone to pay the same percentage of income in
taxes.
11) The concept that people should pay taxes based on the benefits they receive from
government services is called
a.the ability-to-pay principle.
b.the benefits principle.
c.horizontal equity.
d.vertical equity.
12) Prince is currently consuming some of good X and some of good Y. If good Y is a
normal good for Prince, then an increase in his income will definitely cause him to
a.increase his consumption of X.
b.increase his consumption of Y.
c.decrease his consumption of X.
d.decrease his consumption of Y.
13) Scenario 21-3
Scott knows that he will ultimately face retirement. Assume that Scott will experience
two periods in his life, one in which he works and earns income, and one in which he is
retired and earns no income. Scott can earn $250,000 during his working period and
nothing in his retirement period. He must both save and consume in his work period
with an interest rate of 10 percent on savings.
Refer to Scenario 21-3. Assume that Scott decides to consume $100,000 in the work
period. How much money will he have available for consumption in his retirement
period?
a. $100,000
b. $110,000
c. $150,000
d. $165,000
14) If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the
deadweight loss from the tax
a.remains constant.
b.increases by a factor of 4.
c.increases by a factor of 9.
d.increases by a factor of 16.
15) For a college student who wishes to calculate the true costs of going to college, the
costs of room and board
a.should be counted in full, regardless of the costs of eating and sleeping elsewhere.
b.should be counted only to the extent that they are more expensive at college than
elsewhere.
c.usually exceed the opportunity cost of going to college.
d.plus the cost of tuition, equals the opportunity cost of going to college.
16) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Japan and Korea would not be able to gain from trade if Korea’s opportunity cost of one
car changed to
a.1/5 airplane.
b.1/3 airplane.
c.3 airplanes.
d.5 airplanes.