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1) If the for a good is 6, then a 3 percent decrease in price results in
a.a 20 percent increase in the quantity demanded.
b.an 18 percent increase in the quantity demanded.
c.a 2 percent increase in the quantity demanded.
d.a 1.8 percent increase in the quantity demanded.
2) Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax
rate in 1999 was
a.more than 50 percent.
b.exactly 50 percent.
c.higher than her average tax rate.
d.lower than her average tax rate.
3) Identify each of the following topics as being part of microeconomics or
macroeconomics:
a.the impact of a change in consumer income on the purchase of luxury automobiles
b.the effect of a change in the price of Coke on the purchase of Pepsi
c.the impact of a war in the Middle East on the rate of inflation in the United States
d.factors influencing the rate of economic growth
e.factors influencing the demand for tractors
f.the impact of tax policy on national saving
g.the effect of pollution taxes on the U.S. copper industry
h.the degree of competition in the cable television industry
i.the effect of a balanced-budget amendment on economic stability
j.the impact of deregulation on the savings and loan industry
4) Figure 7-20
For quantities greater than M, the value to the marginal buyer is
a.greater than the cost to the marginal seller, so increasing the quantity increases total
surplus.
b.less than the cost to the marginal seller, so increasing the quantity increases total
surplus.
c.greater than the cost to the marginal seller, so decreasing the quantity increases total
surplus.
d.less than the cost to the marginal seller, so decreasing the quantity increases total
surplus.
5) Employers can try to overcome the moral-hazard problem involving their employees
by
a.paying their employees more often.
b.paying their employees below-equilibrium wages since the employees will likely
shirk some of their responsibilities.
c.better monitoring their employees' work efforts.
d.requiring their employees to take a pre-employment work effort test.
6) Which of the following statements is not correct?
a.If the signaling theory of education is correct, additional schooling does not affect
worker productivity but rather signals a correlation between natural ability and
education.
b.The theory of efficiency wages suggests that firms pay higher wages to workers in
order to induce workers to be more productive.
c.Discrimination against workers of a certain race or ethnicity is often in conflict with a
firm's desire to maximize profits.
d.The theory of compensating wage differentials reflects the different skills, abilities,
and productivity of workers.
7) Which of the following is not correct?
a.The producer who requires a smaller quantity of inputs to produce a good is said to
have an absolute advantage in producing that good.
b.The producer who gives up less of other goods to produce Good X has the smaller
opportunity cost of producing Good X.
c.The producer who has the smaller opportunity cost of producing a good is said to
have a comparative advantage in producing that good.
d.The gains from specialization and trade are based not on comparative advantage but
on absolute advantage.
8) Table 16-3
The following table shows the output produced by each of the top eight firms in four
industries as well as the total industry output for those industries.
Which industry has the lowest concentration ratio?
a.Industry A
b.Industry B
c.Industry C
d.Industry D
9) Production Opportunities
We could use the information in the table to draw a production possibilities frontier for
England and a second production possibilities frontier for France. If we were to do this,
measuring wine along the horizontal axis, then
a.the slope of England's production possibilities frontier would be 4 and the slope of
France's production possibilities frontier would be -0.4.
b.the slope of England's production possibilities frontier would be 0.25 and the slope of
France's production possibilities frontier would be -2.5.
c.the slope of England's production possibilities frontier would be 0.25 and the slope of
France's production possibilities frontier would be 2.5.
d.the slope of England's production possibilities frontier would be 4 and the slope of
France's production possibilities frontier would be 0.4.
10) Which of the following statements about oligopolies is not correct?
a.An oligopolistic market has only a few sellers.
b.The actions of any one seller can have a large impact on the profits of all other sellers.
c.Oligopolistic firms are interdependent in a way that competitive firms are not.
d.Unlike monopolies and monopolistically competitive markets, oligopolies prices do
not exceed their marginal revenues.
11) Figure 13-9
The figure below depicts average total cost functions for a firm that produces
automobiles.
At output levels greater than N, the firm experiences
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.minimum efficient scale.
12) The adage, There is no such thing as a free lunch, is used to illustrate the principle
that
a.goods are scarce.
b.people face tradeoffs.
c.income must be earned.
d.households face many decisions.
13) The production possibilities frontiers below show how much Bob and Betty can
each produce in 8 hours of time.
Bob's Production Possibilities Frontier
Betty's Production Possibilities Frontier
Bob has
a.an absolute and comparative advantage producing good x.
b.an absolute but not a comparative advantage producing good x.
c.a comparative but not an absolute advantage producing good x.
d.neither a comparative nor an absolute advantage producing good x.
