1) Which of the following demonstrates the law of supply?
a.When the price of leather belts rose, leather belt sellers increase their quantity
supplied of leather belts.
b.When car production technology improved, car producers increased their supply of
cars.
c.When sweater producers expected sweater prices to rise in the near future, they
decreased their current supply of sweaters.
d.When ketchup prices rose, ketchup sellers decreased their quantity supplied of
ketchup.
2) Table 12-10
If Miss Kay has $80,000 in taxable income, her tax liability is
a. $11,581.
b. $16,181.
c. $20,000.
d. $24,881.
3)
Table 12-21
The dollar amounts in the last three columns are the taxes owed under the three
different tax systems.
Which of the three tax systems is progressive?
a.Tax System A
b.Tax System B
c.Tax System C
d.All of the tax systems are progressive.
4) If the government allowed a free market in organs for transplant there would be
a.a decrease in the shortage of organs for transplant.
b.a decrease in producer surplus.
c.an decrease in consumer surplus
d.an increase in the waiting period for transplant organs.
5) Consider the budget constraint between ‘spending today” on the horizontal axis and
‘spending a year from today” on the vertical axis. Suppose that you have $100 today and
expect to receive $100 one year from today. Your money market account pays an annual
interest rate of 25%, and you may borrow money at that interest rate. Suppose now that
the interest rate decreases to 10%. What happens to the slope of your budget constraint
relative to when the interest rate was 25%? The slope
a.becomes steeper.
b.becomes flatter.
c.doesn’t change because the budget constraint shifts in parallel to the original budget
constraint.
d.doesn’t change because the budget constraint shifts out parallel to the original budget
constraint.
6) Figure 10-6
Which quantity represents the socially-optimal quantity of output in this market?
a.Q
b.Q’
c.Either Q or Q’. It is necessary to know whether the externality is positive or negative
to determine the socially-optimal quantity.
d.Some quantity between Q and Q’. The socially-optimal quantity depends on the
negotiating skills of the interested parties.
7) Since air pollution creates a negative externality,
a.social welfare will be enhanced when some, but not all air pollution is eliminated.
b.social welfare is optimal when all air pollution is eliminated.
c.governments should encourage private firms to consider only private costs.
d.the free market result maximizes social welfare.
8) Westland and Oceania have just started to trade with each other. Westland exports
goods produced with skilled labor and imports goods made with unskilled labor from
Oceania. Over time, we would expect that in Oceania the wages of unskilled workers
will
a.rise, and the wages of skilled labor will fall.
b.fall, and the wages of skilled labor will rise.
c.rise, and the wages of skilled labor will rise.
d.fall, and the wages of skilled labor will fall.
9) Compensating differentials are differences in wages related to the characteristics of a
job.
a.True
b.False
10) Figure 7-23
Refer to Figure 7-23. If the price were P1, producer surplus would be represented by the
area
a.F.
b.F+G.
c.D+H+F.
d.D+H+F+G+I.
11) Figure 16-4
Which of the following will occur in the long run in this industry?
a.Firms will exit this industry.
b.Firms will enter this industry.
c.This firm will continue to earn positive economic profits.
d.This firm will incur losses.
12) When the government imposes taxes on buyers or sellers of a good, society
a.loses some of the benefits of market efficiency.
b.gains efficiency but loses equality.
c.is better off because the government’s tax revenues exceed the deadweight loss.
d.moves from an elastic supply curve to an inelastic supply curve.