1) The circular flow model is not used anymore because it fails to perfectly replicate
real world situations.
a.True
b.False
2) Ensuring that Social Security is financially sound for future generations is an
important use of taxpayer dollars is an example of a
a.normative economic statement.
b.positive economic statement.
c.statement made by an economist working as a scientist.
d.judgment based on evaluation of evidence, not values.
3) Empirical work that does not account for differences in the productivity of workers
a.is unlikely to find evidence of wage differentials.
b.can provide strong evidence of labor market discrimination.
c.is likely to misinterpret apparent evidence of labor market discrimination.
d.is accepted as superior to empirical work that does correct for differences in
productivity of workers.
4) Figure 10-12
Which of the following is an appropriate label for Line 2?
a.social cost
b.social value
c.private cost
d.private value
5) Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
If the market price is Pa, in the short run the firm will earn
a.positive economic profits.
b.negative economic profits but will try to remain open.
c.negative economic profits and will shut down.
d.zero economic profits.
6) Table 15-16
A monopolist faces the following demand curve:
The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the
profit-maximizing level of output, the monopolist’s average total cost is
a. $9.00.
b. $7.50.
c. $6.74.
d. $5.82.
7) The government has just passed a law requiring that all residents earn the same
annual income regardless of work effort. This law is likely to
a.increase efficiency and increase equality.
b.increase efficiency but decrease equality.
c.decrease efficiency but increase equality.
d.decrease efficiency and decrease equality.
8) Brittany decides to save $50 from each paycheck so that she can go on a Spring
Break trip with her college roommates. However, when she gets paid this week, she
spends all of her money on new clothes. Which of the following insights into human
behavior does Brittany exhibit?
a.People are overconfident.
b.People care about fairness.
c.People are reluctant to change their minds.
d.People are inconsistent over time.
9) Prices direct economic activity in a market economy by
a.influencing the actions of buyers and sellers.
b.reducing scarcity of the goods and services produced.
c.eliminating the need for government intervention.
d.allocating goods and services in the most equitable way.
10) Mankiw argues that a primary difference between taxing products like gasoline and
taxing soda and other sugary drinks is that
a.consumption of gasoline causes negative externalities on society while consumption
of soda affects the consumer.
b.the government can generate significant revenue from the gas tax but not from a soda
tax.
c.gasoline has inelastic demand but soda has elastic demand.
d.Both a and c are correct.
11) Which of the following is correct? When oligopolies collude
a.they make higher profits and consumers of the product are better off.
b.they make higher profits but consumers of the product are worse off.
c.they make lower profits and consumers of the product are better off.
d.they make lower profits and consumers of the product are worse off.
12) Researchers have found that the systematic mistakes that people make in their
decision making include a lack of confidence in their own abilities.
a.True
b.False
13) Economic models can help us understand reality only when they include all details
of the economy.
a.True
b.False
14) Baseballs and baseball bats are substitute goods.
a.True
b.False
15) The opportunity cost of current household consumption is the
a.wage rate.
b.market interest rate.
c.price of the goods consumed.
d.explicit cost of consumption.
16) Firms operating in perfectly competitive markets produce an output level where
marginal revenue equals marginal cost.
a.True
b.False
17) Some economists are skeptical of the argument that employers are responsible for
discriminatory wage differences. They argue that market economies provide a natural
remedy to employer discrimination, and that remedy is
a.social responsibility.
b.the profit motive.
c.fear of reprisal from groups that suffer from those wage differences.
d.fear of reprisal from government in the form of prosecution.
18) Scenario 19-5
Jason works part-time at a grocery store after school. Jason has worked at the store for
two years but still hasn’t received a wage increase, even though newer employees have
received raises. Jason has threatened his employer with a lawsuit if he doesn’t get a
raise in the next few weeks. Jason believes he is a victim of labor-market
discrimination.
Refer to Scenario 19-5. In a competitive market for grocery store employees, why
might Jason’s wage differential persist?
a.Jason works harder than the other employees.
b.Jason may choose to do tasks other workers find undesirable.
c.Jason’s amiable personality allows him to work well with his coworkers.
d.None of the above is correct.
19) Which of the following statements about the circular-flow diagram is correct?
a.One must imagine that the economy operates without money in order to make sense
of the diagram.
b.The diagram leaves out details that are not essential for understanding the economic
transactions that occur between households and firms.
c.The government cannot be excluded as a decision maker in a circular-flow diagram.
d.All of the above are correct.
20) Public school teachers are known to have low wages. Which of the following would
push the teachers’ wages lower?
a.Public school teacher jobs are difficult.
b.Public school teachers are required to be college graduates.
c.Public school teachers belong to a union.
d.Teaching in a public school has a high element of personal satisfaction.