1) Which of the following is not an explanation for why better educated workers earn
more, on average, than less educated workers?
a.The higher wages may be a compensating differential for the cost of acquiring the
education.
b.Workers with a college degree signal their higher abilities to potential employers.
c.Skilled labor is increasingly becoming a substitute for unskilled labor, which raises
the earnings of workers with more education.
d.Better educated workers are more productive, on average.
2) Poverty is found to be correlated with
a.age and race but not family composition.
b.race only.
c.race and family composition but not age.
d.age, race, and family composition.
3) The government may choose to do nothing to reduce monopoly inefficiency because
the “fix” may be worse than the problem.
a.True
b.False
4) Which of the following is an example of the Tragedy of the Commons?
a.The number of professional football teams increases to the point where the quality of
the games decreases, as does television viewership.
b.The number of satellites increases to the point where they begin running into each
other.
c.Disney World becomes so crowded that it institutes a lottery for admissions.
d.A tiger breeding program becomes so successful that local zoos have to build
additional exhibits so that visitors can view the cats.
5) The following table shows a portion of the demand schedule for a particular good at
various levels of income.
Using the midpoint method, at a price of $16, what is the income elasticity of demand
when income rises from $5,000 to $10,000?
a.0.00
b.0.50
c.1.00
d.1.50
6) “Monopolists do not worry about efficient production and minimizing costs since
they can just pass along any increase in costs to their consumers.” This statement is
a.false; price increases will mean fewer sales, which may lower profits.
b.true; this is the primary reason why economists believe that monopolies result in
economic inefficiency.
c.false; the monopolist is a price taker.
d.true; consumers in a monopoly market have no substitutes to turn to when the
monopolist raises prices.
7) When a supply curve is relatively flat,
a.sellers are not very responsive to changes in price.
b.supply is relatively inelastic.
c.supply is relatively elastic.
d.Both a and b are correct.
8) Corporate income taxes are based on the amount of revenue a corporation earns.
a.True
b.False
9) Free entry and exit means that the number of firms in the market adjusts until
a.producers continuously enter the market freely.
b.the market grows to a profitable level.
c.economic profits are driven to zero.
d.products are free.
10) You can think of an indifference curve as an
a.equal-cost curve.
b.equal-marginal-cost curve.
c.equal-utility curve.
d.equal-marginal-utility curve.
11) Implicit costs
a.do not require an outlay of money by the firm.
b.do not enter into the economist’s measurement of a firm’s profit.
c.are also known as variable costs.
d.are not part of an economist’s measurement of opportunity cost.
12) Which of the following statements is not correct about competitive firms?
a.In a long-run equilibrium, firms must be operating at their efficient scale.
b.In the short run, the number of firms in an industry may be fixed.
c.In the long run, the number of firms can adjust to changing market conditions.
d.In the short run, firms must be operating at a level of output where price equals
average variable cost.
13) Along the vertical axis of the production function we typically measure
a.revenue.
b.the marginal product of the input.
c.the quantity of input.
d.the quantity of output.
14) Suppose the government imposes a tax of 20 percent on the first $50,000 of income
and 30 percent on all income above $50,000. What is the average tax rate when income
is $60,000?
a.21.7 percent
b.25.0 percent
c.46.7 percent
d.50.0 percent
15) If the owners of land,
labor, and capital are represented by Box B of this circular-flow diagram, then
a.households are represented by Box A.
b.firms are represented by Box C.
c.firms are represented by Box A.
d.firms are sellers in Box B.
16) Figure 15-7
In order to maximize profits, the monopolist should charge a price of
a. $9.
b.$12.
c.$20.
d.$23.
17) Market failure refers to a situation in which the market does not allocate resources
efficiently.
a.True
b.False
18) Tax systems that impose recordkeeping requirements on taxpayers are said to have
a(n)
a.auditing burden.
b.lower incidence of compliance.
c.administrative burden.
d.certification requirement.