1) A central issue in the Microsoft antitrust lawsuit involved Microsoft’s integration of
its Internet browser into its Windows operating system, to be sold as one unit. This
practice is known as
a.tying.
b.predation.
c.wholesale maintenance.
d.retail maintenance.
2) The North American Free Trade Agreement
a.is an example of the unilateral approach to free trade.
b.eliminated tariffs on imports to North America from the rest of the world.
c.reduced trade restrictions among Canada, Mexico and the United States.
d.All of the above are correct.
3) “The government should choose policies deemed to be just, as evaluated by an
impartial observer behind a ‘veil of ignorance.'” This statement is most closely
associated with which political philosophy?
a.liberalism
b.utilitarianism
c.libertarianism
d.welfarism
4) Economist Arthur Laffer made the argument that tax rates in the United States were
so high that reducing the rates would increase tax revenue.
a.True
b.False
5) The buyer runs a risk of being sold a good of low quality when there is
a.a principal-agent problem.
b.a moral-hazard problem.
c.a problem involving hidden actions.
d.a problem involving hidden characteristics.
6) Horizontal equity refers to a tax system in which individuals with higher incomes
pay more in taxes than individuals with lower incomes.
a.True
b.False
7) In general, game theory is the study of
a.how people behave in strategic situations.
b.how people behave when the possible actions of other people are irrelevant.
c.oligopolistic markets.
d.all types of markets, including competitive markets, monopolistic markets, and
oligopolistic markets.
8) Between 1975 and 2011, the wage gap between women with a high school education
and women with a college education increased. In particular, in 2011 women with a
college degree earned about
a.12% more than women with a high school education.
b.26% more than women with a high school education.
c.70% more than women with a high school education.
d.81% more than women with a high school education.
9) Which of the following is an example of a positive externality?
a.Sue not catching the flu because she got a flu vaccine
b.Mary not catching the flu from Sue because Sue got a flu vaccine
c.Sue catching the flu because she did not get a flu vaccine
d.Mary catching the flu from Sue because Sue did not get a flu vaccine
10) Which of the following events must cause equilibrium price to rise?
a.demand increases and supply decreases
b.demand and supply both decrease
c.demand decreases and supply increases
d.demand and supply both increase
11) Measuring poverty using an absolute income scale like the poverty line can be
misleading because
a.income measures do not include the value of in-kind transfers.
b.money is more highly valued by the rich than by the poor.
c.the poor are not likely to participate in the labor market.
d.income measures are not adjusted for the effects of labor-market discrimination.
12) The demand for chicken wings is more elastic than the demand for razor blades.
Suppose the government levies an equivalent tax on chicken wings and razor blades.
The deadweight loss would be larger in the market for
a.chicken wings than in the market for razor blades because the quantity of chicken
wings would fall by more than the quantity of razor blades.
b.chicken wings than in the market for razor blades because the quantity of razor blades
would fall by more than the quantity of chicken wings.
c.razor blades than in the market for chicken wings because the quantity of chicken
wings would fall by more than the quantity of razor blades.
d.razor blades than in the market for chicken wings because the quantity of razor blades
would fall by more than the quantity of chicken wings.
13) A rational decisionmaker takes an action if and only if the marginal cost exceeds the
marginal benefit.
a.True
b.False
14) Pepsi and pizza are normal goods. When the price of pizza falls, the substitution
effect by itself will cause a
a.shift to a lower indifference curve so that the consumer buys less Pepsi.
b.shift to a higher indifference curve so that the consumer buys more Pepsi.
c.movement along the indifference curve so that the consumer buys more Pepsi.
d.movement along the indifference curve so that the consumer buys less Pepsi.
15) If the distribution of water is a natural monopoly, then
(i)imultiple firms would likely each have to pay large fixed costs to develop their own
network of pipes.
(ii)allowing for competition among different firms in the water-distribution industry is
efficient.
(iii)a single firm can serve the market at the lowest possible average total cost.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(i) and (iii) only
d.(iii) only
16) Katie is planning to sell her house, and she is considering making two upgrades to
the house before listing it for sale. Replacing the carpeting will cost her $2,500 and
replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the
value of her house by $3,000 and the new roof to increase the value of her house by
$7,000.
a.She should make both improvements to her house.
b.She should replace the carpeting but not replace the roof.
c.She should replace the roof but not replace the carpeting.
d.She should not make either improvement to her house.
17) Suppose that a firm’s longrun average total costs of producing small commuter jet
airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of
output, the firm is experiencing
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.specialization.
18)
Which of the following is not a result of the shift of the economy’s production
possibilities frontier from Panel (a) to Panel (b)?
a.The tradeoff between the production of tractors and sofas changes.
b.Production of 2 tractors and 10 sofas becomes efficient.
c.Production of 6 tractors and 14 sofas becomes possible.
d.The opportunity cost of a sofa is higher at all levels of sofa production.
19) The superstar phenomenon applies to
a.all famous people equally.
b.any type of worker who has high productivity.
c.markets where technology allows the best producer to supply every customer at a low
cost.
d.markets where a small group of workers produce a much higher quality product than
the average worker.
20) When the prisoners’ dilemma game is generalized to describe situations other than
those that literally involve two
prisoners, we see that cooperation between the players of the game
a.can be difficult to maintain, but only when cooperation would make at least one of the
players of the game worse off.
b.can be difficult to maintain, even when cooperation would make both players of the
game better off.
c.always works to the benefit of society as a whole.
d.always works to the detriment of society as a whole.