1) Assume the market for handkerchiefs is competitive. A decrease in the market price
of handkerchiefs
a.decreases the demand for workers who make handkerchiefs and decreases their
equilibrium wage.
b.decreases the demand for workers who make handkerchiefs and increases their
equilibrium wage.
c.increases the demand for workers who make handkerchiefs and decreases their
equilibrium wage.
d.increases the demand for workers who make handkerchiefs and increases their
equilibrium wage..
2) Which of the following sets of events must cause an increase in the price of a new
house?
a.higher wages for carpenters, higher wood prices, increases in consumer incomes,
higher apartment rents, increases in population, and expectations of higher house prices
in the future
b.lower wages for carpenters, lower wood prices, increases in consumer incomes,
higher apartment rents, increases in population and expectations of higher house prices
in the future
c.lower wages for carpenters, higher wood prices, decreases in consumer incomes,
higher apartment rents, decreases in population and expectations of higher house prices
in the future
d.higher wages for carpenters, lower wood prices, decreases in consumer incomes,
lower apartment rents, decreases in population and expectations of lower house prices
in the future
3) If a country is an exporter of a good, then it must be the case that
a.the world price is less than its domestic price.
b.consumer surplus is higher than a no trade situation.
c.the world price is greater than its domestic price.
d.they used an infant-industry argument to protect its producers.
4) An increase in the supply of labor has the effect of decreasing the
a.wage.
b.marginal product of labor.
c.value of the marginal product of labor.
d.All of the above are correct.
5) The government provides public goods because
a.private markets are incapable of producing these types of goods.
b.free-riders make it difficult for private markets to supply the socially optimal quantity.
c.markets are always better off with some government oversight.
d.external benefits will accrue to private producers.
6) Assuming that oligopolists do not have the opportunity to collude, once they have
reached the Nash equilibrium, it
a.is always in their best interest to supply more to the market.
b.is always in their best interest to supply less to the market.
c.is always in their best interest to leave their quantities supplied unchanged.
d.may be in their best interest to do any of the above, depending on market conditions.
7) The values in the table represent the amounts of lemonade and pizzas that Alice and
Betty can produce in one week without and with specialization and trade. What are
Alice and Betty’s gains from specialization and trade?
a.Alice gains 7 pitchers of lemonade and 10 pizzas, while Betty gains 13 pitchers of
lemonade and 10 pizzas.
b.Alice gains 200 pitchers of lemonade and 100 pizzas, while Betty gains 180 pitchers
of lemonade and 180 pizzas.
c.Alice gains 207 pitchers of lemonade and 110 pizzas, while Betty gains 193 pitchers
of lemonade and 190 pizzas.
d.Alice gains 400 pitchers of lemonade and 0 pizzas, while Betty gains 0 pitchers of
lemonade and 300 pizzas.
8) Using the midpoint method, which of the three supply curves has the most elastic
price elasticity of supply?
a.Supply curve X
b.Supply curve Y
c.Supply curve Z
d.There is no difference in the elasticity of the three supply curves.
9) In the long run, the quantity supplied of most goods
a.will increase in almost all cases, regardless of what happens to price.
b.cannot respond at all to a change in price.
c.can respond to a change in price, but the change is almost always inconsequential.
d.can respond substantially to a change in price.
10) Economists who support minimum-wage legislation are likely to believe that the
a.demand for unskilled labor is relatively inelastic.
b.demand for unskilled labor is relatively elastic.
c.supply of unskilled labor is relatively elastic.
d.supply of unskilled labor is relatively inelastic.
11) Frank is given the choice between pizza and hotdogs and chooses pizza. Then,
before serving him, his host tells Franks he could have a hamburger. Frank says he
wants a hot dog. Which of the properties of Arrow’s impossibility theorem does Frank
violate?
12) Table 15-1
If the monopolist sells 8 units of its product, how much total revenue will it receive
from the sale?
a. $14
b. $40
c. $112
d. $164
13) Most economic models incorporate the assumption of rational behavior on the part
of economic actors.
a.True
b.False
14) Bill operates a boat rental business in a competitive industry. He owns 10 boats and
pays $1,000 per month on the loan that he took out to buy them. He rents each boat for
$200 per month. The variable cost for each boat rental is $50. In the off season, Bill
should
a.operate his business as long as he rents at least 7 boats per month.
b.operate his business as long as he rents at least 1 boat per month.
c.operate his business as long as he rents all 10 boats each month.
d.raise the price he charges per boat rental.
15) Which of the following is likely to have the most price inelastic demand?
a.mint-flavored toothpaste
b.toothpaste
c.Colgate mint-flavored toothpaste
d.a generic mint-flavored toothpaste
16) The accountants hired by the Brookside Racquet Club have determined total fixed
cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000.
Because of this information, in the short run, the Brookside Racquet Club should
a.shut down because staying open would be more expensive.
b.lower their prices to increase their profits.
c.stay open because shutting down would be more expensive.
d.stay open because the firm is making an economic profit.
17) If the government were to intervene and set a wage for unskilled labor above the
market wage, then we would expect, relative to the market outcome,
a.an increase in the number of unskilled jobs available.
b.a decrease in the number of unskilled jobs available.
c.a decrease in the number of workers wanting unskilled jobs.
d.None of the above is correct.
18) Which of the following is an example of signaling?
a.Pat is considering the purchase of a used car. Before making the purchase he has the
car checked by an auto mechanic.
b.Zach is applying for a new life insurance policy. Before writing the policy, the
insurance company requires Zach to be examined by a doctor.
c.Denise is applying for a new job. Before hiring her, the firm requires Denise to take a
drug test.
d.Marcus is planning to ask for Chaquila’s hand in marriage. Before asking her, he buys
her a box of her favorite chocolates and takes her to dinner at her favorite restaurant.
19) Assume that Max and Min can switch between producing mittens and producing
hats at a constant rate.
Which of the following points would be on Min’s production possibilities frontier,
based on a 36-hour production period?
a.(3 mittens, 8 hats)
b.(8 mittens, 5 hat)
c.(10 mittens, 4 hats)
d.More than one of the above would be on Min’s production possibilities frontier.