1) Figure 20-2
Refer to Figure 20-2. Which of the following is consistent with the data reported in the
figure?
a.The female poverty rate is higher for all age groups than the male poverty rate.
b.The disparity between male and female poverty increases with age.
c.Neither a nor b are correct.
d.Both a and b are correct.
2) The slope of a line is equal to the change in the x-variable divided by the change in
the y-variable.
a.True
b.False
3) Denmark is an importer of computer chips and adds a $5 per chip tariff to the world
price of $12 per chip. Suppose Denmark removes the tariff. Which of the following
outcomes is not possible?
a.More Danish-produced chips are sold in Denmark.
b.More foreign-produced chips are sold in Denmark.
c.Danish consumers of chips become better off.
d.Total surplus in the Danish chip market increases.
4) Figure 15-8
What is the socially efficient price and quantity?
a.price = A; quantity = X
b.price = B; quantity = Y
c.price = B; quantity = X
d.price = C; quantity = X
5) Economists normally assume that the goal of a firm is to
(i)sell as much of its product as possible.
(ii)set the price of the product as high as possible.
(iii)maximize profit.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(iii) only
d.(i), (ii), and (iii)
6) A marginal change is a small incremental adjustment to an existing plan of action.
a.True
b.False
7) Figure 10-15
Which graph illustrates a pollution permit program?
a.the left graph
b.the right graph
c.both graphs
d.neither graph
8) Insurance companies charge annual premiums to collect revenue, which they then
use to pay customers who file claims for damages they incur. As a result of the moral
hazard problem (1) what is the effect on the percentage of policy holders making
claims, and (2) what is the effect on the average premium charged when compared to a
world with no moral hazard problem?
a.The percentage of policy holders making claims is higher; average annual premiums
are lower.
b.The percentage of policy holders making claims is lower; average annual premiums
are lower.
c.The percentage of policy holders making claims is higher; average annual premiums
are higher.
d.The percentage of policy holders making claims is lower; average annual premiums
are higher.
9) Suppose that in Brazil total annual output is worth $600 million and people work 30
million hours. In Peru total annual output is worth $800 million and people work 50
million hours. Productivity is higher
a.in Brazil. Most variation in the standard of living across countries is due to differences
in productivity.
b.in Brazil. Differences in productivity explain very little of the variation in the
standard of living across countries.
c.in Peru. Most variation in the standard of living across countries is due to differences
in productivity.
d.in Peru. Differences in productivity explain very little of the variation in the standard
of living across countries.
10) The product-variety externality states the benefits to consumers from the
introduction of a new product.
a.True
b.False
11) Because of the free-rider problem,
a.private markets tend to undersupply public goods.
b.the federal government spends too many resources on national defense and not
enough resources on medical research.
c.fireworks displays have become increasingly dangerous.
d.poverty has increased.
12) People have their highest saving rates when they are
a.retired.
b.middle-aged.
c.married with young children.
d.young and single.
13) If these are the only three sellers in the market, then the market quantity supplied at
a price of $6 is
a.6 units.
b.12 units.
c.18 units.
d.24 units.
14) Table 18-9
The following table shows the production function for a particular business. The
numbers represent the various labor and output combinations the firm may choose for
its output on a daily basis.
Refer to Table 18-9. What is the marginal product of the fifth unit of labor?
a.30 units
b.40 units
c.50 units
d.250 units
15) Libertarianism identifies a redistribution of income role for government when
a.the utility of the worst-off could be improved.
b.the income distribution is altered by illegal means (e.g. theft).
c.the total utility for society can be improved through redistribution of income.
d.a “veil of ignorance” would result in a recommendation of redistribution of income.
16)
It is apparent from the figure that the
a.good is inferior.
b.demand for the good decreases as income increases.
c.demand for the good conforms to the law of demand.
d.All of the above are correct.
17) The midpoint method is used to compute elasticity because it
a.automatically computes a positive number instead of a negative number.
b.results in an elasticity that is the same as the slope of the demand curve.
c.gives the same answer regardless of the direction of change.
d.automatically rounds quantities to the nearest whole unit.
18) Two firms, A and B, each currently dump 50 tons of chemicals into the local river.
The government has decided to reduce the pollution and from now on will require a
pollution permit for each ton of pollution dumped into the river. It costs Firm A $100
for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B
$50 for each ton of pollution that it eliminates before it reaches the river. The
government gives each firm 20 pollution permits. Government officials are not sure
whether to allow the firms to buy or sell the pollution permits to each other. What is the
total cost of reducing pollution if firms are not allowed to buy and sell pollution permits
from each other? What is the total cost of reducing pollution if the firms are allowed to
buy and sell permits from each other?
a. $3,000; $1,500
b. $4,500; $3,500
c. $4,500; $4,000
d. $4,500; $2,500
19) Which of the following statements regarding a competitive market is not correct?
a.There are many buyers and many sellers in the market.
b.Firms can freely enter or exit the market.
c.Price equals average revenue.
d.Price exceeds marginal revenue.