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1) The income effect of a price change is the change in consumption that results from
the movement to a new indifference curve.
a.True
b.False
2) All else equal, an increase in demand will cause an increase in producer surplus.
a.True
b.False
3) State and local governments receive the largest portion of their tax revenues from
a.sales taxes and income taxes.
b.income taxes and property taxes.
c.payroll taxes and income taxes.
d.property taxes and sales taxes.
4) Which of the following is not a question that economists try to answer when
measuring the distribution of income?
a.How many people live in poverty?
b.How often do people receive a raise at work?
c.How often do people move among income classes?
d.What problems arise in measuring the amount of inequality?
5) With a corrective tax, the supply curve for pollution is
a.vertical.
b.horizontal.
c.upward-sloping.
d.downward-sloping.
6) Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway
needs to be shoveled. Each person has to decide whether to take part in shoveling the
driveway. At the end of the day, either the driveway will be shoveled (if one or both
roommates take part in shoveling), or it will remain unshoveled (if neither roommate
shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy),
the possible outcomes are as follows:
Refer to Figure 17-4. In pursuing his own self-interest, Ed will
a.refrain from shoveling whether or not Aaron shovels.
b.shovel only if Aaron shovels.
c.shovel only if Aaron refrains from shoveling.
d.shovel whether or not Aaron shovels.
7) Uzbekistan's Production Possibilities FrontierAzerbaijan's Production
Possibilities Frontier
Aze
rbaijan has an absolute advantage in the production of
a.bolts and a comparative advantage in the production of bolts.
b.bolts and a comparative advantage in the production of nails.
c.nails and a comparative advantage in the production of bolts.
d.nails and a comparative advantage in the production of nails.
8) Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain
consumer named Steve.
Refer to Figure 21-24. In moving from point A to point C, Steve gives up
a.4.9 pounds of apples, gains 2.0 pounds of pears, and becomes worse off.
b.4.9 pounds of apples, gains 2.0 pounds of pears, and becomes better off.
c.5.5 pounds of apples, gains 4.1 pounds of pears, and becomes worse off.
d.5.5 pounds of apples, gains 4.1 pounds of pears, and becomes better off.
9) Figure 15-21
What is the price and quantity for this natural monopolist under fair return pricing?
a.A and J
b.E and J
c.F and K
d.H and L
10) To raise productivity, policymakers could
a.increase spending on education.
b.provide tax credits to firms for capital improvements.
c.fund research and development.
d.All of the above are correct.
11) In order to study labor markets more easily, we make which of the following
assumptions about firms?
(i)Firms sell their products in competitive markets.
(ii)Firms buy their inputs in competitive markets.
(iii)Firms maximize profits.
(iv)Firms maximize revenues.
a.(iii) only
b.(i) and (iii) only
c.(i), (ii), and (iii) only
d.(i), (ii), (iii), and (iv)
12) A utilitarian government has to balance the gains from greater income equality
against the losses from distorted work incentives. To maximize total utility, therefore,
the government
a.would never tax labor income.
b.must always achieve a fully egalitarian society.
c.enacts policies that only benefit the middle class.
d.stops short of a fully egalitarian society.
13) Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
If the market price is Pd, 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.
14) Which of the following are necessary characteristics of a monopoly?
(i)The firm is the sole seller of its product.
(ii)The firm's product does not have close substitutes.
(iii)The firm generates a large economic profit.
(iv)The firm is located in a small geographic market.
a.(i) and (ii) only
b.(i) and (iii) only
c.(i), (ii), and (iii) only
d.(i), (ii), (iii), and (iv)
