State and local governments typically spend most of their budgets on providing
a. education.
b. public goods.
c. public welfare programs.
d. police protection and administrative services.
A market
a. may be an organized exchange.
b. refers to a set of sellers and buyers whose actions affect a commodity’s price.
c. is that area in which buyers and sellers compete to affect a product price.
d. All of the above are correct.
The more specialized and highly valued a worker’s skills are,
a. the lower is her stock of human capital.
b. the more likely she is to earn economic rent.
c. the less likely she is to sell her skills on the primary labor market.
d. the more likely she is to be directly affected by minimum wage legislation.
Discrimination can come from many groups of people, including employers and fellow
employees.
a. True
b. False
If price rises, what happens to demand for a product?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-economic theory has no answer to this question.
Discrepancies in profitability tempt rivals to charge the more profitable consumers
somewhat lower prices in order to lure them away from the firm that is “overcharging”
them. This practice is referred to as
a. collusion.
b. price dealing.
c. skimming.
d. market penetration.
An optimal decision is one that is selected based on an analysis of
a. explicit costs but not implicit costs.
b. implicit costs but not explicit costs.
c. both explicit costs and implicit costs.
d. neither explicit costs nor implicit costs.
Figure 11-5
Crown Theater is the only movie theater in the city. Its cost and revenue curves are
shown in Figure 11-5 Monopolist Crown Theater would set the price of its tickets at
a. $7,50
b. $6,00
c. $4,50
d. $3,00
If a team from the NFC wins the Superbowl, we can accurately predict
a. the stock market will end the year higher than it started.
b. the stock market will end the year lower than it started.
c. the stock market will rise, then fall, and end the year unchanged.
d. nothing about future stock prices.
In the Wealth of Nations, Adam Smith wrote about how countries could increase their
consumption of goods and services through specialization and trade with other
countries.
a. True
b. False
Asymmetric information generally leads to efficient resource allocation.
a. True
b. False
Bond prices in the marketplace will fall when
a. interest rates fall.
b. the company is losing money.
c. interest rates rise.
d. the company is making money.
The theory of land rent holds that
a. capital invested on any plot of land must yield the same return as capital invested on
any other plot of land.
b. the difference between the costs of producing on any two pieces of land must equal
the difference between their rents.
c. marginal land earns no rent.
d. All of the above are correct.
State governments’ main source of revenue is
a. property taxes.
b. income taxes.
c. excise taxes.
d. sales taxes.
Figure 20-3
Figure 20-3 shows a worker’s backward-bending supply curve of labor. Which of the
following statements is correct?
a. The substitution effect of a change in the wage dominates the income effect at all
points on the curve.
b. The income effect of a change in the wage dominates the substitution effect at all
points on the curve.
c. Above W*, the substitution effect of a change in the wage dominates the income
effect; below W*, the income effect dominates the substitution effect.
d. Above W*, the income effect of a change in the wage dominates the substitution
effect; below W*, the substitution effect dominates the income effect.
For more than a thousand years, the Catholic Church required its members to abstain
from meat on Fridays. Catholics customarily ate fish on Friday. After 1966 abstinence
from meat on Fridays was no longer required. Consequently, the
a. demand curve for fish shifted to the right.
b. demand curve for fish shifted to the left.
c. demand for meat decreased.
d. price of fish increased.
Figure 4-5
If the suppliers of a good will sell any amount at $30 but there are no sales, then the
market can best be represented by which graph in Figure 4-5?
a. 1
b. 2
c. 3
d. 4
The fact that resources tend to be specialized is one reason the production possibilities
frontier is drawn
a. bowed outward.
b. bowed inward.
c. as a straight line (but not horizontal).
d. as a horizontal straight line.
Government spending plays no role in meeting our social and public needs.
a. True
b. False
Professional baseball teams in the United States use only wooden bats. If aluminum
bats were permitted, the likely result would be a
a. shift in the supply curve for aluminum bats.
b. shift in the supply curve for wooden bats.
c. change in the quantity supplied of aluminum bats.
d. persistent shortage of aluminum bats.
The actions of speculators
a. help smooth out price fluctuations.
b. serve no useful economic purpose.
c. make investment much more risky.
d. cause severe shortages of some commodities.
The elasticity of demand is determined partly by whether the good is a necessity or a
luxury.
a. True
b. False
What are private goods? Mention two important attributes of private goods.
What are the strengths and weaknesses of the negative income tax (NIT) as an
alternative to traditional welfare programs?
Differentiate between an open and a closed economy? Do you agree that US economy
is more open among the advanced industrial countries in the world?
The cross elasticity between two goods has been measured at −1,2. How are the goods
related? Explain. Give an example of goods for which this might be a reasonable
measure of cross elasticity.
The interest rate is the opportunity cost of transferring spending power between time
periods. However, the market mechanism may fail to provide adequately for future
economic growth. List the reasons why a market might fail.
Explain the purpose of payroll taxes. Is it a proportional form of tax?
What are the assumptions of the model of perfect competition? Explain why each is
important for short-run and long-run equilibrium.
Use consumer indifference curves and budget lines to illustrate the effects of an
increase in income for a normal good and an inferior good (use two graphs). Be sure
your diagrams are fully and correctly labeled.