1) Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings
to start a coffee shop. The interest rate is 5 percent for both the bank loan and her
personal savings. Her opportunity cost of capital is $250.
a.True
b.False
2) Which of the following statements is correct?
a.The use of pollution permits and corrective taxes reduces the cost of environmental
protection.
b.Rich countries usually have cleaner environments than poor countries because a clean
environment is like other normal goods in that it has a positive income elasticity.
c.Clean water and clean air are goods to which the law of demand applies.
d.All of the above are correct.
3) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Korea has an absolute advantage in the production of
a.cars and a comparative advantage in the production of cars.
b.cars and a comparative advantage in the production of airplanes.
c.neither good and a comparative advantage in the production of cars.
d.neither good and a comparative advantage in the production of airplanes.
4) When studying the effects of changes in public policy, economists believe that
a.it is important to distinguish between the short run and the long run.
b.the assumptions used in studying those effects should be the same for the short run as
for the long run.
c.the short-run effects of those changes are always more beneficial to society than are
the long-run effects.
d.the long-run effects of those changes are always more beneficial to society than are
the short-run effects.
5) Figure 8-13
Suppose the government places a $5 per-unit tax on this good. The per-unit burden of
the tax on buyers is
a.$1.
b.$2.
c.$3.
d.$5.
6) Elasticity of demand is closely related to the slope of the demand curve. The less
responsive buyers are to a change in price, the
a.steeper the demand curve will be.
b.flatter the demand curve will be.
c.further to the right the demand curve will sit.
d.closer to the vertical axis the demand curve will sit.
7) Lisa’s Production Possibilities FrontierBryce’s Production Possibilities Frontier