1) If the government were to impose a tax that assigned everyone the same tax liability,
it would be
a.a lump-sum tax.
b.an equitable tax.
c.supported by the poor.
d.a progressive tax.
2) What is the most important factor that explains differences in living standards across
countries?
a.the quantity of money
b.the level of unemployment
c.productivity
d.equality
3) A consumer spends all of her income on goods x and y. At her optimum,
a.her valuation of the two goods exceeds the market’s valuation of the two goods.
b.her marginal rate of substitution between good x and good y exceeds the ratio of the
price of good x to the price of good y.
c.the slope of her budget constraint is equal to the slope of the highest indifference
curve that she can reach while remaining within her budget.
d.her expenditure on good x is equal to her expenditure on good y.
4) Scenario 7-2
Suppose market demand and market supply are given by the equations:
Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply
curve to
By how much does total consumer surplus increase as a result of this supply shift?
5)
Using the midpoint method, what is the price elasticity of supply between $4 and $5?
a. 0.50
b.0.56
c.1.80
d.2.00
6) High-school athletes who skip college to become professional athletes
a.obviously do not understand the value of a college education.
b.usually do so because they cannot get into college.
c.understand that the opportunity cost of attending college is very high.
d.are not making a rational decision since the marginal benefits of college outweigh the
marginal costs of college for high-school athletes.
7) Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
If
Chile and Colombia switch from each country dividing its time equally between the
production of coffee and soybeans to each country spending all of its time producing
the good in which it has a comparative advantage, then total production of soybeans
will increase by
a.3 pounds.
b.6 pounds.
c.9 pounds.
d.12 pounds.
8) When negative externalities are present in a market
a.private costs will be greater than social costs.
b.social costs will be greater than private costs.
c.only government regulation will solve the problem.
d.the market will not be able to reach any equilibrium.
9) The Coase theorem suggests that private solutions to an externality problem
a.are effective under all conditions.
b.will usually allocate resources efficiently if private parties can bargain without cost.
c.are only efficient when there are negative externalities.
d.may not be possible because of the distribution of property rights.
10) The demand for bread is likely to be more elastic than the demand for solid-gold
bread plates.
a.True
b.False