1) Susie wins $2 million in her state’s lottery. If Susie keeps working after she wins the
money, we can infer that the income effect is larger than the substitution effect for her.
a.True
b.False
2) A view of a spectacular sunset along a private beach is an example of a
a.private good.
b.public good.
c.nonrival but excludable good.
d.rival but nonexcludable good.
3) Table 22-15
Diane, Henry, and Linda are voting for who to promote. They can only promote one
candidate. Their preferences are given in the table below.
Refer to Table 22-15. If elections were held where voters choose either Beth or Mary,
and then choose either the winner or Fred, what would the results be?
a.Beth would win both elections.
b.Beth would win the first election and Fred would win the second election.
c.Mary would win the first and second elections.
d.Mary would win the first election and Fred would win the second election.
4) Scenario 21-3
Scott knows that he will ultimately face retirement. Assume that Scott will experience
two periods in his life, one in which he works and earns income, and one in which he is
retired and earns no income. Scott can earn $250,000 during his working period and
nothing in his retirement period. He must both save and consume in his work period
with an interest rate of 10 percent on savings.
Refer to Scenario 21-3. If the interest rate on savings increases,
a.Scott will decrease his savings in the work period if the income effect is greater than
the substitution effect for him.
b.Scott will increase his savings in the work period if the income effect is greater than
the substitution effect for him.
c.Scott will increase his savings in the work period if the substitution effect is greater
than the income effect for him.
d.Both a and c are correct.
5) One way that public policy encourages cooperation among oligopolists is through
antitrust law.
a.True
b.False
6) Vertical equity states that taxpayers with a greater ability to pay taxes should
a.contribute a decreasing proportion of each increment in income to taxes.
b.contribute a larger amount than those with a lesser ability to pay.
c.be less subject to administrative burdens of a tax.
d.be less subject to tax distortions that lead to deadweight losses.
7) A group of firms that collude is called a cartel.
a.True
b.False
8) Cory has just graduated from veterinary school. He can earn $40,000 working at a
small animal clinic or $50,000 working with farm animals and horses where the risks of
getting injured by an animal are higher. The higher salary to work with larger animals is
an example of
a.a compensating differential.
b.signaling theory.
c.an efficiency wage.
d.efficient union bargaining.
9) Suppose your college institutes a new policy requiring you to pay for a permit to
park your car in a campus parking lot.
a.The cost of the parking permit is not part of the opportunity cost of attending college
if you would not have to pay for parking otherwise.
b.The cost of the parking permit is part of the opportunity cost of attending college if
you would not have to pay for parking otherwise.
c.Only half of the cost of the parking permit is part of the opportunity cost of attending
college.
d.The cost of the parking permit is not part of the opportunity cost of attending college
under any circumstances.
10) When a country allows trade and becomes an importer of bottled water, which of
the following is not a consequence?
a.The gains of domestic consumers of bottled water exceed the losses of domestic
producers of bottled water.
b.The losses of domestic producers of bottled water exceed the gains of domestic
consumers of bottled water.
c.The price paid by domestic consumers of bottled water decreases.
d.The price received by domestic producers of bottled water decreases.