1) Suppose that a rare virus infects and kills a significant percentage of the population.
Assuming that land and labor are complements in a farming production function, what
would happen to the wages earned by workers and the rents earned by landowners?
a.Both wages and rents would increase.
b.Both wages and rents would decrease.
c.Wages would increase, and rents would decrease.
d.Wages would decrease, and rents would increase.
2) When a tax is imposed on a good for which the demand is relatively elastic and the
supply is relatively inelastic,
a.buyers of the good will bear most of the burden of the tax.
b.sellers of the good will bear most of the burden of the tax.
c.buyers and sellers will each bear 50 percent of the burden of the tax.
d.the effective price paid by buyers will decrease as a result of the tax.
3) Game theory is just as necessary for understanding competitive or monopoly markets
as it is for understanding oligopolistic markets.
a.True
b.False
4) The fact that someone with a high risk of medical problems is likely to buy a large
amount of health insurance is an example of
a.adverse selection.
b.monitoring.
c.moral hazard.
d.screening.
5) Which of the following statements is correct?
a.The demand for flat-screen computer monitors is more elastic than the demand for
monitors in general.
b.The demand for grandfather clocks is more elastic than the demand for clocks in
general.
c.The demand for cardboard is more elastic over a long period of time than over a short
period of time.
d.All of the above are correct.
6) Two variables that have a negative correlation move in opposite directions.
a.True
b.False
7) Figure 16-14
If this firm were operating in a perfectly competitive market, it would charge a price
equal to point
a.I but in a monopolistically competitive market, the profit-maximizing price is C.
b.G but in a monopolistically competitive market, the profit-maximizing price is C.
c.C but in a monopolistically competitive market, the profit-maximizing price is G.
d.G but in a monopolistically competitive market, the profit-maximizing price is J.
8) When a profit-maximizing firm in a monopolistically competitive market is
producing the long-run equilibrium quantity,
a.its average revenue will equal its marginal cost.
b.its marginal revenue will exceed its marginal cost.
c.it will be earning positive economic profits.
d.its demand curve will be tangent to its average total cost curve.
9) Labor-saving technological advances decrease the marginal productivity of labor.
a.True
b.False
10) Human capital refers to the physical tools and equipment that workers use on their
jobs to enhance their productivity.
a.True
b.False
11) Table 22-9
Voter Type
Refer to Table 22-9. The table shows the preferences of four types of voters over four
possible outcomes: A, B, C, D. In addition, the table shows the percentage of voters of
each type. Based on this information, which of the following statements is false?
a.Outcome D is preferred to outcome C overall.
b.Outcome C is preferred to outcome B overall.
c.Outcome B is preferred to outcome D overall.
d.Outcome D is preferred to outcome A overall.
12) Relationship between Price and Restaurant Meals
Which of the following could result in a movement from point A to point B?
a.a change in income
b.a change in the cost of producing a restaurant meal
c.a change in the price of restaurant meals
d.a change in the price of movies
13) Consider a game of the €Jack and Jill€ type in which a market is a duopoly and
each firm decides to produce either a €high€ quantity of output or a €low€ quantity of
output. If the two firms successfully reach and maintain the cooperative outcome of the
game, then
a.both the combined profit of the firms and total surplus are maximized.
b.the combined profit of the firms is maximized but total surplus is not maximized.
c.the combined profit of the firms is not maximized but total surplus is maximized.
d.neither the combined profit of the firms nor total surplus is maximized.
14) Suppose that you have $100 today and expect to receive $100 one year from today.
Your money market account pays an annual interest rate of 25%, and you may borrow
money at that interest rate. Suppose that you borrow $60 and spend $160 today. After
you repay your loan one year from today, how much money will you have available for
consumption one year from today?
a.$0
b.$25
c.$50
d.$75
15) Suppose that beef producers create a negative externality. What is the relationship
between the equilibrium quantity of beef and the socially optimal quantity of beef?
a.They are equal.
b.The equilibrium quantity is greater than the socially optimal quantity.
c.The equilibrium quantity is less than the socially optimal quantity.
d.There is not enough information to answer the question.
16) It is possible for an economy to increase its production of both goods if the
economy
a.moves downward and to the right along its production possibilities frontier and the
frontier is bowed outward.
b.moves upward and to the left along its production possibilities frontier and the
frontier is bowed outward.
c.moves in either direction along its production possibilities frontier and the frontier is a
straight line.
d.moves from a situation of inefficient production to a situation of efficient production.
17) Majority rule will produce the outcome most preferred by the median voter, as
demonstrated by the
a.Arrow impossibility theorem.
b.Condorcet paradox.
c.pairwise voting proposition.
d.median voter theorem.
18) Assume that Aruba and Iceland can switch between producing coolers and
producing radios at a constant rate.
Assume that Aruba and Iceland each has 80 labor hours available. If each country
divides its time equally between the production of coolers and radios, then total
production is
a.28 coolers and 50 radios.
b.30 coolers and 9 radios.
c.60 coolers and 18 radios.
d.120 coolers and 36 radios.