1) A tax on an imported good is called a.
2) An externality arises when a person engages in an activity that influences the
well-being of
a.buyers in the market for that activity and yet neither pays nor receives any
compensation for that effect.
b.sellers in the market for that activity and yet neither pays nor receives any
compensation for that effect.
c.bystanders in the market for that activity and yet neither pays nor receives any
compensation for that effect.
d.Both (a) and (b) are correct.
3) When the government uses a command-and-control policy to solve an externality, it
a.is usually the most effective policy option available.
b.creates policies that directly regulate behavior.
c.usually involves taxing the consumption of a commodity.
d.typically refers to the Coase theorem to structure the policy.
4) Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day,
and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has
10 workers. For many years, the two countries traded, each completely specializing
according to their respective comparative advantages. Now war has broken out between
them and all trade has stopped. Without trade, Caninia produces and consumes 10
blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5
meals per day. The war has caused the combined daily output of the two countries to
decline by
a.15 blankets and 35 meals.
b.25 blankets and 40 meals.
c.35 blankets and 45 meals.
d.50 blankets and 80 meals.
5) The collection of statutes aimed at curbing monopoly power is called
a.the 14th amendment.
b.the Clayton Act.
c.the Sherman Act.
d.antitrust law.
6) Scenario 18-8
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to
graduate school in economics to become a university economics professor.
Event 2: A decreasing number of students in U.S. primary and secondary schools
decreases the number of students entering college, decreasing the output price of
university economics professors’ services.
Refer to Scenario 18-8. As a result of these two events, holding all else constant, the
equilibrium quantity of university economics professors will
a.increase.
b.decrease.
c.not change.
d.It is not possible to determine what will happen to the equilibrium quantity.
7) Which of the following goods is both excludable and rival in consumption?
a.a wristwatch
b.fire protection in a small town
c.fish in the ocean
d.efforts to fight poverty
8) You are trying to design a tax system that will simultaneously achieve both of the
following goals: 1) a person with no income would pay no taxes, and 2) a high-income
person would pay a higher fraction of income in taxes than a low-income person.
Which of the following statements is correct?
a.A lump-sum tax would achieve the second goal but not the first.
b.A regressive tax would achieve the second goal but not the first.
c.A progressive tax could achieve both goals.
d.A proportional tax could achieve the second goal but not the first.
9) Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that
amounts to
a.B.
b.E.
c.D + F.
d.B + D + E + F.
10) Economists who study labor markets have discovered that
a.only about 5 percent of wage differences are related to chance.
b.ability is not difficult to measure but is largely insignificant in explaining wage
differences.
c.work effort is difficult to measure but is not likely to contribute much to an
explanation of wage differences.
d.ability, effort, and chance are likely to be significant contributors to wage differences.
11) When a jeweler sells a low quality diamond to a young man who believes the
diamond is the highest quality, she is engaging in
a.both moral hazard and adverse selection.
b.neither moral hazard nor adverse selection.
c.moral hazard, but not adverse selection.
d.adverse selection, but not moral hazard.
12) Analysis of data on workers and those looking for work is conducted by economists
at the
a.Office of Management and Budget.
b.Department of Labor.
c.Congressional Budget Office.
d.Department of the Treasury.
13) Scenario 15-6
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two
types of concert-goers: die- hard fans and casual fans. For a particular WeR2Loud
concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual
fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue.
Suppose the cost of putting on the concert is $50,000, which includes the cost of the
band, lighting, security, etc.
How much profit will the concert promoters earn if they set the price of each ticket at
$50?
a. $25,000
b. $75,000
c. $100,000
d. $150,000