1) The Condorcet paradox shows that
a.allocations of resources based on majority rule are always inefficient.
b.problems in counting votes can negate legitimate democratic outcomes.
c.the order on which things are voted can affect the result.
d.transitive preferences are inconsistent with rationality.
2) A Giffen good is a good for which an increase in the price
a.decreases the quantity supplied.
b.increases the quantity supplied.
c.decreases the quantity demanded.
d.increases the quantity demanded.
3) Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She
can create one photo frame in an hour. She earns $10 per hour at a part-time job at the
local coffee shop. She can sell a photo frame for $30 each.
An accountant would calculate the total profit for one photo frame to be
a. $10.
b.$15.
c.$20.
d.$25.
4) A corrective tax
a.allocates pollution to those factories that face the highest cost of reducing it.
b.is a form of regulation.
c.works well for all types of externalities.
d.is inferior to regulatory policy according to most economists.
5) When a transaction between a buyer and seller directly affects a third party, the effect
is called an externality.
a.True
b.False
6) When the government taxes income as part of a redistribution program,
a.the poor pay higher taxes.
b.the rich always benefit more than the poor.
c.the poor are encouraged to work.
d.incentives to earn income are diminished.
7) For a competitive, profit-maximizing firm, the demand curve for labor will shift in
response to a change in the
a.wage rate.
b.quantity of labor demanded.
c.price of the product that the firm sells.
d.an increase in the supply of labor.
8) Miguel receives a pay raise at his part-time job from $7.50 to $9 per hour. He used to
work 10 hours per week, but now he decides to work 12 hours per week. For this price
range, his labor supply curve is
a.vertical.
b.horizontal.
c.upward sloping.
d.backward sloping.
9) In 1950 there were approximately 7 working age people for every elderly person;
however, in 2050 there will be
a.only 2.5 working people for every elderly person.
b.only 5 working age people for every elderly person.
c.10 working age people for every elderly person.
d.14 working age people for every elderly person.
10) In order to calculate consumer surplus in a market, we need to know willingness to
pay and price.
a.True
b.False
11) Two college students, Mary and Maggie, are spending spring break in Florida. Mary
buys a cup of coffee each morning at the local Starbucks rather than from one of the
local coffee shops. Maggie claims that Mary is irrational because she never purchases
Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local
shops. An economist would most likely explain Mary’s behavior by suggesting that
a.Mary’s behavior is rational, but Maggie’s behavior is clearly irrational.
b.Mary’s behavior is clearly irrational, but Maggie’s behavior is rational.
c.the Starbucks brand name suggests consistent quality.
d.the advertising by Starbucks in Florida is more persuasive than the advertising by
Starbucks in Mary and Maggie’s home town.
12) The total cost to the firm of producing zero units of output is
a.zero in both the short run and the long run.
b.its fixed cost in the short run and zero in the long run.
c.its fixed cost in both the short run and the long run.
d.its variable cost in both the short run and the long run.
13) Table 20-4
Source: U.S. Bureau of Census
Refer to Table 20-4. In 2011, the top fifth of families have
a.almost 13 times as much income as the bottom fifth of families.
b.28.2% more income than the bottom fifth of families.
c.50.3% more income than the bottom fifth of families.
d.45.1% more income than the bottom fifth of families.
14) The game that oligopolists play in trying to reach the oligopoly outcome is similar
to the game that the two prisoners play in the prisoners’ dilemma.
a.True
b.False
15) There are two types of markets in which firms face some competition yet are still
able to have some control over the prices of their products. Those two types of market
are
a.monopolistic competition and oligopoly.
b.duopoly and triopoly.
c.perfect competition and monopolistic competition.
d.duopoly and imperfect competition.
16) Figure 9-5
The figure illustrates the market for tricycles in a country.
Without trade, consumer surplus amounts to
a. $810.
b. $1,620.
c. $3,240.
d. $6,480.
17) Over the last several years, the earnings gap between workers with college degrees
and workers with high school degrees has
a.remained roughly constant for both men and women.
b.widened for both men and women.
c.widened for men and narrowed for women.
d.narrowed for men and widened for women.
18) On car insurance policies, Countrywide Insurance Company offers drivers an
option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an
annual premium of $500. Policy 2 features a deductible of $250, and it requires a driver
to pay an annual premium of $1,000.
a.In offering these two policies, Countrywide is engaging in illegal price discrimination.
b.In offering these two policies, Countrywide is screening drivers.
c.Policy 1 is more of a burden for safe drivers than it is for risky drivers.
d.In offering these two policies, Countrywide is signaling their quality to drivers.
19) Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities
Frontier