1) Which of the following policies is the government most inclined to use when faced
with a positive externality?
a.taxation
b.permits
c.subsidies
d.usage fees
2) Which of the following is a plausible explanation for a firm paying
above-equilibrium wages to its workers?
a.It increases the probability that a worker who shirks will be caught.
b.It discourages workers from shirking out of fear of losing their high-paying job.
c.The Condorcet Paradox suggests that paying high wages will result in greater effort
by employees.
d.By paying a high wage, employers solve this adverse selection problem and motivate
the employees to work harder.
3) To produce 100 bushels of wheat, Farmer A requires fewer inputs than does Farmer
B. We can conclude that Farmer A has an absolute advantage over Farmer B in
producing wheat.
a.True
b.False
4) In Lee Benham’s 1972 article examining the impact of advertising on the average
price paid for a pair of eyeglasses, Benham found that
a.the average price paid for eyeglasses was nearly 20% higher in the states that did not
restrict advertising.
b.the average price paid for eyeglasses was nearly 20% lower in the states that did not
restrict advertising.
c.there was no difference in the average price paid between states that restricted
advertising and those that did not.
d.the average price paid for eyeglasses was almost 5 times higher in the states that did
not restrict advertising.
5) Refer to Figure 9-20. Given that Vietnam is a small country, it is apparent from the
figure that
a.Vietnam will export rice if trade is allowed.
b.Vietnam will import rice if trade is allowed.
c.Vietnam has nothing to gain either by importing or exporting rice.
d.the world price will fall if Vietnam begins to allow its citizens to trade with other
countries.
6) When a tax is levied on the sellers of a good, the
a.supply curve shifts upward by the amount of the tax.
b.quantity demanded decreases for all conceivable prices of the good.
c.quantity supplied increases for all conceivable prices of the good.
d.None of the above is correct.
7) Scenario 18-3
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as
a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives
a tour bus around the ski resort, earning $11 per hour.
Refer to Scenario 18-3. During the summer months, what is Sam’s opportunity cost of
taking an hour off work to go hiking?
a.$13
b.between $11 and $12
c.$11
d.less than $11
8) Your college roommate receives a pay raise at her part-time job from $9 to $11 per
hour. She used to work 10 hours per week, but now she decides to work 15 hours per
week. For this price range, her labor supply curve is
a.vertical.
b.horizontal.
c.upward sloping.
d.backward sloping.
9) Which of the following is not a characteristic of a monopoly?
a.the seller has market power
b.one seller
c.free entry and exit
d.a product without close substitutes
10) For the economy as a whole, spending on advertising comprises about what percent
of total firm revenue?
a. 0.5
b.2
c.10
d.20
11) 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 engage in price discrimination?
a. $100,000
b. $125,000
c. $150,000
d. $175,000
12) Pete owns a shoe-shine business. Which of the following costs would be implicit
costs?
(i)shoe polish
(ii)rent on the shoe stand
(iii)wages Pete could earn delivering newspapers
(iv)interest that Pete’s money was earning before he spent his savings to set up the shoe-
shine business
a.(i) and (ii) only
b.(iv) only
c.(iii) and (iv) only
d.(i), (ii), (iii), and (iv)
13) Which of the following statements is not correct?
a.Male workers with good looks tend to earn more than male workers with average
looks
b.If discriminating wage differentials persist in competitive markets, it is primarily
because employers chose to discriminate even in spite of customer preferences.
c.A higher level of human capital raises a worker’s wages.
d.In competitive markets, workers are paid a wage equal to the value of their marginal
product.
14) Suppose that when the price of good X falls from $6 to $4, the quantity demanded
of good Y rises from 30 units to 40 units. Using the midpoint method, the is
a.-0.71, and X and Y are complements.
b.-1.40, and X and Y are complements.
c.-0.71, and X and Y are substitutes.
d.-1.40, and X and Y are substitutes.
15) Suppose a profit-maximizing firm in a competitive market produces rubber bands.
When the market price for rubber bands rises above the minimum of its average
variable cost, but still lies below the minimum of average total cost, in the short run the
firm will
a.experience losses but will continue to produce rubber bands.
b.shut down.
c.earn both economic and accounting profits.
d.raise the price of its product.
16) Assume that Max and Min can switch between producing mittens and producing
hats at a constant rate.
Which of the following points would not be on Max’s production possibilities frontier,
based on a 36-hour production period?
a.(18 mittens, 0 hats)
b.(12 mittens, 2 hats)
c.(6 mittens, 4 hats)
d.(2 mittens, 6 hats)
17) At a price of $15,
a.quantity demanded exceeds quantity supplied.
b.there is a shortage.
c.there is an excess demand.
d.All of the above are correct.
18) Table 12-11
If Al has taxable income of $165,000, his marginal tax rate is
a. 16%.
b.24%.
c.34%.
d.36%.
19) Economics is the study of how evenly goods and services are distributed within
society.
a.True
b.False
20) Define the deadweight loss of a tax.
21) Calculate the marginal tax rate and the average tax rate of a lump-sum tax of
$5,000.
22) The field of economics that combines the study the psychology of human behavior
and economic issues is
23) When some people are better informed than others and the imbalance affects the
choices they make, economists say there is
24) Economists at which administrative department analyze data on workers and those
looking for work to help formulate labor-market policies?
25) Using the outline below, draw a circular-flow diagram representing the interactions
between households and firms in a simple economy. Explain briefly the various parts of
the diagram.
26) Brandon is considering buying a used car but he first downloads a report from the
internet that shows the history of accidents and major repairs conducted on the car. This
action is called
27) Consider a small hair styling salon. List some examples of explicit costs of this
business.