1) When John F. Kennedy said, “A rising tide lifts all boats,” to what was he referring?
a.With government intervention, all citizens receive a greater allocation of resources.
b.With market forces working independently, everyone receives an equitable share of
resources.
c.With economic growth, more families are pushed above the poverty line.
d.None of the above are correct.
2) Suppose that the market for labor is initially in equilibrium. If the firm employs
labor-saving technology, the equilibrium wage
a.and the equilibrium quantity of labor will rise.
b.and the equilibrium quantity of labor will fall.
c.will rise, and the equilibrium quantity of labor will fall.
d.will fall, and the equilibrium quantity of labor will rise.
3) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The imposition of the tax causes the price received by sellers to decrease by
a. $20.
b. $200.
c. $300.
d. $500.
4) Because nothing can be done about sunk costs, they are irrelevant to decisions about
business strategy.
a.True
b.False
5) Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the
entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and
pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza.
Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne.
Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
Refer to Scenario 22-4. If, before any votes were cast, ravioli was eliminated from the
choices and the vote were conducted according to a Borda count system where each
person’s first choice receives 3 points, second choice 2 points, and third choice 1 point,
the election winner would be
a.pizza.
b.spaghetti
c.lasagne.
d.The result would be a three-way tie between pizza, spaghetti and lasagne.
6) When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
a.True
b.False
7) If a firm is a price taker, it operates in a
a.competitive market.
b.monopoly market.
c.oligopoly market.
d.monopolistically competitive market.
8) John Maynard Keynes referred to economics as an easy subject,
a.at which very few excel.
b.but not as easy as philosophy or the pure sciences.
c.which very few can enjoy.
d.which deals primarily with common sense.
9) While the production possibilities frontier is a useful model, it cannot be used to
illustrate economic growth.
a.True
b.False
10) From 1950 to today, government spending on Social Security, Medicare, and
Medicaid as a percentage of GDP has
a.decreased from about ten percent to less than one percent.
b.increased from less than one percent to about ten percent.
c.remained constant at less than one percent.
d.remained constant at about ten percent.
11) A monopolistically competitive firm chooses its
a.price and quantity just as a monopoly does.
b.quantity but faces a horizontal demand curve just as a competitive firm does.
c.price but can sell any quantity at the market price just as an oligopoly does.
d.price and quantity based on the decisions of the other firms in the industry just as an
oligopoly does.
12) Individual Retirement Accounts and 401(k) plans make the current U.S. tax system
a.more like a consumption tax and so more like the tax system of many European
countries.
b.more like a consumption tax and so less like the tax system of many European
countries.
c.less like a consumption tax and so more like the tax system of many European
countries.
d.less like a consumption tax and so less like the tax system of many European
countries.
13) An increase in which of the following would shift the supply curve for gasoline to
the right?
a.demand for gasoline
b.price of gasoline
c.number of producers of gasoline
d.price of oil, an input into the production of gasoline
14) Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
Which level of production in the table has the lowest average variable cost?
a.1 unit
b.2 units
c.3 units
d.4 units
15) Bridget drinks three sodas during a particular day. The marginal benefit she enjoys
from drinking the third soda
a.can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the
total benefit she would have enjoyed by drinking just two sodas.
b.determines Bridget’s willingness to pay for the third soda.
c.is likely different from the marginal benefit provided to Bridget by the second soda.
d.All of the above are correct.
16) Figure 15-8
What is the area of deadweight loss?
a.the rectangle (A-C)*X
b.the triangle 1/2[(A-C)*(Y-X)]
c.the triangle 1/2[(A-B)*(Y-X)]
d.the rectangle (A-C)*X plus the triangle 1/2[(A-C)*(Y-X)]
17) Figure 8-3
The vertical distance between points A and C represents a tax in the market.
The per-unit burden of the tax on sellers is
a.P3 – P1.
b.P3 – P2.
c.P2 – P1.
d.P4 – P3.
18) When considering her budget, the highest indifference curve that a consumer can
reach is the
a.one that is tangent to the budget constraint.
b.indifference curve farthest from the origin
c.indifference curve that intersects the budget constraint in at least two places.
d.None of the above is correct.
19) Which of the following transactions does not take place in the markets for factors of
production in the circular-flow diagram?
a.a landowner leases land to a farmer
b.a farmer hires a teenager to help with harvest
c.a construction company rents trucks for its business
d.a woman buys corn for dinner