1) In-kind transfers
a.are cash payments given to the poor from the government.
b.are available to citizens of all income levels, but usually only sought by the poor.
c.are non-monetary items given to the poor.
d.include food stamps, but not housing vouchers or medical services.
2) Suppose that a firm operating in perfectly competitive market sells 400 units of
output at a price of $4 each. Which of the following statements is correct?
(i)Marginal revenue equals $4.
(ii)Average revenue equals $100.
(iii)Total revenue equals $1,600.
a.(i) only
b.(iii) only
c.(i) and (iii) only
d.(i), (ii), and (iii)
3) Which of the following can be added to profit to obtain total revenue?
a.net profit
b.capital profit
c.operational profit
d.total cost
4) Suppose you sell a kayak for $600, but you were willing to sell it for $450. The
buyer was willing to pay $650. The total surplus is $200.
a.True
b.False
5) What will happen in the market for shotgun-shell ammunition now if buyers expect
higher shotgun-shell prices in the near future?
a.The demand for shotgun-shell ammunition will increase.
b.The demand for shotgun-shell ammunition will decrease.
c.The demand for shotgun-shell ammunition will be unaffected.
d.The supply of shotgun-shell ammunition will increase.
6) The poverty line is an absolute standard and is based on the cost of providing an
adequate diet.
a.True
b.False
7) Critics argue that a disadvantage of minimum-wage laws is that they do not
effectively target the working poor because many minimum-wage workers are the
teenage children of middle-income families.
a.True
b.False
8) The duties of the Council of Economic Advisers are to advise the president of the
United States and to determine U.S. monetary policy.
a.True
b.False
9) The field of political economy applies the methods of
a.psychology to study how the economy works.
b.political science to study how the economy works
c.economics to study how government works.
d.psychology to study how government works.
10) Pepsi and pizza are normal goods. When the price of pizza rises, the substitution
effect causes Pepsi to be relatively
a.more expensive, so the consumer buys more Pepsi.
b.more expensive, so the consumer buys less Pepsi.
c.less expensive, so the consumer buys more Pepsi.
d.less expensive, so the consumer buys less Pepsi.
11) Government subsidized scholarships are an example of a government policy aimed
at correcting negative externalities associated with education.
a.True
b.False
12) Which of the following statements is correct?
a.Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts.
b.Antitrust laws automatically prevent mergers between companies that produce similar
products.
c.Antitrust laws reduce the government’s power to regulate private companies.
d.Antitrust laws can reduce social welfare if they prevent mergers that would lower
costs through more efficient joint production.
13) When goods are available free of charge, the market forces that normally allocate
resources in our economy are absent.
a.True
b.False
14) Economists are unanimous in their belief that advertising is socially inefficient.
a.True
b.False
15) Which of the following is an example of a positive externality?
a.A college student buys a new car when she graduates.
b.The mayor of a small town plants flowers in the city park.
c.Local high school teachers have pizza delivered every Friday for lunch.
d.An avid fisherman buys new fishing gear for his next fishing trip.