1) Labor-augmenting technological advances decrease the marginal productivity of
labor.
a.True
b.False
2) In 2011, which category represented the largest source of receipts for the U.S. federal
government?
a.Medicare
b.Social Security
c.corporate income taxes
d.individual income taxes
3) Total revenue equals
a.price x quantity.
b.price/quantity.
c.(price x quantity) – total cost.
d.output – input.
4) The highest form of competition is called
a.absolute competition.
b.cutthroat competition.
c.perfect competition.
d.market competition.
5) The time spent by students in college
a.leads to lower lifetime earnings because opportunity costs are high.
b.is an investment in human capital.
c.decreases human capital by lowering work experience.
d.increases as the wages paid to low-skilled workers rise.
6) The idea of requiring motorists to pay to use the busiest streets in a city
a.has been proposed by many public officials, but to date the idea never has been tried
in a major city anywhere in the world.
b.was tried in New York City in the 1990s, but the result was more – not less –
congestion on busy streets, and the experiment was short-lived.
c.reflects the fact that a congested road is a public good.
d.reflects the fact that a congested road is a common resource.
7) The graph shown is known as a
a.time-series graph.
b.bar graph.
c.scatterplot.
d.pie chart.
8) Which of the following is not an example of Joel Waldfogel’s “Tyranny of the
Market€?
a.A daily newspaper tailored to appeal to the majority of readers in an area.
b.Nike creating specialized shoes for American Indians’ wider feet.
c.Pharmaceutical companies spending research and development funds on drugs for
common diseases.
d.Airlines offering daily direct flights from one large city to another.
9) The competitive firm‘s short-run supply curve is its
a.marginal revenue curve, but only the portion where marginal revenue exceeds
marginal cost.
b.marginal cost curve.
c.marginal cost curve, but only the portion above the minimum of average total cost.
d.marginal cost curve, but only the portion above the minimum of average variable cost.
10) For a particular good, a 5 percent increase in price causes a 2 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a.There are many close substitutes for this good.
b.The good is a luxury.
c.The market for the good is broadly defined.
d.The relevant time horizon is long.
11) Suppose consumer income increases. If grass seed is a normal good, the equilibrium
price of grass seed will
a.decrease, and producer surplus in the industry will decrease.
b.increase, and producer surplus in the industry will increase.
c.decrease, and producer surplus in the industry will increase.
d.increase, and producer surplus in the industry will decrease.
12) A government’s policy of redistributing income makes the income distribution
a.more equal, distorts incentives, alters behavior, and makes the allocation of resources
more efficient.
b.more equal, distorts incentives, alters behavior, and makes the allocation of resources
less efficient.
c.less equal, distorts incentives, alters behavior, and makes the allocation of resources
more efficient.
d.less equal, distorts incentives, alters behavior, and makes the allocation of resources
less efficient.
13) A study using data from the late 1960s showed that black baseball players earned
less than comparable white players. Studies of more recent salaries in baseball,
however, have found no evidence of discriminatory wage differentials.
a.True
b.False
14) Table 20-11
Poverty Thresholds in 2011, by Size of Family and Number of Related Children
Under 18 Years [Dollars]
Source: U. S. Bureau of the Census, Current Population Survey.
Refer to Table 20-11. What is the poverty line for a family with one 68-year-old adult
and one child?
a.$10,788
b.$15,446
c.$15,504
d.$18,106
15) Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that
produce safe drinking water. Each week Rochelle and Alec work together to decide how
many gallons of water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that Rochelle and Alec can
pump as much water as they want without cost so that the marginal cost of water equals
zero. The weekly town demand schedule and total revenue schedule for water is shown
in the table below:
Refer to Table 17-1. What is the socially efficient quantity of water?
a.0 gallons
b.600 gallons
c.900 gallons
d.1,200 gallons
16) A downward-sloping demand curve illustrates
a.that demand decreases over time.
b.that prices fall over time.
c.the relationship between income and quantity demanded.
d.the law of demand.
17) Figure 14-7
Suppose the price of the good is $175. If the firm produces and sells 514 units of
output, its profit is approximately
a. $24,995.
b. $25,550.
c. $25,750.
d. $26,025.
18) In markets, the invisible hand allocates resources efficiently
a.in all cases.
b.when the buyers and sellers are the only interested parties.
c.when there are positive externalities, but not when there are negative externalities.
d.when there are negative externalities, but not when there are positive externalities.
19) Which of the following is not correct?
a.A negative income tax only applies to working people, so it encourages people to get
full-time work.
b.Supporters advocate the use of the Earned Income Tax Credit as a way to help the
working poor.
c.A negative income tax subsidizes the incomes of poor people.
d.An advantage of a negative income tax is that it is not based on the number of
children, so it does not provide incentives for unmarried women to have children.