1) Food and clothing tend to have
a.small income elasticities because consumers, regardless of their incomes, choose to
buy relatively constant quantities of these goods.
b.small income elasticities because consumers buy proportionately more of both goods
at higher income levels than they buy at low income levels.
c.large income elasticities because they are necessities.
d.large income elasticities because they are relatively inexpensive.
2) Figure 9-5
The figure illustrates the market for tricycles in a country.
If this country allows free trade in tricycles,
a.consumers will gain and producers will lose.
b.consumers will lose and producers will gain.
c.both consumers and producers will gain.
d.both consumers and producers will lose.
3) Scenario 16-6
Ike’s Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The
market for ice cream parlors is monopolistically competitive.
As a result of the new Ike’s Ice Cream parlor, existing ice cream shops located in
Mayville are likely to experience a
a.business-stealing externality, which harms producers.
b.business-stealing externality, which benefits producers.
c.product-variety externality, which harms consumers.
d.product-variety externality, which benefits consumers.
4) An increase in the demand for houses
a.increases the equilibrium wage of carpenters and increases the value of carpenters’
marginal product of labor.
b.increases the equilibrium wage of carpenters and decreases the value of carpenters’
marginal product of labor.
c.decreases the equilibrium wage of carpenters and increases the value of carpenters’
marginal product of labor.
d.decreases the equilibrium wage of carpenters and decreases the value of carpenters’
marginal product of labor.
5) Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each
country divides its time equally between the production of toothbrushes and
hairbrushes, then total production is
a.24 toothbrushes and 12 hairbrushes.
b.48 toothbrushes and 24 hairbrushes.
c.96 toothbrushes and 48 hairbrushes.
d.720 toothbrushes and 1440 hairbrushes.
6) Table 22-7
Suppose that residents of a town are asked to vote on the best way to improve the safety
of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop.
The voters are divided into three groups based on their preferences.
Voter Type
Refer to Table 22-7. If the first vote pits a 2-way stop against a 4-way stop and the
second vote pits a stoplight against the winner of the first vote, then the outcome is as
follows:
a.2-way stop wins the first vote and 2-way stop wins the second vote, so the town
installs a 2-way stop.
b.2-way stop wins the first vote and stoplight wins the second vote, so the town installs
a stoplight.
c.4-way stop wins the first vote and 4-way stop wins the second vote, so the town
installs a 4-way stop.
d.4-way stop wins the first vote and stoplight wins the second vote, so the town installs
a stoplight.
7) An increase in quantity supplied
a.results in a movement downward and to the left along a fixed supply curve.
b.results in a movement upward and to the right along a fixed supply curve.
c.shifts the supply curve to the left.
d.shifts the supply curve to the right.
8) The manager of a firm operating in a competitive market can ignore sunk costs when
making business decisions.
a.True
b.False
9) The slope of the budget constraint is all of the following except
a.the relative price of two goods.
b.the rate at which a consumer can afford to trade one good for another.
c.the marginal rate of substitution.
d.constant.
10) How does a competitive market compare to a monopoly that engages in perfect
price discrimination?
a.In both cases, total social welfare is the same.
b.Total social welfare is higher in the competitive market than with the perfectly price
discriminating monopoly.
c.In both cases, some potentially mutually beneficial trades do not occur.
d.Consumer surplus is the same in both cases.
11) It is likely that, if we could measure the quality as well as the quantity of education,
a.the human-capital argument would become less compelling as a means of explaining
wage differentials between white workers and black workers.
b.the human-capital argument would become less compelling as a means of explaining
wage differentials between male workers and female workers.
c.wage differentials between white workers and black workers would be more puzzling
than they are now.
d.wage differentials between white workers and black workers would be more fully
explained.
12) Horizontal equity can be difficult to assess because it is difficult to compare the
similarity of tax payers.
a.True
b.False
13) The term shutdown
a.and the term exit both refer to short-run decisions that a firm might make.
b.and the term exit both refer to long-run decisions that a firm might make.
c.refers to a short-run decision that a firm might make, whereas the term exit refers to a
long-run decision that a firm might make.
d.refers to a long-run decision that a firm might make, whereas the term exit refers to a
short-run decision that a firm might make.
14) Assume that for good X the supply curve for a good is a typical, upward-sloping
straight line, and the demand curve is a typical downward-sloping straight line. If the
good is taxed, and the tax is tripled, the
a.base of the triangle that represents the deadweight loss triples.
b.height of the triangle that represents the deadweight loss triples.
c.deadweight loss of the tax increases by a factor of nine.
d.All of the above are correct.
15) A technological advance in the production of the first good increases the
opportunity cost of the first good in terms of the second good.
a.True
b.False