1) Assume that your roommate is very messy. Suppose she gets a $25 benefit from
being messy but imposes a $50 cost on you. The Coase theorem would suggest that an
efficient solution would be for you to
a.pay your roommate at least $25 but no more than $50 to clean up after herself.
b.pay your roommate at least $51 to clean up after herself.
c.charge your roommate at least $25 to have you clean up after her.
d.charge your roommate at least $50 but no more than $100 to keep you from
complaining about the mess.
2) Scenario 18-6
Rocchetta Industries manufactures and supplies bottled water in Mexico. As a result of
a contamination of water supplies at many of Mexico’s resort communities, the demand
for bottled water has increased.
Refer to Scenario 18-6. We would expect that, as a result of the contamination, the
value of the marginal product for Rocchetta Industries’ workers would
a.be offset by a decrease in wages.
b.be unaffected by a rise in demand for bottled water.
c.increase.
d.decrease.
3) A compensating differential refers to a difference in wages that arises from
nonmonetary characteristics.
a.True
b.False
4) Figure 18-9
Refer to Figure 18-9. If the price of apples decreases, the
a.demand for apple pickers will shift to the left.
b.demand for apple pickers will shift to the right.
c.supply of apple pickers will shift to the left.
d.supply of apple pickers will shift to the right.
5) Highway engineers want to improve a dangerous stretch of highway. They expect
that it will reduce the risk of someone dying in an accident from 5.3 percent to 2.1
percent over the life of the highway. If a human life is worth $10 million, then the
project is worth doing as long as it does not cost more than
a. $53,000.
b. $210,000.
c. $320,000.
d. $2.1 million.
6) A benefit to society of the patent and copyright laws is that those laws
a.help to keep prices down.
b.help to prevent a single firm from acquiring ownership of a key resource.
c.encourage creative activity.
d.discourage the production of inefficient products.
7) Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving
straight at each other. John and Paul have a common interest to avoid crashing into each
other, but they also have a personal, competing interest to not turn first to demonstrate
their courage to those observing the contest. The payoff table for this situation is
provided below. The payoffs are shown as (John, Paul).
Refer to Table 17-21. How many Nash equilibria are there in this Chicken game?
a.0
b.1
c.2
d.3
8) Which of the following is an example of signaling?
a.Graduates of highly-respected universities highlight that fact on their resumes.
b.Magazine advertisements include the phrase “as seen on TV.”
c.Advertisements for universities include the phrase “fully accredited.”
d.All of the above are correct.
9) Assume that Indonesia and India can switch between producing rice and bananas at a
constant rate.
At which of the following prices, if any, can India and Indonesia both gain from trade?
a.1/5 units of bananas per unit of rice.
b.1/3 units of bananas per unit of rice.
c.3/5 units of bananas per unit of rice.
d.None of the above.
10) A worker’s contribution to a firm’s revenue is measured directly by the worker’s
a.marginal product.
b.value of marginal product.
c.marginal product multiplied by the worker’s wage.
d.value of marginal product multiplied by the output price.
11) Figure 18-3
Refer to Figure 18-3. What is the marginal product of the fourth worker?
a.1 unit
b.2 units
c.3.75 units
d.15 units
12) Table 18-10
Refer to Table 18-10. This table describes the number of baseballs a manufacturer can
produce per day with different quantities of labor. Each baseball sells for $2.50 in a
competitive market. What is the marginal revenue product of the fourth worker?
a.$200
b.$300
c.$400
d.$500
13) In order to maximize profits in the short run, a firm should produce where
a.marginal revenue exceeds marginal cost by the greatest amount.
b.marginal cost is minimized.
c.average total cost is minimized.
d.marginal cost equals marginal revenue.
14) Generic drugs enter the pharmaceutical drug market once
a.the ingredients to the name brand drug have been discovered.
b.10 years have passed.
c.they are patented.
d.the patent on the name brand drug expires.
15) For which of the following goods is the income elasticity of demand likely highest?
a.water
b.diamonds
c.hamburgers
d.housing