Which of the following is an example of individual choice?
A) The government announces plans to ban smoking in all Florida restaurants.
B) Lauren spends her allowance on pillows for her bed.
C) France decides to withhold funding to rebuild Iraq.
D) Africa decides to accept U.S. aid for humanitarian efforts.
The difference between the demand price and the supply price at the quota limit is:
A) the quota rent.
B) the rent received by landlords who own rent-controlled apartments.
C) the opportunity cost of using or buying a good, subject to an import quota.
D) usually large enough to cause a surplus.
Total revenue is:
A) total sales less total cost.
B) the price of a good times the quantity of the good that is sold.
C) the price effect times the quantity effect.
D) the price of a good divided by the amount of the good sold.
A competitive market for cell phone chargers is in equilibrium. If the price temporarily
falls below the equilibrium price:
A) producer surplus will rise.
B) producer surplus will fall.
C) the change in producer surplus is indeterminate.
D) there will be no change in producer surplus.
Scenario: Health Costs
Alan is hoping for a healthy year, meaning that he would have zero health costs. Given
his habits, there is a 40% chance that Alan will develop a health issue resulting in
$50,000 in health costs. Assume these are the only two conditions that could exist for
Alan in the coming year.
(Scenario: Health Costs) Look at the scenario Health Costs. Given the fact that Alan has
a 40% chance of developing a health problem, what is the expected value of Alan’s
health care costs for the coming year?
A) $0
B) $50,000
C) $20,000
D) $16,000
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn is $4
and the price of a cup of pretzels is $1, Mario will eat:
A) only pretzels.
B) only popcorn.
C) mostly pretzels.
D) The answer is impossible to determine.
A binding price floor in the market for wheat:
A) increases the price paid by consumers.
B) decreases the price paid by consumers.
C) decreases the price received by farmers.
D) does not change the price received by farmers.
Figure: Consumer Equilibrium II
(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Ashyra
would maximize her utility at point _____ with the consumption of _____ olive oil and
_____ dish soap.
A) J; S; P
B) I; S; P
C) J; N; F
D) I; N; M
Many people smoke and continue poor eating habits because they have health
insurance. This is an example of:
A) moral hazard.
B) signaling.
C) reputation.
D) adverse selection.
Human capital:
A) consists of man-made resources such as buildings and machines.
B) is the improvement in labor produced by education and knowledge that is embodied
in the workforce.
C) has become less important because of the progress in technology.
D) is the improvement in labor produced by education, which has become less
important because of the progress in technology.
An inward shift in the U.S. economy’s production possibility frontier could represent
U.S.:
A) workers moving to Canada.
B) workers moving from New Jersey to Massachusetts.
C) economic growth.
D) economic growth as workers move to different states.
If personal income up to and including $30,000 is not taxed, income of $30,001 to
$60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family
earning an income of $100,000 will pay an AVERAGE tax rate of:
A) 5%.
B) 10%.
C) 13%.
D) 25%.
_____ tax is NOT a major source of revenue for the federal government.
A) Income
B) FICA
C) Profits
D) Property
Your boss asks you to graph company profits for the past 10 years. The best way to
show this information is with:
A) a scatter diagram.
B) a pie chart.
C) a time-series graph.
D) an independent graph.
Pigouvian taxes are designed to reduce:
A) the marginal cost of production.
B) the marginal benefit of consumption.
C) external costs.
D) external benefits.
A _____ tax takes a larger share of the income of high-income taxpayers than of
low-income taxpayers.
A) sales
B) regressive
C) progressive
D) flat
Suppose a person rolls a typical six-sided die. What is the probability that the die will
come up with a 1 and then a 2?
A) 1 in 3
B) 1 in 36
C) 1 in 6
D) 2 in 5
In the short run, a perfectly competitive firm produces output and earns an economic
profit if:
A) P > ATC.
B) P = ATC.
C) P < MC.
D) P < ATC.
The marginal rate of substitution shows how a consumer can substitute between two
goods to:
A) maintain the same income.
B) maintain the same level of total utility.
C) maintain the same marginal utility.
D) increase total utility.
Given the large amount of interdependence among them, cooperation with one’s
competitors is the most profitable strategy for:
A) perfect competitors.
B) monopolistic competitors.
C) oligopolists.
D) monopolists.
If they spend all night writing computer programs, Laurence can write 10 programs,
and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can
make 6 pairs, and Carrie Anne can make 4. Given this information and supposing
Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an
absolute advantage in _____.
A) Laurence; programs but not in sunglasses.
B) Laurence; both programs and sunglasses.
C) Carrie Anne; programs but not in sunglasses.
D) Carrie Anne; both programs and sunglasses.
Figure: The Market for Lattes
(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the
price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint
formula?
A) 1.00
B) 1.29
C) 1.51
D) 3.00
Figure: Short-Run Costs II
(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. At 6 units of output,
average total cost is approximately:
A) $100.
B) $120.
C) $170.
D) $250.
When Caroline’s dress factory hires two workers, the total product is 50 dresses. When
she hires three workers, total product is 60, and when she hires four workers, total
product is 75. The slope of the marginal product curve when two to four workers are
hired is:
A) upward.
B) downward.
C) vertical.
D) horizontal.
The licenses that are exchangeable and that enable the holder to pollute up to a
specified amount during a given period are called:
A) emissions taxes.
B) environmental standards.
C) tradable emissions permits.
D) Pigouvian taxes.
Increases in income inequality in the United States are partially attributed to:
A) equal and rising increases in the salaries of low-wage workers.
B) the impact of technological innovation on the demand for labor.
C) a drop in international trade’s effects on the economy.
D) stricter immigration policies.
Pharmaceutical companies typically face very high fixed costs when developing new
drugs. The marginal cost of producing a drug after development is very low. When
these companies set price and output to maximize profit, patients pay a _____ price for
_____ amounts of the drug than are socially optimal.
A) lower; lower
B) higher; higher
C) lower; higher
D) higher; lower
(Table: Workers and Output) Look at the table Workers and Output. After graduation
you achieve your dream of opening an art shop that specializes in selling mud statues.
You pay $10 per day on a loan from your uncle, and regardless of how much you
produce, you pay $10 per day to each of the workers who make the mud statues. The
total cost of producing 43 statues is:
A) $10.
B) $20.
C) $40.
D) $50.
The law of diminishing marginal utility indicates that the slope of the marginal utility
curve eventually becomes:
A) negative.
B) vertical.
C) horizontal.
D) positive.
(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is
deciding how many football games he wants to attend this year. If tickets to each
football game cost $10, then he should attend _____ game(s).
A) 0
B) 1
C) 2
D) 5