1) For a snow-removal business, the capital stock would include inputs such as snow
blowers and shovels.
a.True
b.False
2) Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
The opportunity cost of 1 pound of pork for the rancher is
a.1 pound of tomatoes.
b.1 hour of labor.
c.1.5 pounds of tomatoes.
d.1.5 hours of labor.
3) If the flow of goods and
services is part of what is represented by the inner loop of this circular-flow diagram,
then
a.the flow of factors of production is also part of what is represented by the inner loop.
b.the flow of income paid to households is also part of what is represented by the inner
loop.
c.the flow of revenue to firms is also part of what is represented by the inner loop.
d.households must be sellers of output.
4) Normally, both buyers and sellers of a good become worse off when the good is
taxed.
a.True
b.False
5) Results of the study done by Lee Benham on advertising for eyeglasses would
suggest that
a.brand loyalty and market power in the eyeglass market was likely to be more
pervasive in states that allowed advertising.
b.eyeglass sales were more profitable in states that allowed advertising.
c.optometrists would not be supportive of advertising restrictions.
d.optometrists would enthusiastically endorse advertising restrictions.
6) Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases
in a week. She is considering hiring her friend Atul to help her. Atul can bottle and sell
three cases per week. What is the maximum total output possible if Riva hires Atul?
a.3 cases
b.4 cases
c.7 cases
d.11 cases
7) The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade
policy. If the world price of goose meat is $3 per pound and the domestic price of goose
meat without trade is $2 per pound, then Aviana should export goose meat.
a.True
b.False
8) Place each of the following in the correct location in the table.
Rival?
Yes No
Excludable?Y
N
a.Congested toll roads
b.Knowledge
c.Fish in the ocean
d.National defense
e.Congested nontoll roads
f.Cable TV
g.The environment
h.Fire protection
i.Ice-cream cones
j.Uncongested toll roads
k.Clothing
l.Uncongested nontoll roads
9) When new entrants into a competitive market have higher costs than existing firms,
a.accounting profits will be the primary determinant of entry into the market.
b.sunk costs become an important determinant of the short-run entry strategy.
c.market price will rise.
d.long-run supply is constant.
10) Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Canada’s opportunity cost of one unit of Good Y is
a.1/2 unit of Good X and Mexico’s opportunity cost of one unit of Good Y is 1/2 unit of
Good X.
b.1/2 unit of Good X and Mexico’s opportunity cost of one unit of Good Y is 2 units of
Good X.
c.2 units of Good X and Mexico’s opportunity cost of one unit of Good Y is 1/2 unit of
Good X.
d.2 units of Good X and Mexico’s opportunity cost of one unit of Good Y is 2 units of
Good X.
11) Which of the following statements can be called a productivity-revealing theory?
a.human-capital theory and signaling theory
b.human-capital theory but not signaling theory
c.signaling theory but not human-capital theory
d.neither human-capital theory nor signaling theory
12) Last year, Joan bought 50 pounds of hamburger when her household’s income was
$40,000. This year, her household income was only $30,000 and Joan bought 60 pounds
of hamburger. All else constant, Joan’s income elasticity of demand for hamburger is
a.positive, so Joan considers hamburger to be an inferior good.
b.positive, so Joan considers hamburger to be a normal good and a necessity.
c.negative, so Joan considers hamburger to be an inferior good.
d.negative, so Joan considers hamburger to be a normal good but not a necessity.
13) A city wants to raise revenues to build a new municipal swimming pool next year.
The mayor suggests that the city raise the price of admission to the current municipal
pools this year to raise revenues. The city manager suggests that the city lower the price
of admission to raise revenues. Who is correct?
a.Both the mayor and city manager would be correct if demand were price elastic.
b.Both the mayor and city manager would be correct if demand were price inelastic.
c.The mayor would be correct if demand were price elastic; the city manager would be
correct if demand were price inelastic.
d.The mayor would be correct if demand were price inelastic; the city manager would
be correct if demand were price elastic.
14) Consider the market for portable air conditioners in equilibrium. When a heat wave
strikes the equilibrium price
a.and quantity both decrease.
b.and quantity both increase.
c.increases, and the equilibrium quantity decreases.
d.decreases, and the equilibrium quantity increases.
15) Assume that Andrea and Paul can switch between producing wheat and producing
beef at a constant rate.
Assume that Andrea and Paul each has 480 minutes available. If each person divides his
time equally between the production of wheat and beef, then total production is
a.24 bushels of wheat and 64 pounds of beef.
b.21 bushels of wheat and 33 pounds of beef.
c.16 bushels of wheat and 48 pounds of beef.
d.5 bushels of wheat and 24 pounds of beef.
16)
The opportunity cost of one cup of coffee is highest when the economy produces
a.0 cups of coffee.
b.2 cups of coffee.
c.4 cups of coffee.
d.6 cups of coffee.