1) The supply of labor in any one market depends on the opportunities available in
other markets.
a.True
b.False
2) Figure 10-19
Note that the lines labeled €Demand€ and €Social Value€are parallel. Also, the slopes
of the lines on the graph reflect the following facts: (1) Private value and social value
decrease by $1.00 with each additional unit of the good that is consumed, and (2)
private cost increases by $1.40 with each additional unit of the good that is produced.
Thus, when the 59th unit of the good is produced and consumed, social well-being
increases by
a. $28.00.
b. $31.40.
c. $33.60.
d. $36.00.
3) The signaling theory of education suggests that when people earn a college degree
they do not become more productive, but they do signal their high ability to prospective
employers.
a.True
b.False
4) Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The
for this good is
a.inelastic and equal to 6
b.elastic and equal to 6
c.inelastic and equal to 0.17
d.elastic and equal to 0.17
5) Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:
If the price is $3.50 in the short run, what will happen in the long run?
a.Nothing. The price is consistent with zero economic profits, so there is no incentive
for firms to enter or exit the industry.
b.Individual firms will earn positive economic profits in the short run, which will entice
other firms to enter the industry.
c.Individual firms will earn negative economic profits in the short run, which will cause
some firms to exit the industry.
d.Because the price is below the firm‘s average variable costs, the firms will shut down.
6) Unemployment could cause this economy to produce at
point B.
a.True
b.False
7) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Japan’s opportunity cost of one car is
a.1/5 airplane and Korea’s opportunity cost of one car is 1/3 airplane.
b.1/5 airplane and Korea’s opportunity cost of one car is 3 airplanes.
c.5 airplanes and Korea’s opportunity cost of one car is 1/3 airplane.
d.5 airplanes and Korea’s opportunity cost of one car is 3 airplanes.
8) An externality is the impact of
a.society’s decisions on the well-being of society.
b.a person’s actions on that person’s well-being.
c.one person’s actions on the well-being of a bystander.
d.society’s decisions on the poorest person in the society.
9) Suppose that in 2020 the average citizen’s federal tax bill is $11,987, and total federal
spending is $12,294 per person. In 2020, the federal government will have
a.a budget surplus.
b.a budget deficit.
c.horizontal equity.
d.vertical equity.
10) Special tax treatment given to specific types of behavior are called
a.tax avoidance.
b.tax evasion.
c.tax loopholes.
d.tax burden.
11) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Assume that Japan and Korea each has 2400 hours available. If each country divides its
time equally between the production of cars and airplanes, then total production is
a.40 cars and 8 airplanes.
b.64 cars and 16 airplanes.
c.80 cars and 16 airplanes.
d.128 cars and 32 airplanes.
12) A typical consumer consumes both coffee and donuts. After the consumer’s income
decreases, the consumer consumes more coffee but fewer donuts than before. For this
consumer, donuts are a normal good, but coffee is an inferior good.
a.True
b.False
13) Consumer theory provides the foundation for understanding demand curves because
a.each point on a demand curve represents an optimal choice point.
b.consumers purchase more inferior goods than normal goods.
c.increases in income cause the budget constraint to rotate inward along one axis, which
changes the consumer’s purchases.
d.increases in income cause the budget constraint to rotate outward along one axis,
which changes the consumer’s purchases.
14) Which of the following is likely to have the most price elastic demand?
a.clothing
b.blue jeans
c.Tommy Hilfiger jeans
d.All three would have the same elasticity of demand because they are all related.
15) What are the two main sources of tax revenues for state and local governments?
16) Figure 21-31
The figure shows two indifference curves and two budget constraints for a consumer
named Kevin.
Refer to Figure 21-31. Suppose point A was Kevin’s optimum last week, and point B is
his optimum this week. What happened between last week and this week?
17) Suppose demand is given by the equation:
Using the midpoint method, what is the between $1 and $2?
18) Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-14. The trend in income inequality from 1980 to 2010 is _______.
19) The measure of how willing consumers are to buy less of a good as its price rises is
called
20) If identical firms that remain in a competitive market over the long run make zero
economic profit, why do these firms choose to remain in the market?