1) About what percent of total world trade is accounted for by countries that belong to
the World Trade Organization?
a.54 percent
b.72 percent
c.89 percent
d.97 percent
2) The United States has more income inequality than Japan, Germany, and France.
a.True
b.False
3) Positive statements are descriptive, while normative statements are prescriptive.
a.True
b.False
4) First grade teachers who work in Lynn, Massachusetts’s (a large, low income city
north of Boston) public schools earn more than first grade teachers who work in private
schools in more affluent communities north of Boston. Lynn teachers belong to a
teachers’ union. Which statement best explains the scenario described above?
a.Lynn school teachers receive a compensating differential because they work in a more
difficult environment, and they receive higher than market equilibrium wages because
they are members of a teachers’ union.
b.Lynn school teachers receive a compensating differential because they work in a more
difficult environment, but they do not receive higher than market equilibrium wages
because they are members of a teachers’ union.
c.Lynn school teachers do not receive a compensating differential because they work in
a more difficult environment, but they do receive higher than market equilibrium wages
because they are members of a teachers’ union.
d.Lynn school teachers do not receive a compensating differential because they work in
a more difficult environment, and they do not receive higher than market equilibrium
wages because they are members of a teachers’ union.
5) At the equilibrium price, quantity demanded is equal to quantity supplied.
a.True
b.False
6) In calculating accounting profit, accountants typically don‘t include
a.long-run costs.
b.sunk costs.
c.explicit costs of production.
d.opportunity costs that do not involve an outflow of money.
7) The law of supply and demand asserts that
a.demand curves and supply curves tend to shift to the right as time goes by.
b.the price of a good will eventually rise in response to an excess demand for that good.
c.when the supply curve for a good shifts, the demand curve for that good shifts in
response.
d.the equilibrium price of a good will be rising more often than it will be falling.
8) Suppose that monopolistically competitive firms in a certain market are earning
positive profits. In the transition from this initial situation to a long-run equilibrium,
a.the number of firms in the market decreases.
b.each existing firm experiences a decrease in demand for its product.
c.each existing firm experiences a rightward shift of its marginal revenue curve.
d.each existing firm experiences an upward shift in its average total cost curve.
9) Figure 7-15
Area B represents
a.the combined profits of all producers when the price is P2.
b.the increase in producer surplus to all producers as the result of an increase in the
price from P1 to P2.
c.producer surplus to new producers entering the market as the result of an increase in
the price from P1 to P2.
d.that portion of the increase in producer surplus that is offset by a loss in consumer
surplus when the price increases from P1 to P2.
10) For a good that is a luxury, demand
a.tends to be inelastic.
b.tends to be elastic.
c.has unit elasticity.
d.cannot be represented by a demand curve in the usual way.
11) A distinguishing feature of an oligopolistic industry is the tension between
a.profit maximization and cost minimization.
b.cooperation and self interest.
c.producing a small amount of output and charging a price above marginal cost.
d.short-run decisions and long-run decisions.
12) An decrease in the price of oranges would lead to a(n)
a.increased supply of oranges.
b.increase in the prices of inputs used in orange production.
c.a movement down and to the left along the supply curve for oranges.
d.a movement up and to the right along the supply curve for oranges.
13) The goal of liberalism is to
a.redistribute income based on the assumption of diminishing marginal utility.
b.redistribute income in order to improve the well-being of the worst-off person in
society.
c.punish crimes and enforce voluntary agreements but not to redistribute income.
d.measure happiness and satisfaction.
14) Asymmetric information, political economy, and behavioral economics
a.are topics at the frontier of microeconomics.
b.are topics that economists no longer research.
c.are being studied as economists try to expand their understanding of human behavior
and society.
d.both a and c are correct.
15) The commercial jetliner industry consisting of Boeing and Airbus would best be
described as a (an)
a.perfectly competitive market.
b.monopolistically competitive market.
c.oligopoly.
d.monopoly.
16) Consider the following problems: overcrowded public highways, overfishing in the
ocean, polluted air, and the near- extinction of the wild rhinoceros. What do these
problems have in common?
a.Private markets could easily solve them if governments left the markets alone.
b.They would all go away if the government sponsored an intensive public-information
campaign.
c.They are all the result of a failure to establish clear property rights over something of
value.
d.They are all the result of a failure of corrective taxes.