1) Table 10-5
The following table shows the marginal costs for each of four firms (A, B, C, and D) to
eliminate units of pollution from their production processes. For example, for Firm A to
eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second
unit of pollution it would cost an additional $67.
If the government wanted to eliminate exactly 11 units of pollution, which of the
following fees per unit of pollution would achieve that goal?
a.$75
b.$87
c.$90
d.$106
2) When a tax is imposed on buyers, consumer surplus and producer surplus both
decrease.
a.True
b.False
3) An example of positive analysis is studying
a.how market forces produce equilibrium.
b.whether equilibrium outcomes are fair.
c.whether equilibrium outcomes are socially desirable.
d.if income distributions are fair.
4) In a competitive market, the quantity of each good produced and the price at which it
is sold are not determined by any single buyer or seller.
a.True
b.False
5) Most goods in our economy are allocated in markets, where buyers pay for what they
receive and sellers are paid for what they provide.
a.True
b.False
6) Juanita is preparing to study for her economics final exam. She tells her friend that
she will be happy if she just gets a B, even though she could likely earn an A if she
studied harder. Juanita is what Herbert Simon would call a
a.rational maximizer.
b.satisficer.
c.homo economicus.
d.screener.
7) Assume that Jamaica and Norway can switch between producing coolers and
producing radios at a constant rate. The following table shows the number of coolers or
number of radios each country can produce in one day.
Jamaica’s opportunity cost of one cooler is
a.0.5 radios, and Norway’s opportunity cost of one cooler is 0.125 radios.
b.0.5 radios, and Norway’s opportunity cost of one cooler is 8 radios.
c.2 radios, and Norway’s opportunity cost of one cooler is 0.125 radios.
d.2 radios, and Norway’s opportunity cost of one cooler is 8 radios.
8) Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
England should specialize in the production of
a.cheese and Spain should specialize in the production of bread.
b.bread and Spain should specialize in the production of cheese.
c.both goods and Spain should specialize in the production of neither good.
d.neither good and Spain should specialize in the production of both goods.
9) On a graph we draw a consumer’s budget constraint, measuring the number of apples
on the horizontal axis and the
number of light bulbs on the vertical axis. If the slope of the budget constraint is -2,
then
a.an apple costs twice as much as a light bulb.
b.the opportunity cost of a light bulb is 2 apples.
c.the opportunity cost of an apple is one-half of a light bulb.
d.All of the above are correct.
10) Juanita is trying to convince the owner of a jewelry store to hire her. She argues that
she could help the shop sell an additional three rings per day for a profit of $20 each. If
the facts are not in dispute, but the owner does not hire her, then
a.the wage rate must be less than $60 per day.
b.hiring Juanita would involve a negative marginal product.
c.the wage rate must be more than $60 per day.
d.the wage rate must be less than $20 per day.
11) Why can superstar athletes and movie stars earn multimillion dollar salaries but
superstar electricians and professors cannot?
a.Every customer in the market wants to enjoy the good supplied by the best producer.
b.Technology makes it possible for the best producer to supply every customer at low
cost.
c.Customers are willing to pay more for entertainment than other services.
d.Both a and b are correct.
12) National defense is a classic example of a public good because
a.there is no market for private security services.
b.it is difficult to exclude people from receiving the benefits from national defense once
it is provided.
c.everyone agrees that some level of national defense is important, but only the
government knows the optimal amount.
d.there are no private firms willing to supply defense goods such as tanks and weapons.
13) When comparing the percentage of income (or expenditure) of the lowest and
highest 10 percent of the population,
a.South Africa has a more equal income distribution than the United States.
b.South Africa has a more equal income distribution than Japan.
c.Japan has a more equal income distribution than the United States.
d.Mexico has a more equal income distribution than Germany.
14) The intersection of a firm‘s marginal revenue and marginal cost curves determines
the level of output at which
a.total revenue is equal to variable cost.
b.total revenue is equal to fixed cost.
c.total revenue is equal to total cost.
d.profit is maximized.
15) Conventional economic theory suggests that in the ultimatum game, the player
proposing a split of $50 will propose that she get $49 and that the other player get $1.
By the same reasoning, if the amount to be split is $1000, the player proposing the split
will propose that she gets
a.$500 and that the other player gets $500.
b.$998 and that the other player gets $2.
c.$999 and that the other player gets $1.
d.$1000 and that the other player gets nothing.
16) Which of the following groups has the lowest poverty rate?
a.blacks
b.Asians
c.children (under age 18)
d.female households, no spouse present
17) Figure 7-34
Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If
the government removed the price floor, by how much would total producer surplus
change, assuming the producers with the lowest cost were the ones supplying the
market when the price floor was in place?