1)
Sellers’ total revenue would increase if the price
a.increased from $12 to $15.
b.decreased from $39 to $36.
c.decreased from $27 to $24.
d.All of the above are correct.
2) Human capital is
a.an important determinant of wages, but it does not affect the production of goods and
services.
b.an important determinant of wages, and it affects the production of goods and
services.
c.a specific type of physical capital made by humans rather than machines.
d.very different from physical capital in that physical capital represents an investment,
while human capital does not represent an investment.
3) The price effect describes the situation when a monopolist lowers the price of output
and, all else equal, total revenue
a.increases.
b.decreases.
c.is unchanged.
d.is maximized.
4) Jake experiences an increase in his wages. The hours of labor that he supplies to the
market would decrease if
a.the income effect is larger than the substitution effect.
b.the substitution effect is larger than the income effect.
c.neither the income effect nor the substitution effect apply to Harry’s laborleisure
tradeoff.
d.Jake views both labor and leisure as inferior goods.
5) Which of the following is not an example of a compensating differential?
a.Chris is a consultant who is paid more than other workers with similar skills because
he is required to travel 80% of the time.
b.Abby is a teacher who is paid less than other workers with similar skills because she
does not have to work during the summer months.
c.Ben is a businessman who is paid more than other workers with similar skills because
he graduated from a prestigious university with honors.
d.Daphne is a skyscraper window-washer who is paid more than other workers with
similar skills because of the risk she faces in her daily job.
6) Efficiency refers to whether a market outcome is fair, while equality refers to
whether the maximum amount of output was produced from a given number of inputs.
a.True
b.False
7) Which of the following is not an important question for economic policy raised by
the experience of the textile industry?
a.How does international trade affect consumer well-being?
b.Who gains and who loses from free trade among countries?
c.How do the gains from trade compare to the losses?
d.Which argument for restricting free trade is politically feasible?
8)
Efficient production is represented by which point(s)?
a.L, M
b.L, M, N, P, Q
c.N, O, P
d.Q
9) Table 22-21
The following table shows the number of voters preferring various amounts of spending
to develop a river to make it more attractive for canoeing and kayaking.
Refer to Table 22-21. Suppose on election day that the voters with a preference for less
than $1.5 million do not show up to vote on a choice to spend either $2 million or $2.5
million. In this case, what is the preferred spending amount of the median voter (among
those who actually cast a vote)?
a.$2 million and $2 million wins.
b.$2 million, but $2.5 million wins.
c.$2.5 million, and $2.5 million wins.
d.$2.5 million, but $2 million wins.
10) Which of the following statements is correct?
a.The poverty line is a relative standard.
b.More families are pushed above the poverty line as economic growth pushes the
entire income distribution upward.
c.Increasing income inequality reduces poverty.
d.Economic growth, by definition, affects all families equally.
11) Scenario 22-2
A wireless telephone service provider offers three service plans to its consumers.
Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone
provider is
a.signaling to customers that they offer great customer service.
b.screening customers to reveal how much they plan to use the service.
c.creating asymmetric information because only the firm knows the true cost of the
service.
d.engaging in a principal-agent problem
12) Table 7-17
Both the demand curve and the supply curve are straight lines. At equilibrium, total
surplus is
a.$44.
b.$56.
c.$72.
d.$96.
13) In the long run a company that produces and sells laundry detergent incurs total
costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For
this range of output, the laundry detergent company exhibits
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.efficient scale.
14) Economists generally agree that
a.human capital theory provides the best explanation of discriminatory practices.
b.differences in average wages do not by themselves provide conclusive evidence about
the magnitude of discrimination in labor markets.
c.discrimination is exclusively an economic, rather than political, phenomenon.
d.most of the wage differentials observed in the U.S. economy are due to
discrimination.
15) Relative to a situation in which gasoline is not taxed, the imposition of a tax on
gasoline causes the quantity of gasoline demanded to
a.decrease and the quantity of gasoline supplied to decrease.
b.decrease and the quantity of gasoline supplied to increase.
c.increase and the quantity of gasoline supplied to decrease.
d.increase and the quantity of gasoline supplied to increase.
16) The theory of efficiency wages asserts that
a.employers set wages based on each employee’s productivity.
b.employers strive to hold wages below equilibrium levels.
c.employers may find it profitable to pay above-equilibrium wages.
d.efficient workers actually earn lower wages than those earned by inefficient workers.
17) Which of the following statements is not correct?
a.An invisible hand leads buyers and sellers to an equilibrium that maximizes total
surplus.
b.Market power can cause markets to be inefficient.
c.Externalities can cause markets to be inefficient.
d.The invisible hand can remedy all types of market failures.
18) Table 17-32
Suppose that Angelina and Brad own the only two professional photography stores in
town. Each must choose between a low price and a high price for senior photo
packages. The annual economic profit from each strategy is indicated in the table
below:
Refer to Table 17-32. Does Brad have a dominant strategy? If so, describe it.
19) If the output effect is larger than the price effect, an individual firm will _______
production.
20) Briefly evaluate the advantages and disadvantages of a lump-sum tax.
21) List the productivity factors that may explain the differences in pay between men
and women in similar occupations. Do any of these factors arise as a result of cultural
or social traditions? If so, describe how changes in social relationships will affect the
pay gap over time.
22) d.
23) Consider the market for 2-packs of light bulbs below.
What are the values of the equilibrium price and quantity?
24) Describe the circumstances under which it would be better for the government to
sell pollution permits than to levy a corrective tax.