1) Research into new technologies conveys neither negative externalities nor positive
externalities.
a.True
b.False
2) A congested side street in your neighborhood is
a.excludable and rival in consumption.
b.excludable and not rival in consumption.
c.not excludable and rival in consumption.
d.not excludable and not rival in consumption.
3) On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and
another point is (quantity supplied = 250, price = $4.50). Using the midpoint method,
the price elasticity of supply is about
a. 0.22.
b. 0.53.
c. 1.00.
d. 1.89.
4) The table below shows the quantities demanded of cases of Mt. Dew per month by
four families at various prices.
Which of the following could cause all four families to demand more Mt. Dew at all
prices?
a.The price of sugar decreases.
b.All four family incomes increase, and Mt. Dew is a normal good.
c.A major university study reveals that drinking Mt. Dew can cause diabetes.
d.The technology for bottling carbonated beverages improves.
5) The movement from point B to point C is
a(n)
a.shift of the demand curve.
b.movement along the demand curve.
c.indication that the price of grapes has changed.
d.indication that the costs incurred by firms that produce grapes have changed.
6) Oil field workers’ wages are directly tied to the world price of oil.
a.True
b.False
7) Which of the following statements is not correct?
a.Libertarians are opposed to redistributing income.
b.Critics of the welfare system argue that it breaks up families.
c.One of the problems with measuring income inequality is valuing in-kind transfers.
d.Utilitarians believe that the government should punish crimes but should not
redistribute income.
8) Which of the following explains the “beauty premium” differences in wages?
a.People who spend time on their personal appearance may send a signal that they are
more productive workers.
b.Personal appearance and intelligence are inversely related.
c.The ‘superstar phenomenon” explains the “beauty premium.”
d.Better-looking people are more efficient; thus, they are paid an efficiency wage.
9) What is Barbuda’s opportunity cost of one umbrella?
a.3/5 towels
b.2/3 towels
c.3/2 towels
d.5/3 towels
10) Labor-saving technological advances increase the marginal productivity of labor.
a.True
b.False
11) To increase safety at a bad intersection, the mayor must decide whether to install a
traffic light at a cost of $45,000.
If the traffic light reduces the risk of fatality by 0.4 percent, and the value of a human
life is estimated to be $10 million, the mayor should
a.install the light because the expected benefit of $400,000 is greater than the cost.
b.install the light because the expected benefit of $45,000 is greater than the cost.
c.not install the light because the expected benefit of $45,000 is only equal to the cost.
d.not install the light because the expected benefit of $40,000 is less than the cost.
12) A rational decision maker takes an action if and only if
a.the average benefit of the action exceeds the average cost.
b.the average cost of the action exceeds the average benefit.
c.the marginal benefit of the action exceeds the marginal cost.
d.the marginal cost of the action exceeds the marginal benefit.