1) A lump-sum tax would take different amounts from the poor and the rich.
a.True
b.False
2) The poverty line is based on the percentage of people who cannot afford an adequate
diet.
a.True
b.False
3) Figure 14-7
At what price is the firm‘s maximum profit zero?
a.$80
b.$90
c.$100
d.$125
4) Figure 21-9
Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?
a. $1,500
b.$50
c.$5
d. $0.50
5) Scenario 12-4
A taxpayer faces the following tax rates on her income: 20 percent of the first $40,000
of her income; 30 percent of all her income above $40,000.
The taxpayer faces a marginal tax rate of
a.20 percent when her income rises from $40,000 to $40,001.
b.20 percent when her income rises from $30,000 to $30,001.
c.0 percent when her income rises from $30,000 to $30,001.
d.10 percent when her income rises from $40,000 to $40,001.
6) Which of the following is correct concerning opportunity cost?
a.Except to the extent that you pay more for them, opportunity costs should not include
the cost of things you would have purchased anyway.
b.To compute opportunity costs, you should subtract benefits from costs.
c.Opportunity costs and the idea of trade-offs are not closely related.
d.Rational people should compare various options without considering opportunity
costs.
7) Suppose that demand is inelastic within a certain price range. For that price range,
a.an increase in price would increase total revenue because the decrease in quantity
demanded is proportionately less than the increase in price.
b.an increase in price would decrease total revenue because the decrease in quantity
demanded is proportionately greater than the increase in price.
c.a decrease in price would increase total revenue because the increase in quantity
demanded is proportionately smaller than the decrease in price.
d.a decrease in price would not affect total revenue.
8) Scenario 22-1
Esteban and Michaela own an apartment building. They hire Nico to manage the
building and deal with tenants’ complaints. They also hire Ted to make any necessary
repairs to the apartments or the common area and they hire Rex to be the door guard at
night.
Refer to Scenario 22-1. Which of the following is an example of a moral hazard
problem?
a.Ted steals $5 off the counter in a tenant’s apartment while he is there to repair a leaky
faucet.
b.Esteban and Michaela do not tell Nico that they are planning to sell the building at the
end of the year.
c.Esteban goes golfing while Michaela reviews the financials from the business.
d.Rex is paid an efficiency wage to ensure productivity because he is usually not
monitored while working.
9) Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative
to the no-trade situation, international trade in cardboard
a.benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
b.benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.
c.benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
d.harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.
10) When the price of a good is high, selling the good is profitable, and so the quantity
supplied is large.
a.True
b.False
11) 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 charged a fee of $84 per unit of pollution, how many units of
pollution would the firms eliminate altogether?
a.7
b.8
c.9
d.10
12) Figure 8-13
Suppose the government places a $5 per-unit tax on this good. The amount of tax
revenue collected by the government is
a. $120.
b.$80.
c.$50.
d.$30.
13) Figure 10-4
At Q3
a.the marginal consumer values this product less than the social cost of producing it.
b.every consumer values this product less than the social cost of producing it.
c.the cost to society is equal to the value to society.
d.the marginal consumer values this product more than the private cost.
14) Which of the following is not an example of a systematic mistake that people
make?
a.When asked to predict how many movie stars he can list, Ed says 200 but when put to
the test he can only name 130.
b.Susan watched a home improvement show in which a contractor installed a faulty
deck which collapsed within 2 years of installation. She is now concerned about the
safety of her own deck.
c.Kate’s manager asks her to work additional hours for which she will be paid her usual
hourly wage. Kate weighs the value of her leisure time against the additional wages
before responding to her manager.
d.Bill has purchased Skillman tools for years and has recently noticed a decline in
quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a
Skillman brand drill.
15) The business-stealing externality states that entry of a new firms imposes a cost on
existing firms because they lose customers.
a.True
b.False
16) When a single firm can supply a good or service to an entire market at a lower cost
than could two or more firms, the industry is known as a _________.
17) Mary’s Production Possibilities Frontier Kate’s Production Possibilities
Frontier
What is Kate’s opportunity cost of one cookie?
18) Is a tornado siren excludable? Is it rival in consumption? How do we classify a
tornado siren in terms of the four types of goods?
19) Someone who uses a good without paying for it is called a ?
20) Explain the practice of tying and discuss why it is controversial.
21) Superstars arise in markets in which every customer in the market is able to enjoy
the good supplied by the
22) What effect, if any, does diminishing marginal product have on the shape of the
marginal cost curve?