1) Consider the market for capital equipment. Suppose the value of the marginal
product of capital equipment increases. Holding all else constant, the equilibrium rental
price of capital equipment will
a.increase.
b.decrease.
c.not change.
d.It is not possible to determine what will happen to the equilibrium rental price of
capital equipment.
2) Which of the following tools and concepts is useful in the analysis of international
trade?
a.total surplus
b.domestic supply
c.equilibrium price
d.All of the above are correct.
3) Assume all capital is owned by firms, rather than by households. Under this
assumption, capital is paid according to the value of its marginal product
a.only if this income is transmitted to households in the form of interest.
b.only if this income is transmitted to households in the form of dividends.
c.only if this income is transmitted to households in the form of interest or dividends.
d.regardless of whether this income is transmitted to households in the form of interest
or dividends or whether it is kept within firms as retained earnings.
4) George and Brad are waiters at a local restaurant. The female customers think that
George is better looking than Brad. If George earns more than Brad, this could be an
example of each of the following except
a.customer preferences.
b.discrimination.
c.a beauty premium.
d.a compensating differential.
5) Which of the following is an example of a positive, as opposed to normative,
statement?
a.When the minimum wage is increased, unemployment is a predictable consequence.
b.The income tax rate should be increased to offset the budget deficit.
c.Increasing government spending is the best way to help the economy move out of a
recession.
d.More than one of the above are positive statements.
6) Macroeconomics is the study of economy-wide phenomena.
a.True
b.False
7) Figure 8-10
Suppose the government imposes a tax that reduces the quantity sold in the market after
the tax to Q2. The deadweight loss of the tax is
a. [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
b. [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
c. (P2-P8) x Q2.
d. 1/2 x (P2-P8) x (Q5-Q2).
8) The movement from point A to point B is
a(n)
a.shift of the demand curve.
b.indication of a change in preferences for grapes.
c.movement along the demand curve.
d.indication of an increase in income.
9) Table 12-22
A regressive tax is illustrated by tax
a.A only.
b.B or D.
c.C only.
d.A or D.
10) Yasmine
Mercedes
If Yasmine and Mercedes are the only two consumers in the market, then the market
quantity demanded at a price of $12 is
a.3 units.
b.6 units.
c.9 units.
d.12 units.
11) An economic model can accurately explain how the economy is organized because
it is designed to include, to the extent possible, all features of the real world.
a.True
b.False
12) The property of society getting the most it can from its scarce resources is called
a.efficiency.
b.equality.
c.externality.
d.productivity.
13) A consumer is currently spending all of her available income on two goods: music
CDs and DVDs. At her current consumption bundle, she is spending twice as much on
CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs
and 2 DVDs, what is the price of a DVD?
a.$4
b.$8
c.$12
d.$20
14) If marijuana were legalized, it is likely that there would be an increase in the
demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana
is perfectly elastic, this will result in
a.higher prices and higher total revenue from marijuana sales.
b.higher prices but lower total revenue from marijuana sales.
c.the same price and higher total revenue from marijuana sales.
d.the same price but lower total revenue from marijuana sales.