1) The signaling theory of education is most similar to the
a.human capital theory of education.
b.discrimination theory of advertising.
c.signaling theory of advertising.
d.efficiency wage theory of labor economics.
2) One reason why better-looking workers may have higher earnings is that physical
attractiveness is correlated with intelligence.
a.True
b.False
3) Figure 10-9
d.The value of the economist’s language lies in its ability to provide you with a new and
useful way of thinking about the world in which you live.
6) An increase in demand is represented by a
a.movement downward and to the right along a demand curve.
b.movement upward and to the left along a demand curve.
c.rightward shift of a demand curve.
d.leftward shift of a demand curve.
7) Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Huang has an absolute advantage in the production of
a.parasols and a comparative advantage in the production of parasols.
b.parasols and a comparative advantage in the production of plates.
c.neither good and a comparative advantage in the production of parasols.
d.neither good and a comparative advantage in the production of plates.
8) A budget constraint illustrates the
a.prices that a consumer chooses to pay for products he consumes.
b.purchases made by consumers.
c.consumption bundles that a consumer can afford.
d.consumption bundles that give a consumer equal satisfaction.
9) The product-variety externality arises in monopolistically competitive markets
because
a.firms produce with excess capacity.
b.firms try to differentiate their products.
c.firms would like to produce homogeneous products, but the large number of firms
prohibits it.
d.entry and exit is restricted.
10) The shape of the total-cost curve is inversely related to the shape of the production
function.
a.True
b.False
11) The product-variety externality and the business-stealing externality are both
spillover benefits of new firms entering a monopolistically competitive market.
a.True
b.False
12) The measures how much
a.quantity demanded responds to a change in price.
b.quantity demanded responds to a change in income.
c.price responds to a change in demand.
d.demand responds to a change in supply.
13) Economics is the study of how society manages its
a.limited wants and unlimited resources.
b.unlimited wants and unlimited resources.
c.limited wants and limited resources.
d.unlimited wants and limited resources.
14) Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline
slopes upward. The production of the 1,000th gallon of gasoline entails the following:
♦ private cost of $3.10;
♦ social cost of $3.55;
♦ value to consumers of $3.70.
Let QMARKET represent the equilibrium quantity of gasoline, and let QOPTIMUM
represent the socially optimal quantity of gasoline. Which of the following inequalities
is correct?
a.1,000<QOPTIMUM <QMARKET
b.QOPTIMUM <1,000<QMARKET
c.QMARKET <1,000<QOPTIMUM
d.QOPTIMUM <QMARKET <1,000
15) When quantity demanded decreases at every possible price, the demand curve has
a.shifted to the left.
b.shifted to the right.
c.not shifted; rather, we have moved along the demand curve to a new point on the
same curve.
d.not shifted; rather, the demand curve has become flatter.