1) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Maya has an absolute advantage in the production of
a.both goods and a comparative advantage in the production of mixers.
b.both goods and a comparative advantage in the production of toasters.
c.neither good and a comparative advantage in the production of mixers.
d.neither good and a comparative advantage in the production of toasters.
2) If the wages of a dentist increase,
a.so does her opportunity cost of leisure.
b.her hours of labor supplied may increase.
c.her hours of labor supplied may decrease.
d.All of the above are correct.
3) Susan won $2,000 at the blackjack tables on her birthday. Her winnings are an
example of
a.permanent income.
b.life-cycle income.
c.transitory income.
d.an in-kind transfer.
4) A manufacturer produces 1,000 units, regardless of the market price. For this firm,
the price elasticity of supply is
a.infinity.
b.zero.
c.one.
d.negative one.
5) Assume the market for tennis balls is perfectly competitive. When one tennis ball
producer exits the market,
a.the price of tennis balls increases.
b.the price of tennis balls decreases.
c.the price of tennis balls does not change.
d.there is no longer a market for tennis balls.
6) Suppose that Bill wants to dine at a fancy restaurant, but the only available table is in
the smoking section. Bill dislikes the smell of cigarette smoke. He notices that only one
person, Peter, is smoking in the smoking section. Bill values the absence of smoke at
$15. Peter values the ability to smoke in the restaurant at $10. In order for Bill to pay
Peter not to smoke, he will need to tip the waiter $10 to facilitate the transaction. Which
of the following represents an efficient solution?
a.Peter continues to smoke because the cost to Bill to pay him not to smoke is between
$20 and $25, which exceeds the benefit to him of no smoking ($15).
b.Bill offers Peter between $10 and $15 not to smoke, and he pays the waiter $10. Peter
accepts, and both parties are better off.
c.Bill offers Peter between $10 and $15 not to smoke, and he pays the waiter $10. Peter
declines because he has a right to smoke in the smoking section.
d.Bill offers Peter $5 not to smoke, and he pays the waiter $10. Peter accepts, and both
parties are better off.
7) Table 22-7
Suppose that residents of a town are asked to vote on the best way to improve the safety
of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop.
The voters are divided into three groups based on their preferences.
Voter Type
Refer to Table 22-7. If the first vote pits a 2-way stop against a stoplight and the second
vote pits a 4-way stop against the winner of the first vote, then the outcome is as
follows:
a.2-way stop wins the first vote and 2-way stop wins the second vote, so the town
installs a 2-way stop.
b.2-way stop wins the first vote and 4-way stop wins the second vote, so the town
installs a 4-way stop.
c.Stoplight wins the first vote and stoplight wins the second vote, so the town installs a
stoplight.
d.Stoplight wins the first vote and 4-way stop wins the second vote, so the town installs
a 4-way stop.
8) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
If the
production possibilities frontiers shown are each for 4 hours of work, then which of the
following combinations of bowls and cups could Bintu and Juba together make in a
given 4-hour production period?
a.1 bowl and 14 cups
b.2 bowls and 11 cups
c.3 bowls and 10 cups
d.5 bowls and 5 cups
9) A miniature golf course is a good example of where fixed costs become relevant to
the decision of when to open and when to close for the season.
a.True
b.False
10) The invisible hand refers to
a.how central planners made economic decisions.
b.how the decisions of households and firms lead to desirable market outcomes.
c.the control that large firms have over the economy.
d.government regulations without which the economy would be less efficient.
11) Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific
salmon off the coast of Alaska. As part of her business she hires a captain and several
crew members for each boat. In the market for fresh Pacific salmon, there are thousands
of firms like Gertrude’s. While Gertrude usually catches a significant number of fish
each year, her contribution to the entire harvest of salmon is negligible relative to the
size of the market.
Refer to Scenario 18-2. When Gertrude participates in the labor market to hire crew
members for her boats, she is most likely considered a
a.demander of labor services.
b.supplier of labor services.
c.demander of capital.
d.supplier of capital.
12) Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center,
or an arena. Exactly one of the three choices will prevail, and the choice will be made
by way of pairwise voting, with the majority determining the outcome on each vote.
The preferences of the voters are summarized in the table below.
Voter Type
Refer to Table 22-5. Which of the following statements is correct regarding the
Condorcet paradox and the results of pairwise voting in Anytown?
a.The results of pairwise voting depend on the order of the pairs and preferences are
transitive.
b.The results of pairwise voting depend on the order of the pairs, but preferences are not
transitive.
c.The results of pairwise voting do not depend on the order of the pairs, but preferences
are transitive.
d.The results of pairwise voting do not depend on the order of the pairs and preferences
are not transitive.
13) The price of sugar that prevails in international markets is called the
a.export price of sugar.
b.import price of sugar.
c.comparative-advantage price of sugar.
d.world price of sugar.
14) Under what conditions might government intervention in a market economy
improve the economy’s performance?
15) Why might economists prefer private ownership of monopolies over public
ownership of monopolies?
16) Which of the following types of taxes achieves vertical equity: a proportional tax,
regressive tax, and/or progressive tax?
17) Is it possible for a normal good to be a Giffen good? Briefly explain.
18) The likelihood of successful private solutions to problems caused by externalities
depends, in part, upon the number of interested parties. Briefly explain.
19) Is the following a positive or normative statement? The unemployment rate in
Nevada is higher than the unemployment rate in New York.
20) The most important type of human capital is
21) Figure 8-25
How much is total surplus at the market equilibrium?