1) A tax on a good causes the size of the market to increase.
a.True
b.False
2) Which of the following contributes to the projected rise in government spending on
Social Security and Medicare as a percentage of GDP?
a.increasing life expectancies
b.increasing healthcare costs
c.increasing fertility rates
d.Both a and b are correct.
3) The maximin criterion is the idea that the government should aim to maximize the
well-being of the worst-off person in society.
a.True
b.False
4) Economists make assumptions to
a.provide issues for political discussion.
b.make a complex world easier to understand.
c.make it easier to teach economic concepts and analysis.
d.create policy alternatives that are incomplete or subject to criticism.
5) Drug interdiction, which reduces the supply of drugs, will likely be a less effective
policy than educating consumers to reduce their demand for drugs because the drug
interdiction policy will lower drug prices and reduce the quantity of drugs demanded.
a.True
b.False
6) Table 13-1
What is total output when 5 workers are hired?
a. -10
b.90
c.185
d.225
7) In 2011, what percentage of U.S. families had income levels above $115,866?
a.10 percent
b.20 percent
c.60 percent
d.80 percent
8) Changing the basis of taxation from income earned to amount spent will
a.necessarily reduce tax revenues.
b.lower effective interest rates on savings.
c.distort incentives to earn income.
d.eliminate disincentives to save.
9) Economists use one standard set of assumptions to answer all economic questions.
a.True
b.False
10) In a perfectly competitive market, the process of entry and exit will end when
(i)accounting profits are zero.
(ii)economic profits are zero.
(iii)price equals minimum marginal cost.
(iv)price equals minimum average total cost.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(ii) and (iv) only
d.(i), (ii), (iii), and (iv)
11) If a firm operating in a competitive industry shuts down in the short run, it can
avoid paying
a.fixed costs.
b.variable costs.
c.total costs.
d.The firm must pay all its costs, even if it shuts down.
12) The DeBeers Company faces very little competition from other firms in the
wholesale diamond market. Why isn’t the price of the wholesale diamonds $10,000 per
carat?
a.because the government would not allow such a high price
b.because stockholders would not allow such a high price
c.because the company would sell so few copies that they would earn higher profits by
selling at a lower price
d.All of the above are correct.
13) Prices rise when the quantity of money rises rapidly is an example of a
a.negative economic statement.
b.positive economic statement.
c.normative economic statement.
d.statement that contradicts one of the basic principles of economics.
14) Figure 20-3
Refer to Figure 20-3. In 1968, the percent of elderly aged 65 and over in poverty is
a.higher than both the percentage of adults aged 18 to 64 and the percentage of children
under age 18 in poverty.
b.higher than the percentage of adults aged 18 to 64 but is lower than the percentage of
children under age 18 in poverty.
c.lower than both the percentage of adults aged 18 to 64 and the percentage of children
under age 18 in poverty.
d.is lower than the percentage of adults aged 18 to 64 but is higher than the percentage
of children under age 18 in poverty.
15) Table 18-11
Consider the following daily production data for MadeFromScratch, Inc.
MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per
day.
Refer to Table 18-11. What is the third worker’s marginal product of labor?
a.120 cupcakes
b.140 cupcakes
c.160 cupcakes
d.180 cupcakes