1) The “unfaircompetition” argument might be cited by an American who believes that
a.almost every country has a comparative advantage, relative to the United States, in
producing almost all goods.
b.young industries should be protected against foreign competition until they become
profitable.
c.the American automobile industry should be protected against Japanese firms that are
able to produce automobiles at relatively low cost.
d.the French government’s subsidies to French farmers justify restrictions on American
imports of French
agricultural products.
2) A firm operating in a perfectly competitive market may earn positive, negative, or
zero economic profit in the short run.
a.True
b.False
3) A tax system based on the ability-to-pay principle claims that all citizens should
a.pay taxes based on the benefits they receive from government services.
b.pay the same amount in taxes.
c.pay taxes based on consumption rather than income.
d.make an equal sacrifice.
4) Figure 21-8
Refer to Figure 21-8. You have $36 to spend on good X and good Y. If good X costs $6
and good Y costs $12, your budget constraint is
a.AB.
b.BC.
c.CD.
d.DE.
5) Assume men, on balance, have lower amounts of human capital than women have.
Then we would expect
a.the demand for female labor to be lower than the demand for male labor.
b.the demand for female labor to be higher than the demand for male labor.
c.the supply of female labor to be lower than the demand for male labor.
d.the supply of female labor to be higher than the supply of male labor.
6) Figure 21-27
Refer to Figure 21-27. Anna experiences an increase in her hourly wage. Her optimal
choice point moves from A to B. For Anna,
a.her labor supply curve is backward bending.
b.her labor supply curve is upward sloping.
c.leisure is an inferior good.
d.both a and c are correct.
7) Which of the following is not an advantage of a multilateral approach to free trade
over a unilateral approach?
a.A multilateral approach can reduce trade restrictions abroad as well as at home.
b.A multilateral approach has the potential to result in freer trade.
c.A multilateral approach requires the agreement of two or more nations.
d.A multilateral approach may have political advantages.
8) If society chose to maximize total utility rather than minimum utility,
a.society would achieve perfect income equality.
b.society would achieve the maximin objective.
c.its justice would be more utilitarian than Rawlsian.
d.its justice would be more Rawlsian than utilitarian.
9) Consider a small town with only three families, the Greene family, the Brown family,
and the Black family. The town does not currently have any streetlights so it is very
dark at night. The three families are considering putting in streetlights on Main Street
and are trying to determine how many lights to install. The table below shows each
family’s willingness to pay for each streetlight.
Suppose the cost to install each streetlight is $900 and the families have agreed to split
the cost of installing the streetlights equally. If the residents choose to install the
number of streetlights that will maximize total surplus from the streetlights, how much
total surplus will the Greene family receive?
a.-$40
b.$0
c.$40
d.$60
10) Table 12-18
United States Income Tax Rates for a Single Individual, 2009 and 2010.
What type of tax structure does the United States have in 2010 for single individuals?
a.a proportional tax structure
b.a regressive tax structure
c.a progressive tax structure
d.a lump-sum tax structure
11) Technology is an important factor in explaining the high incomes of some athletes
primarily because
a.technology accounts for differences in incomes within all occupations.
b.technology makes it possible for very large numbers of people to watch athletes
perform.
c.technology improves the performance of athletes.
d.technology requires human capital to use it efficiently.
12) Because it is
a.neither excludable nor rival in consumption, a tornado siren is a common resource.
b.neither excludable nor rival in consumption, a tornado siren is a public good.
c.excludable but not rival in consumption, a tornado siren is produced by a natural
monopoly.
d.rival in consumption but not excludable, a tornado siren is a common resource.
13) Variable costs equal fixed costs when nothing is produced.
a.True
b.False
14) The law of demand states that, other things equal, when the price of a good
a.falls, the demand for the good rises.
b.rises, the quantity demanded of the good rises.
c.rises, the demand for the good falls.
d.falls, the quantity demanded of the good rises.
15) An externality exists whenever
a.the economy cannot benefit from government intervention.
b.markets are not able to reach equilibrium.
c.a firm sells its product in a foreign market.
d.Bobbi engages in an activity that influences the well-being of Rosa and yet Bobbi
neither pays nor receives payment for that influence.
16) When a driver enters a crowded highway he increases the travel times of all other
drivers on the highway. This is an example of a negative externality.
a.True
b.False
17) Scenario 19-1
Ferris B., a student at a community college, is considering what he should do for
summer employment. Two recruiters show up at his school in search of summer
workers. Recruiter A is looking for lifeguards to patrol the beach at an exclusive island
resort in the Caribbean. Recruiter B is looking for workers to staff positions at a
summer youth camp.
Refer to Scenario 19-1. Ferris is carefully considering the options that each recruiter
presents. On the basis of knowledge obtained in his economics class, Ferris concludes
that
a.the lifeguard job will be more fun than the summer camp job, so the wage for that job
will be higher than otherwise.
b.if the summer camp job doesn’t require any special skills, the wage for that job will be
lower than otherwise.
c.since the summer camp job requires some night shift work, the wage for that job will
be lower than otherwise.
d.All of the above are correct.
18) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
What happens to total surplus in this market when the tax is imposed?
a.Total surplus increases by $1,500.
b.Total surplus increases by $3,000.
c.Total surplus decreases by $1,500.
d.Total surplus decreases by $,3000.
19) Severe adverse-selection problems may result in
a.too few good used cars being offered for sale.
b.wages that are too low relative to equilibrium levels.
c.too many good drivers buying too much automobile insurance.
d.people with average health buying too much health insurance.
20) Figure 8-26
How much is total surplus at the market equilibrium?
21) Scenario 7-1
Suppose market demand is given by the equation
Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total
consumer surplus in this market?
22) According to economists Hamermesh and Biddle, how much more do people who
are deemed more attractive than average earn?
23) The table below shows the quantities demanded of milk per month by four families
at various prices.
If the four families listed are the only demanders in this market and the price of a gallon
of milk increases from $4.00 to $5.00, what is the change in the market quantity
demanded?
24) A competitive, profit-maximizing pays its workers a wage of $294 per day. The
marginal product of the last worker is 35 units of output. What is the firm’s marginal
cost of producing its last unit of output?
25) Nike and Reebok (athletic shoe companies) are considering whether to advertise
during the Super Bowl. Devise a simple prisoners’ dilemma game to demonstrate the
strategic considerations that are relevant to this decision. Does the repeated game
scenario differ from a single period game? Is it possible that a repeated game (without
collusive agreements) could lead to an outcome that is better than a single-period game?
Explain the circumstances in which this may be true.
26) Suppose consumers expect the price of a good to be higher in the future than it is
today. Would the current demand for the good increase or decrease?
27) Table 16-7
A monopolistically competitive firm faces the following demand schedule for its
product. In addition, the firm has total fixed costs equal to 20.
When this firm profit maximizes and faces a constant marginal cost of $7, what is the
amount of its markup over marginal cost?