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1) When the nation of Duxembourg allows trade and becomes an importer of software,
a.residents of Duxembourg who produce software become worse off; residents of
Duxembourg who buy software become better off; and the economic well-being of
Duxembourg rises.
b.residents of Duxembourg who produce software become worse off; residents of
Duxembourg who buy software become better off; and the economic well-being of
Duxembourg falls.
c.residents of Duxembourg who produce software become better off; residents of
Duxembourg who buy software become worse off; and the economic well-being of
Duxembourg rises.
d.residents of Duxembourg who produce software become better off; residents of
Duxembourg who buy software become worse off; and the economic well-being of
Duxembourg falls.
2) Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha,
Nebraska. What happens to the earnings of firefighters in Omaha?
a.The reduction in the supply of fire trucks reduces the marginal productivities of
Omaha firefighters, which causes the equilibrium wage to fall.
b.The reduction in the supply of fire trucks increases the marginal productivities of
Omaha firefighters, which causes the equilibrium wage to fall.
c.The reduction in the supply of fire trucks reduces the marginal productivities of
Omaha firefighters, which causes the equilibrium wage to rise.
d.The reduction in the supply of fire trucks increases the marginal productivities of
Omaha firefighters, which causes the equilibrium wage to rise.
3) A decrease in the size of a tax is most likely to increase tax revenue in a market with
a.elastic demand and elastic supply.
b.elastic demand and inelastic supply.
c.inelastic demand and elastic supply.
d.inelastic demand and inelastic supply.
4) Roxanne's hourly wage increases from $9 to $13. Which of the following describes a
consequence of the increase in Roxanne's wage?
a.The opportunity cost of Roxanne's leisure time has increased.
b.Roxanne may choose to work fewer hours due to the increase in her wage.
c.If Roxanne's labor supply curve is upward sloping, she will choose to work fewer
hours.
d.Both a and b are correct.
5) The 2011 U.S. distribution of income shows that the top 5 percent of families have
approximately what share of income?
a.4 percent
b.9 percent
c.21 percent
d.49 percent
6) The statement that "the rich get richer, and the poor get poorer" is supported by
evidence of an expanding wage gap between high-skill and low-skill workers.
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. Without the tax, the producer surplus is
a.(P5-0) x Q5.
b. 1/2 x (P5-0) x Q5.
c. (P8-0) x Q2.
d. 1/2 x (P8-0) x Q2.
8) The amount of income tax owed by a family is
a.not simply proportional to its total income.
b.unaffected by deductions.
c.total income minus tax credits.
d.a constant fraction of income.
9) In monopolistically competitive markets, positive economic profits
a.suggest that some existing firms will exit the market.
b.suggest that new firms will enter the market.
c.are sustained through government-imposed barriers to entry.
d.are never possible.
10) When a country that imports a particular good imposes an import quota on that
good,
a.producer surplus increases and total surplus increases in the market for that good.
b.producer surplus increases and total surplus decreases in the market for that good.
c.producer surplus decreases and total surplus increases in the market for that good.
d.producer surplus decreases and total surplus decreases in the market for that good.
11) Jake and Harry each have 130 hours of college credit from Impressive University.
Each has 30 hours of economics. Jake has a bachelor's degree, while Harry is 3 credits
short of required physical education classes and therefore does not have a degree. Each
of them has one year of experience as a market analyst for ABC Company. Assuming
that the physical education class would not enhance Harry's job performance, if Jake
earns a higher salary than Harry, the ABC Company may subscribe to the
a.human capital theory.
b.discrimination theory.
c.compensating differential theory.
d.signaling theory.
12) Belarus has a comparative advantage in the production of linen, but Russia has an
absolute advantage in the production of linen. If these two countries decide to trade,
a.Belarus should export linen to Russia.
b.Russia should export linen to Belarus.
c.trading linen would provide no net advantage to either country.
d.Without additional information about opportunity costs, this question cannot be
answered.
13) If an objective of public policy is to allocate pollution to those factories that face
the highest cost of reducing it, then that objective could be achieved by
a.a corrective tax, but not by regulation.
b.regulation, but not by a corrective tax.
c.either regulation or a corrective tax.
d.neither regulation nor a corrective tax.
14) A monopolistically competitive firm
a.has the usual deadweight loss of monopoly pricing.
b.experiences a zero profit in a long-run equilibrium.
c.is said to have excess capacity.
d.All of the above are correct.
15) Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the
quantity demanded is 2,000 packages per week. When the price is $280, the quantity
demanded is 1,700 packages per week. Using the midpoint method, the is about
a.1.43, and an increase in the price will cause hotels' total revenue to decrease.
b.1.43, and an increase in the price will cause hotels' total revenue to increase.
c.0.70, and an increase in the price will cause hotels' total revenue to decrease.
d.0.70, and an increase in the price will cause hotels' total revenue to increase.
16) Table 12-2
Suppose that the government imposes a $2 tax on delights, causing the price to increase
from $4.00 to $6.00. Total consumer surplus
a.falls by less than the tax revenue generated.
b.falls by more than the tax revenue generated.
c.falls by the same amount as the tax revenue generated.
d.will not fall since Jennifer will no longer be in the market.
