1) Which of the following is an example of government intervention to solve a Tragedy
of the Commons problem?
a.subsidizing basic research
b.building lighthouses
c.toll charges on congested roads
d.cost-benefit analysis
2) Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space
in their dorm room, but neither enjoys cleaning. The roommates must each make a
decision to either clean or not clean the dorm room’s common space. The payoff table
for this situation is provided below, where the higher a player’s payoff number, the
better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff
for Maddie).
Refer to Table 17-20. What is Maddie’s dominant strategy?
a.Maddie has no dominant strategy.
b.Maddie should always choose Clean.
c.Maddie should always choose Don’t Clean.
d.Maddie has two dominant strategies, Clean and Don’t Clean, depending on the choice
Nadia makes.
3) Table 12-8
The following table presents the total tax liability for an unmarried taxpayer under four
different tax schedules for the income levels shown.
For an individual with $200,000 in taxable income, which tax schedule has the lowest
average marginal tax rate?
a.Tax Schedule A
b.Tax Schedule B
c.Tax Schedule C
d.Tax Schedule D
4) Almost all economists agree that rent control
a.has no effect on the rental income of landlords.
b.allows the market for housing to work more efficiently.
c.adversely affects the availability and quality of housing.
d.is a very inexpensive way to help the most needy members of society.
5) Points A, B, and D represent efficient outcomes for this
economy.
a.True
b.False
6) Policies such as rent control and trade barriers persist
a.because economists are about evenly divided as to the merits of those policies.
b.because almost all economists agree that those policies have no discernible economic
effects.
c.because almost all economists agree that those policies are desirable.
d.despite the fact that almost all economists agree that those policies are undesirable.
7) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Which of the following combinations of mixers and toasters could Miguel not produce
in 80 hours?
a.5 mixers and 6 toasters.
b.6 mixers and 5 toasters.
c.7 mixers and 2 toasters.
d.4 mixers and 8 toasters.
8) Table 17-16
This table shows a game played between two players, A and B. The payoffs are given in
the table as (Payoff to A, Payoff to B).
Refer to Table 17-16. Which of the following statements is true regarding this game?
a.Both players have a dominant strategy.
b.Neither player has a dominant strategy.
c.A has a dominant strategy, but B does not have a dominant strategy.
d.B has a dominant strategy, but A does not have a dominant strategy.
9) The adverse selection problem is a likely explanation for the fact that
a.some parents use video cameras to monitor the nannies caring for their children.
b.some corporate managers were recently sent to prison for enriching themselves at the
expense of shareholders.
c.people in average health may be discouraged from buying health insurance by the
high price.
d.gifts can be interpreted as signals.
10) Which of the following can be used to help explain wage differences among
different groups of workers?
a.human capital
b.discrimination
c.unions
d.All of the above could explain wage differences among groups.
11) Sam needs to have his car serviced. There is an auto repair shop located nearby that
does a lot of business and has an online rating of 4 out of 5 stars. Sam takes his car to
be serviced and thinks the service person is grumpy and that his car is still not running
as well as it could be. Sam then makes a point of telling his friends not to use the repair
shop. Sam’s actions illustrate which of the following systematic mistakes that people
make when making decisions?
a.People are overconfident.
b.People give too much weight to a small number of vivid observations.
c.People are reluctant to change their minds.
d.All of the above are correct.
12) Any point on a country’s production possibilities frontier represents a combination
of two goods that an economy
a.will never be able to produce.
b.can produce using all available resources and technology.
c.can produce using some portion, but not all, of its resources and technology.
d.may be able to produce in the future with more resources and/or superior technology.
13) If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from
the tax increases by a factor of
a.one-half.
b.two.
c.four.
d.six.
14) Taxes are of interest to
a.microeconomists because they consider how to balance equality and efficiency.
b.microeconomists because they consider how best to design a tax system.
c.macroeconomists because they consider how policymakers can use the tax system to
stabilize economic activity.
d.All of the above are correct.
15) The substitution effect in the work-leisure model induces a person to work less in
response to higher wages, which tends to make the labor-supply curve slope upward.
a.True
b.False
16) Explain how a “leaky bucket” can be used to illustrate the utilitarian argument that
governments should not attempt to completely equalize individual incomes.
17) Table 13-19
What is the total output of five workers?
18) Scenario 10−3:
Suppose there is an external cost of $12 associated with the production of each unit of
the good. What is the social cost of producing 30 units of the good?
19) Figure 9-28
The following diagram shows the domestic demand and domestic supply curves in a
market.
Suppose the world price in this market is $6. If the country allows free trade, will the
country import or export this good, and how many units will be imported/exported?
20) Explain how government policies that redistribute income from the rich to the poor
might reduce efficiency.
21) Explain the practice of resale price maintenance and discuss why it is controversial.