1) Positive statements are not
a.descriptive.
b.prescriptive.
c.claims about how the world is.
d.made by economists speaking as scientists.
2) If a government simplified its tax system the likeliest result would be a decrease in
a.consumer surplus.
b.producer surplus.
c.in deadweight loss.
d.tax revenues.
3) Economists make use of assumptions, some of which are unrealistic, for the purpose
of
a.teaching economics to people who have never before studied economics.
b.advancing their political agendas.
c.developing models when the scientific method cannot be used.
d.focusing their thinking.
4) Goods produced abroad and sold domestically are called
a.exports.
b.imports.
c.exchange rates.
d.opportunity costs.
5) Figure 8-23. The figure represents the relationship between the size of a tax and the
tax revenue raised by that tax.
If the economy is at point B
on the curve, then a small decrease in the tax rate will
a.increase the deadweight loss of the tax and increase tax revenue.
b.increase the deadweight loss of the tax and decrease tax revenue.
c.decrease the deadweight loss of the tax and increase tax revenue.
d.decrease the deadweight loss of the tax and decrease tax revenue.
6) Screening is an action taken by an uninformed party to induce an informed party to
reveal information.
a.True
b.False
7) For two individuals who engage in the same two productive activities, it is
impossible for one of the two individuals to
a.have a comparative advantage in both activities.
b.have an absolute advantage in both activities.
c.be more productive per unit of time in both activities.
d.gain from trade with each other.
8) Monopolistically competitive markets may be socially inefficient because
a.most firms produce inferior products.
b.government programs cannot effectively regulate price.
c.firms earn zero economic profit.
d.the market may have too much or too little entry by new firms.
9) At which of the following prices, if any, could both Denmark and Finland gain from
trade?
a.2/3 pounds of ham per dozen eggs.
b.1 pound of ham per dozen eggs.
c.1.4 pounds of ham per dozen eggs.
d.None of the above are correct.
10) Suppose that a company hires recent college graduates for two types of jobs, sales
people and credit analysts. The hours worked and skill levels are the same for both
positions. The sales people get to travel to several desirable locations, whereas the
credit analysts do not leave the home office. When comparing the salaries of the two
positions, it is likely that the company pays the
a.sales people less as a compensating differential.
b.credit analysts less as a compensating differential.
c.same salary for both positions because they require the same skill level.
d.same salary for both positions because it would be illegal to do otherwise.
11) Suppose that a firm’s longrun average total costs of producing custom wooden
picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000
tables. For this range of output, the firm is experiencing
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.specialization.
12) According to the circular flow diagram, if Suzy is a worker who delivers flowers for
Happy Day Flower Company, she participates
a.in the markets for factors of production exchanging labor for income.
b.in the markets for factors of production exchanging flowers for revenue.
c.in the markets for goods and services exchanging flowers for wages, rent, and profit.
d.in the markets for goods and services exchanging labor for income.
13) In choosing among alternative courses of action, Raj must consider how others
might respond to the action he takes. In the language of game theory, we say that Raj
must think
a.openly.
b.strategically.
c.dominantly.
d.cooperatively.
14) The marginal revenue curve for a monopoly firm starts at the same point on the
vertical axis as the
(i)average revenue curve.
(ii)marginal cost curve.
(iii)demand curve.
a.(i) only
b.(i) and (ii) only
c.(i) and (iii) only
d.(iii) only
15) When a tax is imposed on a good for which the supply is relatively elastic and the
demand is relatively inelastic,
a.buyers of the good will bear most of the burden of the tax.
b.sellers of the good will bear most of the burden of the tax.
c.buyers and sellers will each bear 50 percent of the burden of the tax.
d.both equilibrium price and quantity will increase.