1) Suppose that the market for labor is initially in equilibrium. Suppose that workers’
tastes change so that they choose
to retire at age 55 rather than age 67. Then the equilibrium wage
a.and the equilibrium quantity of labor will rise.
b.and the equilibrium quantity of labor will fall.
c.will rise, and the equilibrium quantity of labor will fall.
d.will fall, and the equilibrium quantity of labor will rise.
2) Figure 9-12
Equilibrium price and equilibrium quantity without trade are
a. $54 and 800.
b. $54 and 1,600.
c. $42 and 800.
d. $42 and 1,200.
3) Some, but not all, government economists are employed within the administrative
branch of government. Which of the following government agencies employs
economists outside of the administrative branch?
a.the Department of Labor
b.the Department of the Treasury
c.the Congressional Budget Office
d.the Council of Economic Advisers
4) Why has the value of ivory threatened the extinction of the elephant, whereas the
value of beef has enhanced the survival of the cow?
a.Cows are a common resource, whereas elephants are owned by governments.
b.Elephants are larger than cows, requiring more economic resources.
c.Elephants live in Africa, where economic resources are scarce.
d.Elephants are a common resource, whereas cows are privately owned.
5) Which of the following statements is not correct?
a.Monopolistic competition is different from monopoly because monopolistic
competition is characterized by free entry, whereas monopoly is characterized by
barriers to entry.
b.Both monopolistic competition and oligopoly fall in between the more extreme
market structures of competition and monopoly.
c.Monopolistic competition is different from oligopoly because each seller in
monopolistic competition is small relative to the market, whereas each seller can affect
the actions of other sellers in an oligopoly.
d.Both monopolistic competition and perfect competition are characterized by product
differentiation.
6) Central planning refers to
a.markets guiding economic activity. Today many countries that had this system have
abandoned it.
b.markets guiding economic activity. Today many countries that did not have this
system have implemented it.
c.government guiding economic activity. Today many countries that had this system
have abandoned it.
d.government guiding economic activity. Today many countries that did not have this
system have implemented it.
7) The example of segregated streetcars in the southern United States in the early
twentieth century is one example of
a.racial discrimination by firms, despite government efforts to halt it.
b.racial discrimination by firms with no government action either to halt it or to support
it.
c.government-mandated racial discrimination.
d.a failure to find any discrimination where most would expect to find it.
8) Which of the following is not an advantage of corrective taxes?
a.They raise revenues for the government.
b.They enhance economic efficiency.
c.They subsidize the production of goods with positive externalities.
d.They move the allocation of resources closer to the social optimum.
9) What would happen to the equilibrium price and quantity of latt©s if the cost of
producing steamed milk, which is used to make latt©s, rises?
a.Both the equilibrium price and quantity would increase.
b.Both the equilibrium price and quantity would decrease.
c.The equilibrium price would increase, and the equilibrium quantity would decrease.
d.The equilibrium price would decrease, and the equilibrium quantity would increase.
10) The slope of a line is equal to
a.rise divided by run.
b.run divided by rise.
c.rise minus run.
d.rise plus run.
11) Assume that Indonesia and India can switch between producing rice and bananas at
a constant rate.
India’s opportunity cost of producing rice is
a.1/2 units of bananas. This is higher than Indonesia’s opportunity cost of producing
rice.
b.1/2 units of bananas. This is lower than Indonesia’s opportunity cost of producing
rice.
c.2 units of bananas. This is higher than Indonesia’s opportunity cost of producing rice.
d.2 units of bananas. This is lower than Indonesia’s opportunity cost of producing rice.
12) Figure 8-12
Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting
from this tax is
a. $5.50.
b. $17.50.
c. $22.50.
d. $45.00
13) If Iowa’s opportunity cost of corn is lower than Oklahoma’s opportunity cost of
corn, then
a.Iowa has a comparative advantage in the production of corn.
b.Iowa has an absolute advantage in the production of corn.
c.Iowa should import corn from Oklahoma.
d.Oklahoma should produce just enough corn to satisfy its own residents’ demands.
14) Figure 10-9
21) Suppose the market-equilibrium quantity of good x is larger than the
socially-optimal quantity of good x. Does the production of good x convey a positive
externality or does it convey a negative externality?
22) Given the table shown, which country has a more equal income distribution?
Explain your answer.
23) Scenario 15-11
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50
people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed
at $450. Vincent’s cost is not reduced if he runs a tour with a partially full bus. While
his cost is the same for all tours, Vincent charges each passenger his/her willingness to
pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those
rates, on a typical day Vincent’s demand is:
Assume that Vincent’s customers are always available for the tour¾ therefore, he can
fill his bus for each tour as long as there is sufficient total demand for the day.
One of Vincent’s friends tells him he would be more profitable if he charged a single
price of $12. Assuming no changes in consumer demand, what would Vincent’s profit
be if he charged every customer $12?