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1) Hosne's Production Possibilities FrontierMerve's Production Possibilities
Frontier
If Hosne and Merve both spend all of their time making wallets, then total production is
a.7 wallets.
b.8 wallets.
c.14 wallets.
d.28 wallets.
2) The president of the United States receives tax policy advice from economists in the
a.Federal Reserve.
b.Department of Justice.
c.Department of the Treasury.
d.Congressional Budget Office.
3) An increase in the price of cotton will increase the equilibrium price and decrease the
equilibrium quantity in the market for cotton t-shirts.
a.True
b.False
4) When a restaurant stays open for lunch service even though few customers patronize
the restaurant for lunch, which of the following principles is (are) best demonstrated?
(i)Fixed costs are sunk in the short run.
(ii)In the short run, only fixed costs are important to the decision to stay open for lunch.
(iii)If revenue exceeds variable cost, the restaurant owner is making a smart decision to
remain open for lunch.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(i) and (iii) only
d.(i), (ii), and (iii)
5) The x-coordinate is the
a.first number of an ordered pair and represents the point's horizontal location.
b.second number of an ordered pair and represents the point's horizontal location.
c.first number of an ordered pair and represents the point's vertical location.
d.second number of an ordered pair and represents the point's vertical location.
6) Trade can make everyone better off except in the case where one person is better at
doing everything.
a.True
b.False
7) Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000.
She decides to open her own engineering business. Her annual expenses will include
$15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for
utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up
expenses by cashing in a $20,000 certificate of deposit on which she was earning
annual interest of $500.
According to Ellie's accountant, which of the following revenue totals will yield her
business $50,000 in profits?
a. $55,200
b. $105,200
c. $132,500
d. $185,700
8) When the marginal tax rate equals the average tax rate, the tax is
a.proportional.
b.progressive.
c.regressive.
d.egalitarian.
9) Figure 9-13
Consumer surplus before trade is
a. $1,600.
b. $2,400.
c. $3,200.
d. $3,600.
10) For most goods in an economy, the primary signal that guides the decisions of
buyers and sellers is
a.advertising.
b.quality.
c.reputation.
d.price.
11) Which of the following is an example of an adverse selection problem?
a.A customer purchases four apples, two of which are bruised.
b.A card shop puts its Halloween merchandise on sale on November 1st.
c.A young job applicant fails to reveal that she was fired from her last job because she
was incompetent.
d.A man rents a car and then drives it less carefully and fills it with cheaper gas than he
would if he owned it.
12) If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus
is $35.
a.True
b.False
13) The marginal seller is the seller who
a.cannot compete with the other sellers in the market.
b.would leave the market first if the price were any lower.
c.can produce at the lowest cost.
d.has the largest producer surplus.
14) At a price of $8, there is a
a.surplus of 4 units.
b.surplus of 8 units.
c.shortage of 4 units.
d.shortage of 8 units.
