1) If a poor family has three children in public school and a rich family has two children
in private school, the benefits principle would suggest that
a.the poor family should pay more in taxes to pay for public education than the rich
family.
b.the rich family should pay more in taxes to pay for public education than the poor
family.
c.the benefits of private school exceed those of public school.
d.public schools should be financed by property taxes.
2) The greater the elasticities of supply and demand, the smaller are the gains from
trade.
a.True
b.False
3) Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With
trade and a tariff, consumer surplus is
a.$75,000 and producer surplus is $27,000.
b.$63,000 and producer surplus is $12,000.
c.$75,000 and producer surplus is $12,000.
d.$63,000 and producer surplus is $27,000.
4) Import quotas and tariffs produce some common results. Which of the following is
not one of those common results?
a.Total surplus in the domestic country falls.
b.Producer surplus in the domestic country increases.
c.The domestic country experiences a deadweight loss.
d.Revenue is raised for the domestic government.
5) Which of the following is not a characteristic of pollution permits?
a.Prices are set by supply and demand.
b.Allowing firms to trade their permits reduces the total quantity of pollution beyond
the initial allocation.
c.Real-world markets for pollution permits include sulfur dioxide and carbon.
d.Firms for whom pollution reduction is very expensive are willing to pay more for
permits than firms for whom pollution reduction is less expensive.
6) A government-created monopoly arises when
a.government spending in a certain industry gives rise to monopoly power.
b.the government exercises its market control by encouraging competition among
sellers.
c.the government gives a firm the exclusive right to sell some good or service.
d.Both a and c are correct.
7) In the short-run, society faces a tradeoff between inflation and unemployment.
a.True
b.False
8) Table 10-2
The following table shows the private value, private cost, and social value for a market
with a positive externality.
What is the equilibrium quantity of output in this market?
a.3 units
b.4 units
c.5 units
d.6 units
9) The 2011 U.S. distribution of income shows that the top 20 percent of all families
have
a.more than twelve times the income of the bottom 20 percent.
b.more than six times the income of the bottom 20 percent.
c.more than 100 percent more income than the bottom 20 percent.
d.the same share of income as the bottom 20 percent.
10) The argument that purchases of minivans cause large families is an example of
a.omitted variables.
b.normative statements.
c.reverse causality.
d.bias.
11) In which of the following examples are property rights not well established?
a.Carmen smokes a cigarette outside the door to her office building.
b.Carlita stocks shelves in a grocery store.
c.Cameron watches a movie in his home theater room.
d.Cathy docks her boat at her lake house.
12) Suppose that the wage paid to workers who detassel corn rises. What happens in the
market for workers who weed soybean fields, given that workers who detassel corn can
easily work weeding soybean fields?
a.The demand curve for soybean workers increases.
b.The demand curve for soybean workers decreases.
c.The supply curve for soybean workers increases.
d.The supply curve for soybean workers decreases.
13) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. The consumer surplus before the tax
is measured by the area
a.M.
b.L+M+Y.
c.J.
d.J+K+I.
14) A patent gives a single person or firm the exclusive right to sell some good or
service forever.
a.True
b.False
15) Diminishing marginal product occurs when
a.the increases to total output are declining.
b.marginal product is negative.
c.total output is decreasing.
d.All of the above are correct.
16) Figure 7-24
Refer to Figure 7-24. If 6 units of the good are produced and sold, then
a.consumer surplus is greater than producer surplus.
b.producer surplus is maximized.
c.the sum of consumer surplus and producer surplus is maximized.
d.consumer surplus equals producer surplus.
17) Figure 7-12
If the equilibrium price is $350, what is the producer surplus?
a. $60,000
b. $15,000
c. $30,000
d. $70,000
18) Figure 8-2
The vertical distance between points A and B represents a tax in the market.
The per-unit burden of the tax on sellers is
a. $2.
b.$3.
c.$4.
d.$5.
19) Spain is an importer of computer chips, taking the world price of $12 per chip as
given. Suppose Spain imposes a $5 tariff on chips. As a result,
a.Spanish consumers of chips and Spanish producers of chips both gain.
b.Spanish consumers of chips gain and Spanish producers of chips lose.
c.Spanish consumers of chips lose and Spanish producers of chips gain.
d.Spanish consumers of chips and Spanish producers of chips both lose.
20) As a student, Anne spends 40 hours per week writing term papers and completing
homework assignments. On one axis of her production possibilities frontier is measured
the number of term papers written per week. On the other axis is measured the number
of homework assignments completed per week. Anne’s production possibilities frontier
is a straight line if
a.she faces no trade-off between writing term papers and completing homework
assignments.
b.she can switch between writing term papers and completing homework assignments
at a constant rate.
c.the rate at which she can switch between homework assignments and term papers
depends on the number of homework assignments she is completing and on the number
of term papers she is writing.
d.she is required by her professors to spend half of her time on term papers and the
other half of her time on homework assignments.
21) Figure 8-29
As the size of the tax increases from $3 to $6 to $9, what happens to the deadweight
loss from the tax?
22) What do prices reflect in a market economy?
23) Table 13-19
What is the shape of the marginal-cost curve?
24) Economists at which administrative department help design tax policy?
25) Define monopsony.