According to projections for 2013 by the Tax Policy Center, the 20 percent of U.S.
taxpayers who make the highest incomes
A) use loopholes and tax exemptions to reduce their share of federal income taxes to
less than 20 percent.
B) pay almost 68 percent of federal income taxes.
C) pay about 92 percent of federal income taxes but only about 20 percent of Social
Security and Medicare payroll taxes.
D) pay more in excise and other taxes than they pay in Social Security and Medicare
payroll taxes.
In the legal sector, some practice areas have declined in recent years. For example,
personal-injury and medical-malpractice cases have been undercut by state laws
limiting class-action suits, out-of-state plaintiffs and payouts on damages, and securities
class-action litigation has declined in part because of a buoyant stock market. How does
this affect the market for lawyers?
A) The demand for lawyers shifts to the left.
B) The supply of lawyers shifts to the left.
C) The quantity of lawyers demanded decreases and this is represented by a movement
along the demand curve.
D) Both the demand and supply curves decrease.
If a consumer always buys goods rationally, then
A) the total utilities of the different goods consumed will be equal.
B) the average utilities of the different goods consumed will be equal.
C) the marginal utility per dollar spent on all goods will be equal.
D) the marginal utility of the different goods consumed will be equal.
Figure 2-11
Refer to Figure 2-11. One segment of the circular flow diagram in the figure shows the
flow of labor services from market K to economic agents J. What is market K and who
are economic agents J?
A) K = factor markets; J = households
B) K = product markets; J = households
C) K = factor markets; J = firms
D) K = product markets; J = firms
Table 2-10
Table 2-10 shows the output per day of two pet groomers, Tammi and Horace. They can
either devote their time to grooming dogs or bathing cats.
Refer to Table 2-10. What is Horace’s opportunity cost of bathing a cat?
A) half a groomed dog
B) two groomed dogs
C) two-thirds of a groomed dog
D) one and a half groomed dogs
Figure 17-2
Figure 17-2 shows the marginal revenue product for Becca’s Baubles, a producer of
hand-beaded bracelets.
Refer to Figure 17-2. If the wage rate is $20, how many workers should Becca hire?
A) 6
B) 5
C) 4
D) 3
Which of the following is a positive economic statement?
A) The standard of living in the United States should be higher.
B) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
C) The government should revamp the health care system.
D) The U.S. government should not have bailed out U.S. auto manufacturers.
The Arrow impossibility theoremstates that
A) no system of voting can be devised that will always consistently represent the
underlying preferences of voters.
B) it is impossible for a majority voting system not to consistently represent the
preferences of voters.
C) it is impossible to separate corporate desires from public bureaucracy.
D) no system of voting can be devised that will ensure a 100 percent voter turnout.
If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the
quantity supplied of lobster, then the supply of lobster is
A) unit-elastic.
B) unitarily elastic.
C) elastic.
D) perfectly inelastic.
Figure 11-6
Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the marginal cost
curve?
A) A
B) B
C) C
D) D
Elvira decreased her consumption of bananas when the price of peanut butter increased.
For Elvira, peanut butter and bananas are
A) substitutes in consumption.
B) both inferior goods.
C) complements in consumption.
D) both luxury goods.
The income effect of a wage increase is observed when
A) the higher wage income causes workers to take more leisure and work less.
B) leisure’s higher opportunity cost causes workers to take less leisure and work more.
C) the higher wage income causes workers to take less leisure and work more.
D) leisure’s higher opportunity cost causes workers to take more leisure and work less.
Table 2-11
Table 2-11 shows the number of labor hours required to produce a motorcycle and a
guitar in Ireland and Scotland.
Refer to Table 2-11. What is Scotland’s opportunity cost of producing one guitar?
A) 0.25 motorcycle
B) 4 motorcycles
C) 12 motorcycles
D) 16 motorcycles
Table 4-3
Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco
Kid, a firm that specializes in producing western wear. If the market price of The Waco
Kid’s cowboy hats is $40
A) The Waco Kid will produce four hats.
B) producer surplus from the first hat is $40.
C) producer surplus will equal $28.
D) there will be a surplus; as a result, the price will fall to $24.
In regulating a natural monopoly, the price strategy that ensures the highest possible
output and zero profit is one that sets price
A) equal to average total cost where it intersects the demand curve.
B) equal to marginal cost where it intersects the demand curve.
C) equal to average variable cost where it intersects the demand curve.
D) corresponding to the demand curve where marginal revenue equals zero.
Some economists have argued that path dependence and switching costs can lead to
market failure. Which of the following is an example of this argument?
A) Costly celebrity endorsements lead many consumers to buy a product even though it
is more expensive or less effective than a product that is not endorsed by a celebrity.
B) A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000
even though he would not have paid $3,000 for a ticket if he had not won the lottery.
C) While playing the ultimate game, an allocator decides to share $20 equally with a
recipient rather than keep the $20 for herself.
D) VHS video recorders became more popular with consumers than Sony Betamax
recorders even though the Betamax recorders embodied a superior technology.
Prices of California Merlot wine (assume that this is a normal good) have risen steadily
in recent years. Over this same period, prices for French oak barrels used for wine
storage have dropped and consumer incomes have risen. Which of the following best
explains the rising prices of California Merlots?
A) The supply curve for Merlot has shifted to the right while the demand curve for
Merlot has shifted to the left.
B) The demand curve for Merlot has shifted to the right more than the supply curve has
shifted to the right.
C) The demand curve and the supply curve for Merlot have both shifted to the left.
D) The supply curve for Merlot has shifted to the right more than the demand curve has
shifted to the right.
Scenario: Donna Bader, Globalization opponent
Donna Bader spent her final year at college studying the effect of various economic
factors on the economy of developing nations. Based on the results of her study, she
concluded that globalization does these countries more harm than good.Upon what
assumption does Donna’s conclusion rest?
Donne assumes that ________.
A) there are no factors other than globalization which influence the economic
conditions of a country
B) the welfare of individuals matters less than the economic prosperity of a nation
C) globalization does not affect the employment rate of developed and developing
countries
D) the wages paid to all individuals within developed countries are equal
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his
household income was $30,000. This year, his household income fell to $20,000 and
Sefton purchased 80 pounds of potatoes. All else constant, Sefton’s income elasticity of
demand for potatoes is
A) negative, so Sefton considers potatoes to be an inferior good.
B) positive, so Sefton considers potatoes to be an inferior good.
C) positive, so Sefton considers potatoes to be a normal good and a necessity.
D) negative, so Sefton considers potatoes to be a normal good.
Because the monopolistically competitive firm faces a ________ demand curve for its
product, it ________ the price of its output.
A) downward-sloping; cannot influence
B) horizontal; can influence
C) horizontal; cannot influence
D) downward-sloping; can influence
The cross-price elasticity of demand between an unlimited texting option and an
unlimited call minutes option offered from a cell phone provider would be
A) positive if subscribers consider the services substitutes for each other.
B) positive if subscribers consider the services complements to each other.
C) negative if subscribers consider the services substitutes for each other.
D) negative no matter if subscribers consider the services substitutes or complements
for each other.
A marginal tax rate is
A) the fraction of income that must be paid in taxes.
B) the fraction of each additional dollar of income that must be paid in taxes.
C) the incremental income one must earn to offset each additional dollar of tax.
D) the ratio of a change in income to a change in taxes paid.
A tax is efficient if
A) individuals with the lowest incomes pay proportionately lower taxes than individuals
with the highest incomes.
B) it is based on profits earned and not on wages.
C) it encourages saving and investment.
D) it imposes a small excess burden relative to the revenue it raises.
Figure 12-6
Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves
for Jason’s House of Apples.
Refer to Figure 12-6. To maximize his profit, Jason should produce the rate of output
indicated by point
A) a.
B) b.
C) e.
D) d.
Which of the following is explained by the law of diminishing marginal utility?
A) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the
marginal utility of her third bottle of Coca-Cola.
B) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the
marginal utility of her third pretzel.
C) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the
marginal utility of her friend Margie’s third pretzel.
D) The total utility of one bottle of Coca-Cola is greater than the total utility of two
bottles of Coca-Cola.
If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,500 on an income
of $30,000, then over this range of income the tax is
A) regressive.
B) proportional.
C) progressive.
D) There is insufficient information to answer the question.
Airlines often engage in last-minute price cutting to fill remaining empty seats on a
flight because this practice will generally
A) prevent rival airlines from competing in that market.
B) increase marginal revenue more than marginal cost.
C) maximize marginal revenue.
D) discourage rivals from matching price cuts.
Figure 2-3
Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of
his land is more suitable for raising cattle, and the other portion is better suited for
raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities
frontier?
A) Graph A
B) Graph B
C) Graph C
D) either Graph A or Graph C
E) either Graph B or Graph C
Figure 10-2
Figure 10-2 represents the demand for ice cream cones.
Refer to Figure 10-2. When the price of ice cream cones increases from $2 to $3,
quantity demanded decreases from 4 ice cream cones to 3 ice cream cones. This change
in quantity demanded is due to
A) the price and output effects.
B) the income and substitution effects.
C) the law of diminishing marginal utility.
D) the fact that marginal willingness to pay falls.
Figure 15-14
Refer to Figure 15-14. From the monopoly graph above, identify the following:
a. The profit maximizing price
b. The profit maximizing quantity
c. The area representing deadweight loss
d. The area representing the transfer of consumer surplus to the monopoly
When a firm has been granted a trademark, which grants legal protection against other
firms using the name of the product that has been granted the trademark, the firm
A) still faces the possibility that the name will become widely used and no longer
associated with a specific company.
B) does not have to worry about legally enforcing the trademark; this is the
responsibility of the legal system.
C) still must apply for a copyright and a patent to ensure that no other firm will use the
product’s name.
D) must spend an annual amount on advertising the product each year; the amount it
must spend is negotiated by the firm and the government agency that grants the
trademark.
If the average variable cost curve is above the marginal cost curve, then
A) marginal costs must be decreasing.
B) average variable costs must be increasing.
C) marginal costs must be increasing.
D) marginal costs can be either increasing or decreasing.