1) If the supply of a product decreases, then we would expect equilibrium price
a.to increase and equilibrium quantity to decrease.
b.to decrease and equilibrium quantity to increase.
c.and equilibrium quantity to both increase.
d.and equilibrium quantity to both decrease.
2) Suppose the federal government doubles the gasoline tax. The deadweight loss
associated with the tax
a.also doubles.
b.triples.
c.quadruples.
d.rises by a factor of 8.
3) Which of the following examples would illustrate a backward-sloping labor
supply-curve?
a.An increase in a person’s wages results in the person working fewer hours per week.
b.A decrease in a person’s wages results in the person working more hours per week.
c.An increase in a person’s wages results in the person working more hours per week.
d.Both a and b are correct.
4) A negative income tax system would
a.make taxes more regressive.
b.sever the link between tax policy and income distribution.
c.collect from high-income households and give transfers to low-income households.
d.eliminate progressive tax rates.
5) When one party is better informed about an economic situation than another party,
economists describe the problem as one of
a.asymmetric information.
b.moral hazard.
c.political economy.
d.behavioral economics
6) Figure 7-21
Which area represents producer surplus when the price is P1?
a.A
b.B
c.C
d.D
7) You have eaten two bowls of ice cream at Sundae School Ice Cream store. You
consider eating a third. As a rational consumer you should make your choice by
comparing
a.the benefits from eating all three bowls of ice cream to how much three bowls of ice
cream costs.
b.the benefits from eating all three bowls of ice cream to how much one more bowl of
ice cream costs.
c.the benefits from eating one more bowl of ice cream to how much three bowls of ice
cream costs.
d.the benefits from eating one more bowl of ice cream to how much one more bowl of
ice cream costs.
8) Professional underwater divers are known to have high wages and work an average
of only 20 hours per week. Which of the following would push the divers’ wages
higher?
a.The job is simple.
b.The job is fun.
c.The job is very dangerous.
d.The job does not require specialized training.
9) Figure 8-11
The size of the tax is represented by the
a.length of the line segment connecting points A and B.
b.length of the line segment connecting points A and C.
c.length of the line segment connecting points B and C.
d.area of the triangle bounded by the points A, B, and C.
10) Which of the following events would shift the labor supply curve?
a.changes in the number of women willing to work
b.immigration of workers
c.changing attitudes towards work
d.All of the above are correct.
11) If consumers view cappuccinos and latt©s as substitutes, what would happen to the
equilibrium price and quantity of latt©s if the price of cappuccinos 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.
12) Alexander lives in an apartment building and gets a $250 benefit from playing his
stereo. Mary, who lives next door to Alexander and often loses sleep due to the loud
music coming from Alexander€s stereo, bears a $350 cost from the noise. Mary would
like to offer Alexander some money to turn down the volume on his stereo. If Mary had
to hire a lawyer to draw up the contract, what is the maximum amount she could pay to
the lawyer to ensure that both Alexander and Mary would benefit from the agreement?
a.an amount less than $100
b.an amount between $100 and $250
c.an amount between $250 and $350
d.Any amount could result in both parties benefiting from the agreement.
13) Briefly describe why measuring a firm’s costs is more complicated than measuring
its revenues.
14) Scenario 19-6
Suppose that in the competitive market for auto repair, firms prefer to hire men rather
than women. Assume that the women applying for positions have the same skills,
experience, and work ethic as the men. As a result of this discrimination, the demand
for women is lower than it otherwise would be.
Refer to Scenario 19-6. What conclusion can you draw about women’s wages
compared to men’s wages in this industry?
15) How does increased immigration affect the labor market? How would the
equilibrium wage and the equilibrium quantity of labor be affected?
16) Figure 21-31
The figure shows two indifference curves and two budget constraints for a consumer
named Kevin.
Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin’s optimum, then
what is Kevin’s income?
17) Which type of statement – positive or negative – can be evaluated by analyzing data
alone?
18) Using a supply and demand diagram, demonstrate how a positive externality leads
to market inefficiency. How might the government help to eliminate this inefficiency?
19) Rather than always choosing the best course of action, humans make decisions that
are merely good enough. In other words, they are
20) Explain the role of job experience in explaining the differences between the average
wages of men and women.
21) Fill in the table below, showing whether equilibrium price and equilibrium quantity
go up, go down, stay the same, or change ambiguously.
22) Scenario 1-2
Suppose that you have a choice between going to the movies with a friend for two
hours or working at your job. If you go to the movies, you will spend $7 on a ticket and
$5 on popcorn. If you choose to work, you will earn $10 an hour.
You have the afternoon free. You have a choice between going to the movies with a
friend or studying economics for three hours. If you go to the movies, you will spend
$8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three
hours, you will raise your exam grade by 10 points.
What is your opportunity cost of going to the movies?