1) Economic studies of lottery winners and people who have inherited large amounts of
money show that
a.the income effect of winning the lottery or inheriting large amounts of money likely
outweighs the substitution effect for most people.
b.the substitution effect of winning the lottery or inheriting large amounts of money
likely outweighs the income effect for most people.
c.most people view leisure as an inferior good.
d.most people’s labor supply is unaffected by changes in wealth.
2) Edward Chamberlin argued that governments should
a.ban the use of brand names.
b.not enforce the trademarks that companies use to identify their products.
c.vigorously enforce the trademarks that companies use to identify their products.
d.tax companies whose products have brand names in proportion to how much
consumers recognize their products.
3) If the demand curve for wedding cakes shifts to the right, then the value of the
marginal product of labor for bakers will
a.rise.
b.fall.
c.remain unchanged.
d.rise or fall; either is possible.
4) Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25.
If the market price is $40 for this transaction, then the total surplus would be $15.
a.True
b.False
5) Which of the following would be most likely to have monopoly power?
a.a long-distance telephone service provider
b.a local cable TV provider
c.a large department store
d.a gas station
6) A simultaneous increase in both the demand for MP3 players and the supply of MP3
players would imply that
a.both the value of MP3 players to consumers and the cost of producing MP3 players
has increased.
b.both the value of MP3 players to consumers and the cost of producing MP3 players
has decreased.
c.the value of MP3 players to consumers has decreased, and the cost of producing MP3
players has increased.
d.the value of MP3 players to consumers has increased, and the cost of producing MP3
players has decreased.
7) In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez
asserted the following:
a.Since World War II, higher tax rates on individuals with the highest incomes tend to
be associated with higher
rates of economic growth – not with lower rates of economic growth.
b.The average federal income tax rate on the top 1 percent of income-earners in the
United States more than doubled between 1970 and 2010.
c.A “reasonable” increase in the tax rate on top income earners is all that is needed to
solve longterm fiscal problems faced by the United States.
d.All of the above are correct.
8) Eldin is a house painter. He can paint three houses per week. He is considering hiring
his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is
Murphy’s marginal product?
a.2 houses
b.3 houses
c.5 houses
d.8 houses
9) Consider the labor market for computer programmers. During the late 1990s, the
value of the marginal product of all computer programmers increased dramatically.
Holding all else equal, what effect did this process have on the labor market for
computer programmers? The equilibrium wage
a.increased, and the equilibrium quantity of labor increased.
b.increased, and the equilibrium quantity of labor decreased.
c.decreased, and the equilibrium quantity of labor increased.
d.decreased, and the equilibrium quantity of labor decreased.
10) Table 22-3
Three family members — Seamus, Maeve, and Siobhan — are deciding what type of
movie to attend. The three choices are an action adventure, comedy, or horror. The first,
second, and third choices for each person are as indicated in the table below.
Refer to Table 22-3. If the voting method is a Borda count, which alternative will be
chosen?
a.Comedy
b.Action
c.Horror
d.None of the above is correct; a Borda count fails to produce a winner in this instance.
11) When a night watchman only performs two walk-throughs per night when he is
being paid to perform five walk- throughs per night, it is an example of
a.both moral hazard and adverse selection.
b.neither moral hazard nor adverse selection.
c.moral hazard, but not adverse selection.
d.adverse selection, but not moral hazard.
12) Suppose that an increase in the price of melons from $1.30 to $1.80 per pound
increases the quantity of melons that melon farmers produce from 1.2 million pounds to
1.6 million pounds. Using the midpoint method, what is the approximate value of the
price elasticity of supply?
a.0.67
b.0.89
c.1.00
d.1.13
13) Which of the following could explain the changing gap in income between
unskilled and skilled workers in the United States?
a.International trade has decreased the domestic demand for skilled labor and increased
the domestic demand for unskilled labor.
b.Certain technological changes such as the introduction of computers have increased
the domestic demand for skilled labor and decreased the domestic demand for unskilled
labor.
c.Both a and b are correct.
d.Neither a nor b is correct.