1) Table 10-5
The following table shows the marginal costs for each of four firms (A, B, C, and D) to
eliminate units of pollution from their production processes. For example, for Firm A to
eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second
unit of pollution it would cost an additional $67.
If the government wanted to reduce pollution from 16 units to 6 units, which of the
following fees per unit of pollution would achieve that goal?
a.$67
b.$68
c.$81
d.$83
2) Which of the following is a characteristic of monopolistic competition?
a.ownership of a key resource by a single firm
b.free entry
c.identical product
d.patents
3) Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a
restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized
by monopolistic competition.
As a result of the new restaurant, existing restauranteurs in Boston are likely to
experience a
a.product-variety externality, which is a negative externality.
b.product-variety externality, which is a positive externality.
c.business-stealing externality, which is a negative externality.
d.business-stealing externality, which is a positive externality.
4) The opportunity cost of something is what you give up to get it.
a.True
b.False
5) High marginal income tax rates
a.distort incentives to work.
b.are used to encourage saving behavior.
c.will invariably lead to lower average tax rates.
d.are not associated with deadweight losses.
6) A statement describing how the world is
a.is a normative statement.
b.is a positive statement.
c.would only be made by an economist speaking as a policy adviser.
d.would only be made by an economist employed by the government.
7) A lighthouse might be considered a private good if
a.there is a second lighthouse nearby, thus preventing a monopoly.
b.the owner of the lighthouse is able to exclude beneficiaries from receiving the
benefits of the lighthouse.
c.ships are able to enjoy the benefits of the lighthouse without paying for the benefit.
d.a nearby port authority is able to avoid paying any fees to the lighthouse owner.
8) The free-rider problem exists with
a.public transportation
b.knowledge.
c.online music subscriptions.
d.All of the above are correct.
9) Table 22-4
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is
only fair to have the residents vote on what to do with the surplus. The mayor has
narrowed the options down to three possible projects: a playground, a library, or a
swimming pool. The voters fall into three categories and have preferences as illustrated
in the table.
Refer to Table 22-4. If the mayor asks the residents to choose between the playground
and the library using pairwise voting,
a.the playground wins by 45%.
b.the playground wins by 60%.
c.the library wins by 20%.
d.the library wins by 80%.
10) Supply refers to the position of the supply curve, whereas the quantity supplied
refers to the amount suppliers wish to sell.
a.True
b.False
11) An important factor in the decline of the U.S. textile industry over the past 100 or so
years is
a.foreign competitors that can produce quality textile goods at low cost.
b.lower prices of goods that are substitutes for clothing.
c.a decrease in Americans’ demand for clothing, due to increased incomes and the fact
that clothing is an inferior good.
d.the fact that the minimum wage in the U.S. has failed to keep pace with the cost of
living.
12) The inputs used to produce goods and services are called
a.profit factors.
b.marginal products.
c.labor demands.
d.factors of production.
13) Tuition is the single-largest cost of attending college for most students.
a.True
b.False
14) A worker with a backward-bending labor supply curve responds to an increase in
wages by working more hours.
a.True
b.False
15) In surveys of professional economists, fourteen propositions were endorsed by an
overwhelming majority of respondents.
a.True
b.False
16) Which of these assumptions is often realistic for a firm in the short run?
a.The firm can vary both the size of its factory and the number of workers it employs.
b.The firm can vary the size of its factory but not the number of workers it employs.
c.The firm can vary the number of workers it employs but not the size of its factory.
d.The firm can vary neither the size of its factory nor the number of workers it employs.
17) Market failure is the inability of
a.buyers to interact harmoniously with sellers in the market.
b.a market to establish an equilibrium price.
c.buyers to place a value on the good or service.
d.some unregulated markets to allocate resources efficiently.
18) Briefly describe some of the demographic trends that are predicted to increase the
government’s budget deficit.
19) Figure 8-29
As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?
20) Figure 21-30
The graph shows two budget constraints for a consumer.
Refer to Figure 21-30. Suppose the price of a light bulb is $3 and Budget Constraint B
applies. What is the consumer’s income? What is the price of a hamburger?
21) Which political philosophy argues that the government should choose policies
deemed just, as evaluated by an impartial observer?
22) Economic theory predicts a close relationship between productivity and real wages.
Does history confirm this relationship?