1) An example of asymmetric information is when a seller of a house knows more than
the buyer about the house’s condition.
a.True
b.False
2) An increase in a consumer’s income
a.increases the slope of the consumer’s budget constraint.
b.has no effect on the slope of the consumer’s budget constraint.
c.decreases the slope of the consumer’s budget constraint.
d.has no effect on the consumer’s budget constraint.
3) In a perfectly competitive market, the process of entry and exit will end when firms
face
a.marginal revenue equal to long-run average total cost.
b.total revenue equal to average total cost.
c.average revenue greater than marginal cost.
d.accounting profits equal to zero.
4) According to proponents of the signaling theory of education,
a.schooling has no real productivity benefit.
b.no one person finds it easier to earn a college degree than does any other person.
c.the human-capital view of education is entirely correct.
d.employers send signals to young people to persuade them to expend whatever effort is
necessary to earn college degrees.
5) The fact that doctors are paid more than economics professors is an example of a
compensating differential.
a.True
b.False
6) As the size of a tax increases, the government’s tax revenue rises, then falls.
a.True
b.False
7) In the long run, a firm that produces and sells textbooks gets to choose
a.how many workers to hire.
b.the size of its factories.
c.which short-run average-total-cost curve to use.
d.All of the above are correct.
8) An efficiency wage
a.gives an employee an incentive to shirk his duties.
b.is lower than the equilibrium wage for that position and region.
c.is higher than the equilibrium wage for that position and region.
d.both a and b are correct.
9) Figure 19-5
Refer to Figure 19-5. Suppose this market begins with demand for labor, D1, and
supply of labor, S1, but the labor supply curve shifts to S2. Which of the following
statements best describes the results?
a.Fewer workers are employed, but those who are employed earn a higher wage.
b.More workers are employed but they earn a lower wage.
c.More workers are employed and they earn a higher wage.
d.The same number of workers are employed and they earn a higher wage.
10) Average total cost reveals how much total cost will change as the firm alters its
level of production.
a.True
b.False
11) Which of the following events can cause the labor-supply curve to shift?
a.an increase in the wage rate
b.an increase in the price of output
c.an increase in the rate of immigration
d.a technological advance
12) Points B and C represent infeasible outcomes for this
economy.
a.True
b.False
13) The slope of the budget constraint is determined by the
a.relative price of the goods measured on the axes.
b.relative price of the goods measured on the axes and the consumer’s income.
c.endowment of productive resources.
d.preferences of the consumer.
14) The mathematical result showing that, under certain assumptions, there is no
scheme for aggregating individual preferences into a valid set of social preferences is
called
15) Describe the general shape of the average-fixed-cost curve.
16) When you receive interest on your bank account, that income is part of the
economy’s income.
17) The following table shows the supply and demand schedules in a market.
If the supply curve shifts to the right, will the price in this market rise or fall?
18) Suppose the demand curve and the supply curve in a market are both linear, and
suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per
unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand
is 0.7?
19) Restaurants’ demand for cooks and waiters is inseparably linked to the supply of.
20) If the income elasticity of demand for a good is €1.40, is the good a normal or
inferior good?