1) If a market is in equilibrium, then it is impossible for a social planner to raise
economic welfare by increasing or decreasing the quantity of the good.
a.True
b.False
2) Which of the following events must cause equilibrium quantity to rise?
a.demand increases and supply decreases
b.demand and supply both decrease
c.demand decreases and supply increases
d.demand and supply both increase
3) Barb and Jim run a business that sets up and tests computers. Assume that Barb and
Jim can switch between setting up and testing computers at a constant rate. The
following table applies.
Jim has an absolute advantage in
a.both setting up and testing computers and a comparative advantage in setting up
computers.
b.both setting up and testing computers and a comparative advantage in testing
computers.
c.neither setting up nor testing computers and a comparative advantage in setting up
computers.
d.neither setting up nor testing computers and a comparative advantage in testing
computers.
4) Today’s supply curve for gasoline could shift in response to a change in
a.today’s price of gasoline.
b.the expected future price of gasoline.
c.the number of buyers of gasoline.
d.All of the above are correct.
5) The production possibilities frontier is a graph that shows the various combinations
of output that an economy can possibly produce given the available factors of
production and
a.society’s preferences.
b.the available production technology.
c.a fair distribution of the output.
d.the available demand for the output.
6) Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
The opportunity cost of 1 plate for Huang is
a.1/3 parasol.
b.1/2 parasol.
c.3 parasols.
d.4 parasols.
7) The income effect of a price change is depicted by
a.a parallel shift of the budget constraint at the old set of prices.
b.a parallel shift of the budget constraint at the new set of prices.
c.a movement along the budget constraint holding the level of satisfaction constant.
d.not observable and is therefore neither a shift nor a change in the slope of the budget
constraint.
8) Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a
recent town meeting, several citizens proposed building a large public swimming pool
in the center of town for all of the residents to enjoy. A survey of all 50,000 residents
revealed that the pool would be worth $50 to each of them. Because the cost to build
the swimming pool is only $1,000,000, Manager Miller arranges to have the pool built.
Everyone in town enjoys the pool, but when Manager Miller asks for donations to pay
for the pool, he only collects $250,000. Manager Miller soon realizes that
a.the survey was conducted improperly.
b.the cost of the pool exceeded the social benefits.
c.the pool is a club good.
d.most residents of the town are probably free-riders at the pool.
9) Which of these activities will most likely result in an external benefit?
a.A college student buys a deck of cards to play solitaire in her dorm room.
b.An elderly woman plants a flower garden on the vacant lot next to her house.
c.An executive purchases a book to read on a business trip.
d.A ten-year-old uses his allowance to buy new Nike shoes.
10) Evidence from the market for eyeglasses suggests that advertising leads to
a.lower-quality products for consumers.
b.lower prices for consumers.
c.higher prices for consumers.
d.less concern on the part of consumers about price differences among similar goods.
11) Refer to Figure 9-15. Consumer surplus with the tariff is
a.A.
b.A + B.
c.A + C + G.
d.A + B + C + D +E + F.
12) Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel,
own dairies that produce milk that is safe to drink. Each week Maria and Miguel work
together to decide how many gallons of milk to produce. They bring milk to town and
sell it at whatever price the market will bear. To keep things simple, suppose that Maria
and Miguel can produce as much milk as they want without cost so that the marginal
cost is zero. The weekly town demand schedule and total revenue schedule for milk is
shown in the table below:
Refer to Table 17-3. If this market for milk were perfectly competitive instead of
monopolistic, what would be the price for milk?
a.$0
b.$10
c.$12
d.$16
13) Which term do economists use to refer to a difference in wages that arises from
nonmonetary characteristics of different jobs?
a.non-pecuniary differentials
b.compensating differentials
c.fundamental differences
d.idiosyncratic differences