1) Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates
identified by their last names and are going to vote on which one is hired.
Refer to Table 22-14. Which of the following is correct for this election? There is
a.both transitivity and independence of irrelevant alternatives.
b.transitivity but not independence of irrelevant alternatives.
c.independence of irrelevant alternatives. but not transitivity.
d.neither transitivity nor independence of irrelevant alternatives.
2) Sunshine’s Organic Market sells organic produce. Assume that labor is the only input
that varies for the firm. The store manager has determined that if she hires 5 workers,
the store can sell 150 pounds of produce per day. If she hires 6 workers, the store can
sell 170 pounds of produce per day. The store earns $4 for each pound of produce that it
sells, and the manager pays each worker $60 per day. Which of the following is not
correct?
a.For the 6th worker, the marginal product is 20 pounds of produce per day.
b.For the 6th worker, the marginal revenue product is $20 per day.
c.The store earns a higher profit by employing 6 workers than by employing 5 workers.
d.Assuming no changes in either the daily wages paid to store workers or the price at
which the store sells its produce, the firm would maximize profits by hiring a 7th
worker so long as the store can increase its sales to at least 185 pounds per day.
3) When an employer pays the cost of educating a worker, it is likely that the employer
a.is demonstrating altruistic motives.
b.is pursuing some objective other than profit-maximization.
c.hopes to recapture his investment in the form of increased labor productivity.
d.receives reimbursement from the government for the cost of the education.
4) If the quantity supplied responds only slightly to changes in price, then
a.supply is said to be elastic.
b.supply is said to be inelastic.
c.an increase in price will not shift the supply curve very much.
d.even a large decrease in demand will change the equilibrium price only slightly.
5) Because a monopolist does not face competition from other firms, the outcome in a
market with a monopoly
a.does not illustrate profit maximization.
b.is often not in the best interest of society.
c.is characterized by unlimited profits.
d.would be improved if the government produced the product rather than a private firm.
6) Economists normally assume that the goal of a firm is to earn
(i)profits as large as possible, even if it means reducing output.
(ii)profits as large as possible, even if it means incurring a higher total cost.
(iii)revenues as large as possible, even if it reduces profits.
a.(i) and (ii) only
b.(i) and (iii) only
c.(ii) and (iii) only
d.(i), (ii), and (iii)
7) The “beauty premium” can be explained by the fact that
a.marginal productivity in all occupations has a physical dimension.
b.in some occupations, physical attractiveness of workers may enhance the value of
their marginal product.
c.beauty acts as an implicit signal of innate intelligence.
d.beautiful people are likely to reflect “good breeding.”
8) Even though participants in the economy are motivated by self-interest, the “invisible
hand” of the marketplace guides this self-interest into promoting general economic
well-being.
a.True
b.False
9) Excess capacity characterizes firms in monopolistically competitive markets, even in
situations of long-run equilibrium.
a.True
b.False
10) The flatter the demand curve that passes through a given point, the more elastic the
demand.
a.True
b.False
11) Income mobility studies suggest that poverty
a.cannot be alleviated by privately sponsored anti-poverty programs.
b.cannot be alleviated by government sponsored anti-poverty programs.
c.is a long-term problem for a relatively large number of families.
d.is not a long-term problem for most families.
12) Suppose that a company hires recent college graduates for two types of jobs, sales
people and credit analysts. The hours worked and skill levels are the same for both
positions. The sales people must “cold call,” which many people find to be unpleasant.
When comparing the salaries of the two positions, it is likely that the company pays the
a.credit analysts more as a compensating differential.
b.sales people more as a compensating differential.
c.same salary for both positions because they require the same skill level.
d.same salary for both positions because it would be illegal to do otherwise.
13) An economy’s production possibilities frontier is also its consumption possibilities
frontier
a.under all circumstances.
b.under no circumstances.
c.when the economy is self-sufficient.
d.when the rate of tradeoff between the two goods being produced is constant.
14) Most economists support the infant-industry argument because it is so easy to
implement in practice.
a.True
b.False
15) It takes Anne 3 hours to make a pie and 4 hours to make a shirt. It takes Mary 2
hours to make a pie and 5 hours to make a shirt. Anne should specialize in making
shirts and Mary should specialize in making pies, and they should trade.
a.True
b.False
16) A congestion toll imposed on a highway driver to force the driver to take into
account the increase in travel time she imposes on all other drivers is an example of
internalizing the externality.
a.True
b.False
17) Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
The firm‘s shortrun supply curve is its marginal cost curve above
a.$1.
b.$3.
c. $4.50.
d. $6.30.
18) Studies of wages by labor economists indicate that measurable variables such as
age, job characteristics, years of education, and years of experience account for
a.virtually none of the variation in wages in our economy.
b.some, but less than 50 percent of the variation in wages in our economy.
c.about 75 percent of the variation in wages in our economy.
d.almost all of the variation in wages in our economy.