Consider a public good such as fire protection services. Rich people may benefit more
than the poor from such a service because rich people stand to lose more from a fire that
destroys property. In this case
A) the ability-to-pay principle may support the rich paying more taxes than the poor,
but not the benefits-received principle.
B) the benefits-received principle may support the rich paying more taxes than the poor,
but not the ability-to-pay principle.
C) both the benefits-received and the ability-to-pay principles may support the rich
paying more taxes than the poor.
D) neither the benefits-received nor the ability-to-pay principles may support the rich
paying more taxes than the poor.
Which of the following statements about economic resources is true?
A) Economic resources include financial capital and money.
B) Economic resources are also called factors of production.
C) Economic resources are used only by businesses.
D) All economic resources are man-made.
All of the following represent differences between stocks and bonds except
A) a stock can possibly pay dividends forever, but bonds have a fixed number of
payments.
B) differences of opinion about a stock’s future may vary considerably but there is less
difference about a bond’s future.
C) the future growth of a stock is more uncertain than the payments of a bond.
D) bonds represent partial ownership in a firm but stocks do not.
Which of the following statements about scarcity is true?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity only arises when there is a wide disparity in income distribution.
Which of the following statements best describes the economic short run?
A) It is a period of one year or less.
B) It is a period during which firms are free to vary all of their inputs.
C) It is a period during which at least one of the firm’s inputs is fixed.
D) It is a period during which fixed inputs become variable inputs because of
depreciation.
If Mort’s House of Flowers sells one dozen roses to different customers at different
prices, economists would consider this an example of
A) price gouging.
B) rational ignorance.
C) arbitrage.
D) price discrimination.
Which of the following is an example of a quasi-public good?
A) cable television
B) organic apples
C) stock of knowledge in the public domain
D) crime prevention
Table 4-2
Refer to Table 4-2. The table above lists the highest prices five consumers are willing to
pay for a theater ticket. If the price of one ticket falls from $25 to $10
A) only three tickets will be sold.
B) consumer surplus decreases from $24 to $12.
C) consumer surplus increases from $0 to $31.
D) everyone will buy a ticket.
Which of the following statements is false?
A) There is an indifference curve associated with any combination of goods selected by
a consumer.
B) A consumer is indifferent among all consumption bundles along a given budget line.
C) All consumption bundles along a given indifference curve are equally desirable.
D) Consumption bundles that lie on higher indifference curves yield higher utility.
What is the difference between labor’s marginal product and marginal revenue product?
A) The marginal product of labor is the increase in output as a result of hiring an
additional worker while the marginal revenue product of labor is the increase in profit
as a result of hiring an additional worker.
B) The marginal revenue product of labor is the dollar value of hiring an additional
worker while the marginal product of labor is the increase in the firm’s physical output
as a result of hiring an additional worker.
C) The marginal product of labor is the additional labor’s contribution to the firm’s total
output while the marginal revenue product is the additional labor’s contribution to the
firm’s total sales revenue.
D) Labor’s marginal product is a measure of labor’s productivity while labor’s marginal
revenue product is a measure of labor’s ability to sell the firm’s products.
In order to prove that Motrin and Ibuprofen are substitutes, one should measure the
________ and get a ________.
A) cross-price elasticity; positive number
B) cross-price elasticity; negative number
C) price elasticity of demand; number greater than 1 (in absolute value)
D) price elasticity of demand; number less than 1 (in absolute value)
“Free riding” is a characteristic of which type of good?
A) a private good
B) a common resource
C) a public good
D) a good that is both rival and excludable
Figure 18-8
Refer to Figure 18-8 to answer the following questions.
a. Did the distribution of income become more equal in 2016 than it was in 2015, or did
it become less equal? Explain.
b. If area A = 1,900, area B = 450, and area C = 2,650, calculate the Gini coefficient for
2015 and the Gini coefficient for 2016.
A tax bracket is
A) the percent of taxable income paid in taxes at a specific income bracket.
B) the income range within which a particular tax rate applies.
C) the type of tax structure for which a range of taxes applies.
D) the range, from the high to the low tax rate, of a particular type of tax.
If a firm is in an antitrust court case being accused of monopolizing a product, the firm
would hire an economist to show
A) the cross-price elasticity of demand between the firm’s good and another is negative.
B) the cross-price elasticity of demand between the firm’s good and another is positive.
C) the price elasticity of demand for the firm’s good is highly inelastic.
D) the income elasticity of the firm’s good is inferior.
Stockholders
A) select the board of directors of a corporation.
B) select the employees of a corporation.
C) select the managers of a corporation.
D) all of the above.
Which of the following is not a determinant of a good’s price elasticity of demand?
A) the slope of the demand curve
B) the share of the good in the consumer’s total budget
C) whether the good is a luxury or a necessity
D) the passage of time
Which of the following is not a source of comparative advantage?
A) relative abundance of labor and capital
B) technology
C) climate and natural resources
D) a strong foreign currency exchange rate
In the utility maximizing model, consumer preferences are assumed to be transitive.
What does this mean?
A) that consumers prefer more of a good to less
B) that consumers have the freedom to change their preferences from time to time
C) that consumers have preferences that are relatively consistent in the time period
under consideration
D) that consumers go through cycles in their consumption behavior
Figure 11-18
Refer to Figure 11-18. Starting from point D, a movement along isoquant2 to point F
A) increases the total cost of production with no change in output.
B) increases output but not the total cost of production.
C) increases the total cost of production and decreases output.
D) increases both the total cost of production and output.
The income effect of a price change refers to the impact of a change in
A) income on the price of a good.
B) demand when income changes.
C) the quantity demanded when income changes.
D) the price of a good on a consumer’s purchasing power.
A ________ curve shows the marginal cost of producing one more unit of a good or
service.
A) demand
B) supply
C) production possibilities
D) marginal benefit
Which of the following is not necessarily a consequence of occupational licensing
laws?
A) They restrict competition.
B) Consumers pay higher prices for the services of licensed professions.
C) They result in a higher quality of service.
D) They ensure that licensed professionals meet some minimum qualifications.
Figure 2-9
Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each
country produces two goods, cotton and cashews.
Refer to Figure 2-9. What is the opportunity cost of producing 1 pound of cashews in
Indonesia?
A) 3/8 of a bolt of cotton
B) 5/8 of a bolt of cotton
C) 2 2/3 bolts of cotton
D) 320 bolts of cotton
A perfectly competitive firm’s marginal revenue
A) is greater than price.
B) is less than price because a firm must lower its price to sell more.
C) is equal to price.
D) may be either greater or less than price, depending on the quantity sold.
The average total cost of production
A) is the extra cost required to produce one more unit.
B) equals the explicit cost of production.
C) equals total cost of production divided by the level of output.
D) equals total cost of production multiplied by the level of output.
Trina’s Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each. What
is the opportunity cost of buying a goldfish?
A) 5 angelfish
B) 1/5 of an angelfish
C) $10
D) $2
When an investor buys a corporate bond
A) the investor becomes part owner of the corporation.
B) the principal of the bond is a loan to the corporation.
C) the interest made on the bond represents the bondholder’s limited liability in the
company.
D) the face value of the bond is equal to what the investor paid for the bond.
Table 18-8
Table 18-8 shows the amount of taxes paid on various levels of income.
Refer to Table 18-8. The tax system is
A) progressive throughout all levels of income.
B) proportional throughout all levels of income.
C) regressive throughout all levels of income.
D) progressive between $10,000 and $12,000 of income and regressive between
$12,000 and $22,000.
Financial contributions to the campaigns of members of Congress, state legislators, and
other elected officials by firms that seek special interest legislation that make the firms
better off are
A) examples of rent seeking.
B) illegal.
C) the result of the voting paradox.
D) irrational because elected officials will almost always act in the interest of the voters
who have to pay the cost of the legislation.
Which of the following is not a reason for firms to choose a salary system rather than a
commission system to compensate their employees?
A) Research has shown that most companies will find that a salary system will be more
profitable than a commission system.
B) It is often difficult to attribute output to particular workers.
C) If workers are paid on the basis of the number of units of output they produce, they
may become less concerned about quality.
D) Commission compensation systems are riskier for employees than a salary system,
and many workers dislike risk.
In an oligopoly market
A) the pricing decisions of all other firms have no effect on an individual firm.
B) individual firms pay no attention to the behavior of other firms.
C) advertising of one firm has no effect on all other firms.
D) one firm’s pricing decision affects all the other firms.