Applied Microeconomics
Pre-Test Questions
Course Introduction
Applied Microeconomics focuses on the practical application of microeconomic theories to real-world problems and decision-making in various markets. The course covers topics such as consumer and producer behavior, market structures, pricing strategies, government intervention, and welfare analysis. Students will learn how to analyze economic issues using microeconomic models and quantitative tools, explore case studies, and examine topics like labor markets, environmental regulation, and policy evaluation. Emphasis is placed on developing analytical skills to assess and address economic challenges in industries, public policy, and everyday life.
Recommended Textbook
Microeconomics Private and Public Choice 14th Edition by James D. Gwartney
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Chapter 1: The Economic Approach
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Sample Questions
Q1) Economic analysis assumes that
A)people act only out of selfish motives.
B)people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness.
C)people are basically unselfish, and their actions are, therefore, difficult to predict.
D)changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish.
Answer: D
Q2) When economists say an individual has made a rational choice, they mean the individual has
A)made the choice by weighing their own subjective costs and benefits.
B)made a "good" decision, one that reasonable outside observers would have also made.
C)neglected to consider the unintended consequences arising from their decision.
D)ignored their own personal interests and made the choice that is best for society.
Answer: A
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Chapter 2: A: Some Tools of the Economist
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Sample Questions
Q1) Sally wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Sally is currently spending all of her time efficiently, Sally can spend more time studying this week only if A)she also spends more time doing other things.
B)she spends less time doing other things.
C)Daylight Savings Time begins this week, so everyone moves their clocks ahead one hour.
D)none of the above.
Answer: B
Q2) If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that A)the volume of trade will decline.
B)transaction costs will rise.
C)the gains from trade will increase.
D)buyers and sellers will be worse off.
Answer: C
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Chapter 2: B: Some Tools of the Economist
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Sample Questions
Q1) It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.
Answer: What will be produced is determined by businesses, but they know that the only way to succeed is to offer products consumers find desirable. What they produce is determined by what consumers want. How the goods will be produced is determined by firms that continually seek lower costs of production. Since consumers are price conscious, they will buy the product that carries the lowest price, ceteris paribus. Firms that lower production costs can lower prices and attract more consumers. The goods are consumed by people who desire them and have the ability to pay. Since income is derived from production, those who produce more of what consumers value will have higher incomes. The consumer is at the heart of all three basic economic questions.
Q2) Refer to Table 2-4. Which of the following is correct?
A)Lebos has the comparative advantage in both goods.
B)Slavia has the comparative advantage in food.
C)Lebos has the comparative advantage in food.
D)Lebos has the comparative advantage in clothing.
Answer: C
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Chapter 3: A: Supply, Demand, and the Market Process
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Sample Questions
Q1) Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to A)increase.
B)decrease.
C)remain unchanged.
D)increase if the demand for computers was relatively inelastic, but decrease if the demand for computers was relatively elastic.
Q2) Which of the following events would decrease producer surplus?
A)Sellers' costs stay the same and the price of the good increases.
B)Sellers' costs increase and the price of the good stays the same.
C)Sellers' costs decrease and the price of the good increases.
D)All of the above are correct.
Q3) Which one of the following would most likely increase the demand for wheat?
A)an increase in the price of soybeans, a substitute product
B)a decrease in the price of corn, a substitute product
C)the development of a hybrid seed that doubles wheat yields per acre
D)a decrease in the price of wheat
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Chapter 3: B: Supply, Demand, and the Market Process
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Q1) In Figure 3-24, which of the following is true?
A)At P , consumer surplus and producer surplus are equal.
B)At P , consumer surplus is greater than producer surplus.
C)At P , consumer surplus is greater than producer surplus.
D)At P , consumer surplus and producer surplus are equal.
Q2) Refer to Figure 3-22. Which of the four graphs illustrates a decrease in quantity demanded?
A)A
B)B
C)C
D)D
Q3) Which of the following is not a function of prices in a market system?
A)Prices have the crucial job of balancing supply and demand.
B)Prices send signals to buyers and sellers to help them make rational economic decisions.
C)Prices coordinate economic activity.
D)Prices ensure an equitable distribution of goods and services among consumers.
Q4) A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.
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Chapter 4: A: Supply and Demand: Applications and Extensions
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Q1) After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices
A)discourage the flow of these items into the area.
B)encourage consumers to purchase the items even if they do not plan to use them.
C)help to direct the items toward their highest valued uses.
D)do all of the above.
Q2) Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?
A)Waiting lines to buy the good will develop.
B)The quality of the good will deteriorate.
C)Consumers will buy more than they would at the market equilibrium price.
D)A surplus of the good will develop.
Q3) A $25 government subsidy paid directly to buyers of jeans will result in
A)a downward shift in the demand curve for jeans by $25.
B)an upward shift in the demand curve for jeans by $25.
C)a downward shift in the supply curve for jeans by $25.
D)an upward shift in the supply curve for jeans by $25.
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Chapter 4: B: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Suppose the U.S. government banned the sale and production of cigarettes. Which of the following would be most likely to occur?
A)No one would smoke anymore.
B)The amount of violence involved in the buying and selling of cigarettes would increase.
C)The price of cigarettes would decrease.
D)The supply for cigarettes would become elastic.
Q2) Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by
A)consumers, because the increase in market price will be large relative to the increase in the excise tax.
B)firms, because the increase in market price will be large relative to the increase in the excise tax.
C)consumers, because the increase in market price will be small relative to the increase in the excise tax.
D)firms, because the increase in market price will be small relative to the increase in the excise tax.
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Chapter 5: Difficult Cases for the Market and the Role of Government
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Sample Questions
Q1) If the construction of a new elementary school would create $5 million worth of benefits for citizens and cost $7 million to construct, then using the criterion of economic efficiency, the school
A)should be built.
B)should not be built.
C)results in a substantial improvement to the welfare of society.
D)should be built if it passes by a majority vote.
Q2) "Government failure" exists when political decision-makers choose actions that
A)seek efficient outcomes rather than fair outcomes.
B)seek fair outcomes rather than efficient outcomes.
C)conflict with efficient allocation of resources.
D)conflict with the outcome favored by the majority of voters.
Q3) People who receive the benefit of a good without contributing to its costs of production are called
A)contributors in kind.
B)free riders.
C)frequent flyers.
D)cost maximizers.
Q4) Is education a public good? Focus on whether it meets the two criteria for being a public good.
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Chapter 6: The Economics of Collective Decision-Making
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Sample Questions
Q1) Which of the following factors weakens the case for private-sector provision of goods and services relative to public-sector provision?
A)externalities
B)the rational-ignorance effect
C)the shortsightedness effect
D)well-informed consumers
Q2) Economic theory indicates that the behavior of
A)government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions.
B)elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests.
C)individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices.
D)voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter.
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Chapter 7: Consumer Choice and Elasticity
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Sample Questions
Q1) Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?
A)The consumer will substitute apples for oranges.
B)The consumer will substitute oranges for apples.
C)There is no substitution effect because relative prices have remained constant.
D)Demand for both goods increases.
E)Demand for both goods decreases.
Q2) If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by
A)lowering price.
B)decreasing quantity supplied.
C)leaving price the same.
D)raising price.
E)decreasing supply.
Q3) Fred, a poor college student, states: "I eat tuna sandwiches five times a week. When I graduate and get a real job, I will never purchase tuna again." Is Fred planning on breaking the law of demand?
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Chapter 8: A: Costs and the Supply of Goods
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Sample Questions
Q1) Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.
A)$5
B)$10
C)$15
D)$20
Q2) The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-2. If the marginal cost curve were constructed, at what output would it cross the AVC curve?
A)10
B)15
C)20
D)25
Q3) When total revenue minus total economic cost is equal to zero, the firm is
A)earning above-average economic profit.
B)earning the normal profit rate.
C)losing too much money to stay in business.
D)earning abnormally low profits.
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Chapter 8: B: Costs and the Supply of Goods
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Sample Questions
Q1) Kim used to work at "The Big One" accounting firm, and she earned $50,000 a year. She saved her money and has now invested $100,000 in her own firm. Profit is $20,000 a year, which Kim receives as her only compensation. She concludes that this is great because a 20 percent return is much better than the 8 percent she could get in another investment (the opportunity cost of the funds). What is wrong with this line of thinking?
Q2) Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.
Q3) Andy wants to maximize his grade-point average. Having spent six hours studying for his final exam in economics, Andy calculates his grade and discovers that even with a perfect score on the final, he will not pass the course. He decides to study two more hours so he will not have wasted the first six hours. Is this a good decision? Why or why not?
Q4) If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?
Q5) The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?
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Chapter 9: A: Price Takers and the Competitive Process
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Q1) In competitive price-taker markets, firms
A)can sell all of their output at the market price.
B)produce differentiated products.
C)can influence the market price by altering their output level.
D)are large relative to the total market.
Q2) There are 1,000 identical firms in a price-taker industry. In the short run, the total revenues of each firm are less than total costs. What will happen in the long run?
A)Nothing, because each firm is already maximizing its profits.
B)Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business (cover its variable costs).
C)Additional firms will enter the market, but the price will remain the same because the existing firms will not allow it to decrease.
D)Firms will exit the market, and the product price will rise.
Q3) In a competitive price-taker market,
A)many other sellers are offering a product that is essentially identical.
B)consumers have more influence over the market price than producers do.
C)government intervention prevents firms from influencing price.
D)producers agree not to change the price.
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Chapter 9: B: Price Takers and the Competitive Process
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Q1) Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?
Q2) If a technological advance lowers a firm's production costs, why do prices typically fall? Shouldn't the firm maintain the same price and earn economic profit?
Q3) When a firm is operating in a price-taker market, marginal revenue is A)equal to price.
B)always less than price.
C)equal to zero when the market is in long-run equilibrium.
D)equal to the change in output divided by the change in total revenue.
Q4) Tom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes their costs. Is he correct? Is there significance to this observation?
Q5) The competitive price-taker model is usually used to illustrate the competitive process. If firms cannot choose their price, where is the competition?
Q6) Why is it considered "ideal" for price to just equal marginal cost?
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Chapter 10: Price-Searcher Markets With Low Entry Barriers
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Q1) Refer to Figure 10-14. The firm is currently earning an economic
A)profit equal to the area AHFC.
B)profit equal to the area CFED.
C)loss equal to the area AHED.
D)loss equal to the area CFED.
Q2) If firms in competitive price-searcher markets are earning economic losses, what effect will the exit of existing firms have?
A)Demand for the product of each firm will be reduced until the losses are eliminated.
B)Demand for the product of each firm will increase until all firms earn zero profit.
C)Demand for the product of each firm will increase until price is greater than average total cost.
D)Demand for the product of each firm will fall until price equals marginal cost.
Q3) Evaluate the following statement: "Competitive price-searcher markets are inefficient relative to purely competitive markets since prices are higher and firms don't produce an output rate that minimizes average total cost. As a result, government action should be undertaken to remedy this situation."
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Chapter 11: A: Price-Searcher Markets With High Entry
Barriers
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Q1) Refer to Figure 11-16. The allocative inefficiency caused by a profit-maximizing monopoly amounts to
A)$150.
B)$200.
C)$250.
D)$300.
Q2) If the average total cost curve is always above the demand curve of a monopolist,
A)the profits of the monopolist will be large.
B)the monopolist must be producing inefficiently.
C)even a monopolist will suffer economic losses.
D)entry will occur, forcing the monopolist to reduce price and expand output.
Q3) If pizza used to be produced in a competitive price-taker market, and now the pizza market has become a monopoly, we can expect
A)less pizza to be sold at a higher price.
B)more pizza to be sold at a higher price.
C)less pizza to be sold at a lower price.
D)more pizza to be sold at a lower price.
E)the same amount of pizza to be sold at the same price.
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Chapter 11: B: Price-Searcher Markets With High Entry
Barriers
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Q1) Economic theory suggests that government-operated monopolies will
A)be highly efficient and follow policies that are in the consumers' interest.
B)be dominated by persons who, while seeking to serve the public interest, are not hard-nosed enough to run a business efficiently.
C)be inefficient because of poor incentives for operational efficiency.
D)favor the consumer at the expense of special interest groups in and out of government.
Q2) Licensing is a process in which a firm wanting to enter a market must
A)require all potential customers to obtain government permission to purchase the product.
B)notify the government within a certain period after it has entered the market.
C)pay all overdue taxes before entering the market.
D)obtain permission from the government to enter the market.
Q3) Which of the following is a characteristic of an oligopolistic industry?
A)interdependence of a firm's price and output decisions
B)low barriers to entry
C)small output of individual firms relative to the total market
D)a large number of competing firms
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Chapter 12: The Supply of and Demand for Productive Resources
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Q1) Refer to Figure 12-4. With regard to cookie production, the figure implies
A)diminishing marginal product of workers.
B)diminishing marginal cost of cookie production.
C)decreasing cost of cookie production.
D)increasing marginal product of workers.
Q2) A change in the demand for a resource can be caused by which of the following?
A)a change in the demand for the final product that uses the resource as a factor of production
B)a change in the productivity of the resource
C)a change in the price of other resources that could be used as substitutes for the resource in question
D)all of the above
Q3) Which of the following would tend to decrease the demand for coal miners?
A)an increase in the wages of coal miners
B)an increase in the price of oil
C)a decrease in the demand for coal
D)an increase in the supply of coal miners
Q4) Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of labor and building materials are the same?
Page 20
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Chapter 13: Earnings, Productivity, and the Job Market
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Q1) Suppose that an employer hires workers with blue eyes and workers with brown eyes. Each type of worker has the same productivity. Which of the following is correct if the employer discriminates by offering blue-eyed workers lower wages than brown-eyed workers?
A)The employer will be just as cost efficient as a nondiscriminating employer.
B)The employer will face higher costs than a nondiscriminating employer.
C)The employer will have lower costs.
D)The employer will have higher profits.
E)Both a and c are correct.
Q2) If Congress suddenly passes legislation that required all U.S. workers to receive the same annual pay, we would expect
A)less human capital investment.
B)a shortage of workers to fill the least desirable jobs.
C)a surplus of workers to fill the easy, desirable jobs.
D)all of the above.
Q3) Which of the following would cause the demand for plumbers to decrease?
A)an increase in the productivity of plumbers
B)a decline in the construction of housing
C)a law that mandated higher wages for plumbers
D)an increase in the number of plumbers who belong to a union
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Chapter 14: Investment, the Capital Market, and the Wealth of Nations
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Q1) Some governments enact usury laws, which hold the interest rate below its equilibrium level. Economic analysis indicates that under such laws,
A)saving would increase.
B)borrowers would demand less from the loanable funds market.
C)anyone who wanted to borrow would be happy with the lower interest rate.
D)there would be a shortage of loanable funds, necessitating rationing by some means other than the price (interest rate).
Q2) In an uncertain world, private investors
A)always make decisions that lead to economic profit.
B)never make decisions that generate economic losses.
C)sometimes make decisions that lead to economic losses.
D)rarely invest in human capital.
Q3) If the interest rate is 8 percent, the present value of $750 to be received two years from now is
A)$750.
B)$886.10.
C)$643.
D)$738.14.
Q4) In a barter economy that had no form of currency, how could interest exist?
Page 22
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Chapter 15: Income Inequality and Poverty
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Q1) Over the past several decades, family incomes in the United States have
A)become less equal.
B)become more equal.
C)maintained the same level of inequality.
D)declined substantially for all families.
Q2) Income supplements large enough to significantly increase the economic status of poor people will
A)encourage behavior that increases the risk of poverty.
B)create high implicit marginal tax rates that reduce the incentive of transfer recipients to earn.
C)provide low-income recipients with a strong incentive to work and increase their earnings so they will not be dependent on income transfers.
D) do both a and b.
Q3) Compared to low-income families, a larger proportion of high-income families
A)is headed by a person with a college degree.
B)has both a husband and a wife who work full time.
C)is headed by a person between the ages of 35 and 64.
D)is all of the above.
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Chapter 16: Appendix: Government Spending and Taxation
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Q1) How have the size and functions of government in the United States changed during the last century?
Q2) Government expenditures as a percent of GDP in the United States
A)are very high in comparison to the rest of the world.
B)are smaller than for most other high-income industrial countries.
C)are much smaller today than they were a century ago.
D)are none of the above.
Q3) Which of the following is true?
A)In 2002, national defense accounted for more than half of federal spending.
B)Federal spending on national defense has increase rapidly during the last several decades.
C)Federal spending on health care programs such as Medicare and Medicaid has increased rapidly during the last several decades.
D)Federal spending in the aftermath of hurricane Katrina expanded over 50%.
Q4) Compared to 1980, the top marginal federal income tax rate today is
A)substantially lower and the rate structure is less progressive than in 1980.
B)substantially lower and the rate structure is more progressive than in 1980.
C)substantially higher and the rate structure is less progressive than in 1980.
D)substantially higher and the rate structure is more progressive than in 1980.
Q5) Discuss how size of government can negatively affect economic growth.
Page 24
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Chapter 17: Appendix: the Economics of Social Security
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Q1) (I) Current Social Security retirees typically receive real benefits that are equal to three or four times the amount of their contributions into the system. (II) Current young workers can expect to receive real benefits less than their contributions into the system.
A)I is true; II is false.
B)I is false; II is true.
C)Both I and II are false.
D)Both I and II are true.
Q2) The current surplus of the Social Security system is expected to become a deficit sometime around 2018 because the
A)payroll tax rate is scheduled to decline at that time.
B)number of workers relative to the number of Social Security recipients will decline as the baby boom generation moves into the retirement phase of life.
C)stock market is not expected to perform nearly as well during the next two decades as was the case during the 1980s and 1990s.
D)growth rate of the U.S. economy is expected to slow during the next two decades.
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Q1) Investors are often willing to pay positive prices for shares of firms that have never earned a profit because the investors
A)do not know the firms have never earned a profit.
B)expect the firms to have positive net earnings in the future.
C)expect that interest rates will rise in the future.
D)expect that higher rates of inflation will push stock prices higher in the future.
Q2) Consider a stock with a 50 percent probability of zero net earnings and a 50 percent probability of net earnings equal to $20 per share each year continuously in the future. Furthermore, assume that people are risk averse: That is, they will have to be compensated for uncertainty accompanying variation in their future wealth. If the interest rate were 5 percent, how much would people be willing to pay for a share of this stock?
A)$10
B)$200
C)less than $200
D)more than $200
E)$400
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Chapter 19: Appendix: Great Debates in Economics: Keynes
Versus Hayek
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Q1) The General Theory of John Maynard Keynes exerted a major impact on macroeconomics during the 20 century primarily because
A)it provided the only logically consistent view of what caused the Great Depression.
B)it provided a reasonable explanation of what went wrong during the Great Depression and what could be done to prevent it from happening again.
C)it explained how gross domestic product could be measured and why this was important.
D)it derived the conditions necessary for maximum efficiency of resource use and explained how these conditions could be achieved through central planning.
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Chapter 20: Appendix: the Crisis of 2008: Causes and Lessons for the Future
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Q1) Which of the following is most central to the understanding of the economic crisis of 2008?
A)the decline of the stock market in late 2007
B)the housing boom (2001-2005) and bust (2007-2008)
C)the sharp rise in oil prices in 2008
D)unethical investment practices beginning in 2000
Q2) Since 2002, the Fed has shifted to expansionary monetary policy, then to restrictive policy, and then back to expansionary monetary policy. Policy shifts of this type are most likely to
A)promote economic stability and stimulate employment.
B)keep the general level of prices relatively stable because the periods of restrictive policy will just offset the periods of expansion.
C)help promote economic stability because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly.
D)promote instability because the time lags of monetary policy are long and variable.
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Chapter 21: Appendix: Lessons From the Great Depression
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Q1) As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers
A)reduced tax rates and increased the money supply.
B)increased tax rates and reduced the money supply.
C)increased both tax rates and the money supply.
D)reduced both the tax rates and the money supply.
Q2) Which of the following contributed to the severity of the Great Depression in the 1930s?
A)large increases in tax rates in 1932 and again in 1936
B)large increases in the money supply during the early 1930s
C)a reduction in tariffs protecting many U.S. industries
D)a substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s
Q3) The rapid growth in stock prices during the 1920s was due in large part to
A)the expansionary monetary policy of the Federal Reserve.
B)the wartime demand for military equipment and supplies.
C)the artificially high value of the dollar, which eventually led to the stock market crash of 1929.
D)the technological innovations of the decade, which spurred economic growth.
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Page 29
Chapter 22: Appendix: the Economics of Healthcare
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Q1) Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?
A)The demand for health-care services will decrease.
B)The prices of health-care services will grow less rapidly than has been the case during the last three decades.
C)The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline.
D)The health-care inflation and spending growth of recent decades will continue or even accelerate.
Q2) Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will
A)lead to higher healthcare prices.
B)lead to lower healthcare prices.
C)reduce the incentive of consumers to economize.
D)increase the incentive of healthcare providers to provide their services at a low cost.
E)do both a and c above.
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Chapter 23: Appendix:education: Problems and Performance
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Q1) Which of the following is true with regard to the lower achievement scores of American students compared to students in most developed countries?
A)Teacher salaries in the United States are not as high as in most other developed countries.
B)Spending per elementary student in the U.S. is less than that of most developed countries.
C)There is no obvious link between expenditures on education and student performance on standardized tests.
D)American students are not as smart as they were a generation ago.
Q2) The incentive of schools to provide a high quality education at a low cost and the incentive of parents and students to shop around for the best schools will be weakest when education is produced
A)privately but paid for by taxpayers and provided free of charge.
B)by public schools and the cost of education is covered by taxes.
C)privately and parents must purchase it with their own money.
D)by public schools and parents purchase it with their own money.
Q3) "Increasing competition between schools will tend to lower both the cost and quality of education." Is this statement true or false?
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Chapter 24: Appendix: Earnings Differences Between Men and Women
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Q1) The hourly earnings of full-time working women were a little more than what percent of those of their male counterparts in 2007?
A)60 percent
B)70 percent
C)80 percent
D)90 percent
Q2) During the last two or three decades, the educational and career choices of women have become
A)more like those of men, and the earnings of women have declined relative to those of men.
B)more like those of men, and the earnings of women have increased relative to those of men.
C)less like those of men, and the earnings of women have increased relative to those of men.
D)less like those of men, and the earnings of women have declined relative to those of men.
Q3) "If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?
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Chapter 26: Appendix: the Question of Resource Exhaustion
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Q1) The amount of a resource consumed depends on
A)the price of the resource.
B)consumer income.
C)the price of substitute resources.
D)all of the above.
Q2) Predictions that natural resources such as oil will be essentially used up in the next few decades
A)have been frequently made for the past century but have always proven to be false.
B)have usually been based on the quantity of proved reserves.
C)have ignored the role of price in governing the quantities demanded and supplied.
D)All of the above are correct.
Q3) In the Central Utah Project, the water delivered from dams to users
A)is very well utilized, because planners allocated water to its highest valued uses and users.
B)cannot generally be traded, so is often wastefully used in low-valued uses.
C)is often sold to water-short cities by farmers who can then enjoy a profit from the sale. D)is very expensive to the users who get it.
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33
Chapter 25: Appendix: Do Labor Unions Increase the Wages of Workers
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Q1) To the extent that unions can transfer profits from unionized employers to union workers, they will
A)reduce the incentive of unionized employers to invest in fixed capital and research.
B)increase employment in the unionized sector.
C)reduce the incentive of nonunion firms to invest and expand their output.
D)increase the productivity of labor in the long run.
Q2) Which of the following statements is true for the U.S. economy?
A)Higher wages in the unionized sectors of the economy push up wages in the nonunion sectors as well.
B)Inflation tends to accelerate when the proportion of the labor force that is unionized increases.
C)Union workers currently receive wages that are 15 to 20 percent higher, on average, than similar nonunion workers.
D)When we compare similar union and nonunion workers, we find virtually no difference in the wages they receive.
Q3) List some factors that might make the threat of a strike more effective.
Q4) In a strike, what does the union have to lose? What does management lose?
Q5) What common goals, if any, do labor and management share?
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Chapter 27: Appendix: Difficult Environmental Cases and the
Role of Government
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Q1) When is the definition and enforcement of property rights especially difficult?
A)When many polluters harm a large group of people with the same pollutant.
B)When a single polluter is harming a single person or entity.
C)When land is owned by a corporation.
D)When the benefits of prosecution are clear.
Q2) Government regulation is
A)subject to the same problems of lack of information and lack of incentives for economic efficiency as centrally planned economies.
B)the only reliable way to improve environmental quality.
C)not subject to political concerns when it comes to environmental quality.
D)the most economically efficient way to reduce greenhouse gases.
Q3) Regarding wealth and environmental quality,
A)richer people are more willing to make sacrifices to gain greater environmental quality.
B)poor nations are less resilient when faced with the threats caused by environmental degradation.
C)richer people are more able to make sacrifices to gain greater environmental quality.
D)all of the above
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