Applied Microeconomics
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Course Introduction
Applied Microeconomics explores the practical applications of microeconomic theory in analyzing real-world issues faced by individuals, firms, and policymakers. The course covers topics such as consumer and producer behavior, market structures, pricing strategies, and the role of government intervention in various markets. Students will use data-driven approaches and case studies to examine how microeconomic principles influence decision-making in areas such as labor markets, health care, environmental policy, and industrial organization. Through hands-on projects and empirical analysis, the course aims to equip students with the tools necessary to critically analyze and solve contemporary economic problems.
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) All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?
A)Incentives matter.
B)The value of goods can be determined objectively.
C)Economic thinking is marginal thinking.
D)Information is scarce.
Answer: B
Q2) Economics is primarily the study of A)why people like to make money.
B)the management of a business.
C)the choices people make as the result of scarcity.
D)how to make money in the stock market.
Answer: C
Q3) The economizing problem is essentially one of deciding how to make the best use of A)limited resources to satisfy limited wants.
B)unlimited resources to satisfy limited wants.
C)limited resources to satisfy virtually unlimited wants.
D)unlimited resources to satisfy unlimited wants.
Answer: C
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Page 3
Chapter 2: A: Some Tools of the Economist
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Q1) If the citizens of a country were to work harder and take less leisure time, it would
A)shift the production possibilities curve outward.
B)cause an economy to operate inside its production possibilities curve.
C)shift the production possibilities curve inward.
D)cause an economy to move from one point on the production possibilities curve to another point on the curve.
Answer: A
Q2) Three basic decisions must be made by all economies. What are they?
A)How much will be produced; when will it be produced; who will produce it?
B)What goods will be produced; how will goods be produced; for whom will goods be produced?
C)What will be consumed; how will goods be consumed; for whom will goods be consumed?
D)How will the opportunity cost principle be applied; if the law of comparative advantage will be utilized, how will it be utilized; will the production possibilities constraint apply?
Answer: B
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Chapter 2: B: Some Tools of the Economist
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Sample Questions
Q1) The law of comparative advantage indicates that
A)a group of people will reduce their output when each good or service is supplied by the low opportunity cost producer.
B)trading partners lose when they can acquire a good through trade cheaper than they can produce it.
C)trade is most effective when people trade only among those in their own nation.
D)a group of people can increase their output when each good or service is supplied by the low opportunity cost producer.
Answer: D
Q2) Middlemen, such as grocers, stockbrokers, and realtors
A)specialize in reducing transactions costs.
B)provide nothing of value to either the buyer or the seller.
C)have no effect on economic output in society.
D)do not exist in capitalist economies.
Answer: A
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Chapter 3: A: Supply, Demand, and the Market Process
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Sample Questions
Q1) In a typical college town, when students go home for the summer, the demand for many items such as pizza and textbooks
A)decreases, which is a shift to the left of the demand curves for these goods.
B)decreases, which is a shift to the right of the demand curves for these goods.
C)increases, which is a shift to the left of the demand curves for these goods.
D)increases, which is a shift to the right of the demand curves for these goods.
Q2) Consumer surplus
A)is the difference between total willingness to pay and the total amount actually paid.
B)guarantees that the market value of a good in money is equal to the total economic value of the good.
C)is always negative because of diminishing marginal utility.
D)is the total area under a consumer's demand curve.
Q3) Which of the following would lead to an increase in the demand for designer blue jeans?
A)a decrease in the price of designer blue jeans
B)a reduction in the price of the cotton used to produce the jeans
C)an increase in the income of youthful Americans
D)an increase in the price of the cotton used to produce the jeans
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Chapter 3: B: Supply, Demand, and the Market Process
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Q1) Refer to Figure 3-21. At the quantity Q ,
A)the market is in equilibrium.
B)consumer surplus is maximized.
C)the sum of consumer surplus and producer surplus is maximized.
D)the value to buyers is less than the cost to sellers.
Q2) Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P to P ?
A)ABD
B)ACF
C)DEF
D)BCFD
Q3) John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives
A)producer surplus of $3,000.
B)producer surplus of $2,600.
C)producer surplus of $600.
D)consumer surplus of $400.
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Chapter 4: A: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) An income tax is progressive if the A)tax rate decreases as income increases.
B)percentage of income paid in taxes increases as income increases.
C)percentage of income paid in taxes stays the same regardless of the size of income.
D)dollar amount paid in taxes increases with income.
Q2) If a $5,000 tax is placed legally (statutorily) on the sellers of new automobiles and as a result the price of automobiles to consumers rises by $4,000, then the actual burden of the tax
A)falls completely on automobile buyers.
B)falls completely on automobile sellers.
C)is $4,000 on automobile buyers and $1,000 on sellers.
D)is $1,000 on automobile buyers and $4,000 on sellers.
Q3) When a price ceiling prevents a higher market price from rationing a good,
A)a surplus of the good will develop.
B)scarcity of the good will be eliminated.
C)non-price factors will play a more important role in the rationing process.
D)the future supply of the good will expand rapidly.
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Page 8
Chapter 4: B: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Refer to Figure 4-23. In which market will the majority of the tax burden fall on the buyer?
A)market (a)
B)market (b)
C)market (c)
D)All of the above are correct.
Q2) Refer to Figure 4-16. Some policymakers have argued that the government should establish a "living wage." A living wage would provide workers a reasonable standard of living in their city or region. If a living wage of $10 per hour is established in the market pictured here, we would expect
A)employment will increase to 14 million.
B)employment will decrease to 8 million.
C)the wage will actually rise to $20 per hour.
D)there will be a surplus of 14 million workers.
Q3) Refer to Figure 4-25. The tax causes a reduction in producer surplus that is represented by area
A)A.
B)B + C.
C)D + E.
D)F.
Page 9
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Chapter 5: Difficult Cases for the Market and the Role of Government
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Sample Questions
Q1) When consumers cannot tell the difference at the time of sale between high-quality products and those with defects, strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market. Economists call this
A)the curse of advertising.
B)the imperfect information problem.
C)the brand name problem.
D)an open-access resource.
Q2) Because the benefits derived from an activity decline as it is expanded, it is generally A)wise to undertake all actions that generate benefits.
B)efficient to stop well before perfection is achieved.
C)best to continue as long as it is possible to derive some additional benefits.
D)unwise to engage in activities for which the benefits decline as you do more of it.
Q3) Sam lives next to The Party Pub and its outdoor "beer garden" that features live music. An economics major, Sam considers this a positive externality. Dave, another economics student, lives next to The Party Pub too, but he considers the music a negative externality. Which student, if either, is correct? Why?
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Page 10
Chapter 6: The Economics of Collective Decision-Making
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Sample Questions
Q1) In 2006, the American Association of Retired Persons (AARP) spent over $70 million on lobbying-related expenses in an attempt to get policies enacted that would benefit retirees. In economics, the term used to describe such activity is
A)logrolling.
B)rent seeking.
C)influence peddling.
D)redistribution searching.
Q2) Most voters will likely be concerned with
A)most issues since most issues have some impact, however slight, on each citizen.
B)only a few special issues (those that exert the most impact on the voters' personal welfare).
C)most issues since information on most issues can be obtained at a low cost.
D)the views of a particular political candidate on all issues.
Q3) Which of the following refers to when legislators trade votes on legislation?
A)the shortsightedness effect
B)the special-interest effect
C)rational-ignorance effect
D)logrolling
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11
Chapter 7: Consumer Choice and Elasticity
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Sample Questions
Q1) An inferior good is distinguished by a
A)negative price elasticity of demand.
B)positive price elasticity of demand.
C)positive income elasticity of demand.
D)negative income elasticity of demand.
Q2) Suppose the state of New York imposes a one dollar per pack tax on cigarettes, which increases their price by 30 percent, and as a result, the quantity sold declines by 20 percent. The price elasticity of demand for cigarettes is equal to A)-0.20.
B)-0.67.
C)-1.50.
D)-3.00.
Q3) Which of the following is true regarding the price elasticity of demand?
A)Demand is generally more elastic in the long run than in the short run.
B)Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices).
C)A demand curve that is flatter (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope.
D)All of the above are true.
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Page 12
Chapter 8: A: Costs and the Supply of Goods
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Sample Questions
Q1) The normal rate of return on equity capital is also known as
A)the explicit cost of capital.
B)the marginal cost of capital.
C)economic profit.
D)the opportunity cost of capital.
Q2) If high-level executives of a company award themselves sizable bonuses even though the firm they manage is making losses and performing poorly, this event is most likely to arise because of
A)the law of diminishing marginal returns.
B)competition among business firms for high-level executives.
C)economies of scale.
D)the principal-agent problem.
Q3) Which of the following would increase a firm's average total costs?
A)economies of scale
B)an increase in input prices
C)an improvement in technology
D)an increase in demand for the firm's product
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Chapter 8: B: Costs and the Supply of Goods
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Q1) 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?
Q2) The boss observes that her 10 workers produce 1,000 widgets a day. She concludes that she can employ 20 workers and make 2,000 widgets, 30 to make 3,000, or 40 to make 4,000. Explain why this observation is either correct or incorrect.
Q3) 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?
Q4) James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?
Q5) Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.
Q6) Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?
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Chapter 9: A: Price Takers and the Competitive Process
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Q1) As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its
A)marginal cost curve.
B)average total cost curve.
C)average variable cost curve.
D)market demand curve.
Q2) A competitive price-taker firm's marginal cost curve is regarded as its supply curve because
A)the position of the marginal cost curve determines the price for which the firm should sell its product.
B)among the various cost curves, the marginal cost curve is the only one that slopes upward.
C)the marginal cost curve determines the quantity of output the firm is willing to supply at alternative prices.
D)the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.
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Chapter 9: B: Price Takers and the Competitive Process
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Q1) 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.
Q2) Competitive price-taker markets are characterized by
A)low entry barriers and a large number of firms selling a homogeneous product.
B)intense rivalry among firms selling differentiated products.
C)quality competition among firms and a wide variety of products.
D)advertising.
Q3) The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's
A)MC curves above AVC.
B)AVC curves above marginal revenue.
C)MC curves above ATC.
D)MC curves between AVC and ATC.
Q4) Amy runs a business in a market where all firms are price takers. Bill suggests that she lower her price to attract even more business. Should Amy follow Bill's suggestion, or should she even consider raising her price?
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Chapter 10: Price-Searcher Markets With Low Entry Barriers
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Q1) Which of the following is not a characteristic of a competitive price-searcher market?
A)Each firm produces a differentiated product.
B)The entry barriers are high.
C)Each firm faces a downward-sloping demand curve.
D)The number of firms in the market is large.
Q2) Why do airlines often charge students and vacationers a lower price than business travelers?
A)It is cheaper to provide airline service to students and vacationers than to business travelers.
B)The demand of business travelers is generally more elastic than the demand of students and vacationers.
C)The demand of students and vacationers is generally more elastic than the demand of business travelers.
D)Airlines prefer to deal with students and vacationers rather than business travelers.
Q3) What type of model would be best if we wanted to analyze the market for fast food? Why?
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Chapter 11: A: Price-Searcher Markets With High Entry
Barriers
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Q1) What price and output in Figure 11-1 would an unregulated profit-maximizing monopolist choose?
A)price A and output T
B)price B and output S
C)price B and output R
D)price C and output R
Q2) Which of the following has tended to increase the competitiveness of markets in the United States during the last couple of decades?
A)increases in transport costs
B)development of the Internet
C)decreased competition from imports
D)more government regulation of product quality
Q3) The demand and cost conditions in an industry are as depicted in Figure 11-8. In the viewpoint of economic efficiency, what would the ideal price and output be?
A)price, $10; quantity produced, 100
B)price, $15; quantity produced, 50
C)price, $15; quantity produced, 75
D)price, $20; quantity produced, 50
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Chapter 11: B: Price-Searcher Markets With High Entry
Barriers
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Q1) One answer to the problem of natural monopoly is provision of the good by a government-owned and operated firm. Why is that option not used very often?
Q2) Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?
Q3) Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?
Q4) As Adam Smith indicated, the trouble with monopoly is that A)firms have no incentive to produce efficiently.
B)regardless of what is produced, the firm will use too many resources.
C)a producer has no incentive to keep his costs down.
D)the monopolist "understocks" the market and charges too high a price.
Q5) Since its beginning, the cable television industry has been viewed as a natural monopoly. Typically, cities would grant individual firms local monopolies and then regulate them. Is this a valid approach from an economic perspective? What do you expect the future of the television-viewing market to hold?
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Chapter 12: The Supply of and Demand for Productive Resources
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Q1) A new government study reveals that daily consumption of peanut butter increases life expectancy by 10 years. What will this do to the input markets for peanuts and peanut butter factory workers? Assuming bologna is a substitute for peanut butter, what will happen in the market for bologna factory workers?
Q2) The supply of a resource, such as oil, is likely to be
A)equally elastic in both the short and long run.
B)more elastic in the long run than in the short run.
C)more elastic in the short run than in the long run.
D)determined by the demand for the resource.
Q3) A decrease in resource prices will increase the incentive of
A)users to purchase the resource.
B)suppliers to provide more of the resource.
C)firms to find and develop substitutes for the resource.
D)consumers to look for alternatives that do not contain the resource.
Q4) Refer to Table 12-5. What is the marginal product of the fourth worker?
A)65
B)70
C)75
D)80
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Q5) There is an Italian soccer player who makes more than $10 million a year. Why?
Chapter 13: Earnings, Productivity, and the Job Market
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Q1) A compensation structure that generates much higher pay rates for the top performers, while those whose productivity is only a little lower receive substantially less compensation is called
A)tournament pay.
B)competing differentials.
C)dueling executives.
D)winner take all.
Q2) Other things constant, when the work opportunities in an occupation are unstable (that is, layoffs are common), the hourly wages of workers in the occupation will tend to be
A)higher than the wages of workers with otherwise similar jobs.
B)lower than the wages of workers with otherwise similar jobs.
C)below market equilibrium.
D)above market equilibrium.
Q3) Other things the same, the wages in an occupation are likely to be higher the more A)dangerous the job.
B)prestigious the work environment of the occupation.
C)desirable the location of the job.
D)pleasant the working conditions.
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Page 21
Chapter 14: Investment, the Capital Market, and the Wealth of Nations
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Q1) If the money rate of interest is 10 percent and the real rate of interest is 7 percent, the inflationary premium is
A)3 percent.
B)7 percent.
C)10 percent.
D)17 percent.
Q2) If a nation is going to benefit fully from technological advances and entrepreneurial ideas, it must
A)be relatively easy for persons from diverse backgrounds to try out their ideas at a relatively low cost.
B)have a mechanism that will bring unsound projects to a halt.
C)have a central investment authority that will review projects and decide which should be undertaken.
D)be both a and b.
Q3) The Jones family has always been in the business of manufacturing and selling automobile tires. Usually the profit they earn is reinvested in the business. This year Seth, the youngest son, wants to invest the profit into starting a candy company. If Seth is a shrewd businessman, what does his suggestion indicate?
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Chapter 15: Income Inequality and Poverty
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Q1) How do the high implicit marginal tax rates that often occur when transfer payments are inversely linked to earnings affect the incentive of poor people to work and earn?
A)A poor person's incentive to earn is increased.
B)A poor person's incentive to earn is reduced.
C)The incentive of the poor to earn is unaffected.
D)The incentive of the poor to earn reported income is increased, but the incentive to earn unreported income is reduced.
Q2) As shown in Figure 15-3, 20 percent of families earned a cumulative share of about ____ percent of income.
A)5
B)10
C)30
D)50
Q3) 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.
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Chapter 16: Appendix: Government Spending and Taxation
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Q1) What percentage of Americans age 18 and over paid personal income taxes in 2009?
A)92 percent
B)75 percent
C)51 percent
D)33 percent
Q2) In 2006, the income tax payments of the poorest 50 percent of Americans accounted for approximately what percent of all federal income tax revenue?
A)3 percent
B)25 percent
C)50 percent
D)76 percent
Q3) During the first 125 years of the United States,
A)there were no constitutional constraints on the spending of the federal government. B)real spending per person by the federal government rose by a factor of 60.
C)most of the government spending was undertaken at the state and local levels.
D)most of the government spending was undertaken at the federal level.
Q4) How has the structure of the personal income tax changed and the share of taxes paid by various income groups changed in recent decades?
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Chapter 17: Appendix: the Economics of Social Security
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Q1) Jane states that "Social Security is an unfair program. It discriminates against married women in the workforce and middle-income recipients." Evaluate this view.
Q2) Demographic conditions
A)were much less favorable for the Social Security system in 1950 than is currently the case.
B)are currently unfavorable because the number of retirees is growing rapidly as the result of the high birth rate in the United States during 1930-1945.
C)will be less favorable for the Social Security system once the baby boom generation begins to retire around 2011.
D)don't affect the financial status of the Social Security system because it is based on the same principles as private insurance programs.
Q3) The Social Security Trust Fund
A)will provide a stream of future revenue for the federal government.
B)is a "pot" of money set aside for the payment of future benefits.
C)is a net asset of the U.S. Treasury worth approximately $2 trillion.
D)is of zero asset value to the federal government.
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Q1) The current market value of a stock option contract to purchase 1,000 shares of IBM stock at a price of $100 that can be exercised five years from now would
A)increase if the expected future price of IBM stock rose.
B)increase if the expected future price of IBM stock fell.
C)decrease if the expected future price of IBM stock rose.
D)remain unchanged regardless of the expected future price of IBM stock.
Q2) If the interest rate were 10 percent, how much would people be willing to pay for a stock that was certain to yield a $2 per share stream of net earnings continuously in the future?
A)$2
B)$10
C)$20
D)$100
Q3) Investors can make their investments in corporate stocks less risky by
A)purchasing shares of a mutual fund, which holds the stocks of many diverse corporations.
B)buying stocks and holding them each for only for short periods of time.
C)investing in firms that are in the same, rather than different, industries.
D)none of the above.
Page 26
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Chapter 19: Appendix: Great Debates in Economics: Keynes Versus Hayek
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Q1) According to the Keynesian view, capitalism
A)is a highly productive form of economic organization that works best when government intervention is least.
B)experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism.
C)experiences booms and busts that are primarily the result of inappropriate monetary policy.
D)experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy.
Q2) According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of A)fluctuations in aggregate demand.
B)the "animal spirits" of private investors.
C)excessive credit expansion and artificially low interest rates that trigger malinvestment.
D)the unwillingness of political decision-makers to follow the advice of macroeconomists who know how to alter fiscal policy in a manner that would virtually eliminate the ups and downs of the business cycle.
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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 was a contributing factor to the housing boom and bust and the financial crisis of 2008?
A)An increase in the share of loans to sub-prime borrowers.
B)An increase in the share of loans extended to borrowers making only a small down payment.
C)An increase in adjustable-rate mortgages (ARMs) as a share of the total.
D)All of the above.
Q2) Between 2001-2005,
A)both sub-prime and adjustable rate mortgages decreased as a share of the total.
B)both sub-prime and adjustable rate mortgages increased as a share of the total.
C)sub-prime loans increased, but adjustable rate loans decreased as a share of the total.
D)sub-prime loans decreased, but adjustable rate loans increased as a share of the total.
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Chapter 21: Appendix: Lessons From the Great Depression
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Sample Questions
Q1) The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by
A)increasing the money supply from year to year at a constant rate.
B)decreasing the money supply through a policy of monetary contraction.
C)increasing demand through lower taxes and budget deficits.
D)reducing supply through the planned destruction of agricultural crops and livestock.
Q2) Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?
A)record-high unemployment rates for a period of many years
B)a sharp and prolonged contraction in the money supply
C)significant increases in taxes and trade restrictions in order to counter budget deficits
D)frequent policy changes that generated an unstable and unpredictable economic climate
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Chapter 22: Appendix: the Economics of Healthcare
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Q1) Which of the following would help control the future costs of healthcare?
A)a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers
B)an increase in the share of healthcare expenditures financed with low co-payment insurance
C)allowing consumers to purchase healthcare insurance from out-of-state providers
D)an increase in the tax benefits of purchasing healthcare through one's employer
Q2) Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?
A)the share of healthcare expenditures financed by third parties
B)the prices of healthcare relative to the prices of other goods and services
C)expenditures on healthcare as a share of the economy
D)all of the above
Q3) How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?
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Chapter 23: Appendix:education: Problems and Performance
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Q1) Public elementary and secondary school administrators have a strong incentive to
A)attempt to increase their funding levels.
B)be efficient since their budgets are determined by politicians.
C)cater to the preferences of students and parents.
D)do all of the above.
Q2) Competition between public and private schools is ____ at the college level than at the elementary and secondary level.
A)weaker
B)of similar intensity
C)stronger
D)less important
Q3) Voucher programs appear to ____ the achievement scores of African-American students after one to two years in the program and they tend to ____ racial integration in highly segregated communities.
A)decrease; decrease
B)decrease; increase
C)increase; decrease
D)increase; increase
Q4) What does the evidence suggest regarding the effects of school choice programs?
Q5) What are charter schools? How do they differ from voucher programs?
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Chapter 24: Appendix: Earnings Differences Between Men and Women
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Q1) If an employer could really hire women who were willing and able to do the same work as men for 20 percent less, profit-seeking employers would have
A)a strong incentive to hire more women, which would shrink this differential.
B)little incentive to hire women, since hiring men would still be more profitable.
C)a strong incentive to hire fewer women, and this would reduce the wage gap between men and women.
D)a strong incentive to hire fewer women, which would expand the wage gap between men and women to an even higher level.
Q2) Since the 1970s, the percentage of women preparing for careers in professions has been ____, while the female/male earnings ratio has been ____ during this same period.
A)rising; declining
B)rising; increasing
C)falling; increasing
D)falling; declining
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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Page 32
Chapter 26: Appendix: the Question of Resource Exhaustion
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Q1) An example of a renewable resource is
A)coal.
B)oil.
C)timber.
D)diamonds.
Q2) Water supply problems are generally the result of
A)missing or incomplete markets for water.
B)too much trading of water.
C)too few government subsidies to desalination.
D)all of the above.
Q3) Supply and demand analysis suggests that a sharp increase in the price of gasoline will cause the
A)price of fuel-efficient compact cars to decrease.
B)supply of gasoline to decrease.
C)demand for large luxury cars to increase.
D)demand for fuel-efficient cars to increase.
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Chapter 25: Appendix: Do Labor Unions Increase the Wages of Workers
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Q1) Which of the following would be an expected result of substantially higher wages in the U.S. automobile industry?
A)an increase in the real wages of workers outside the industry
B)an increase in the price of automobiles produced in the United States
C)a reduction in the demand for foreign-produced automobiles
D)an increase in the profit rate of U.S. automobile producers
Q2) The share of the labor force that was unionized increased from 7.4 percent in 1930 to more than 30 percent in 1955. During these 25 years, the share of national income allocated to labor (in contrast to capital)
A)increased approximately 10 percent.
B)increased 17.6 percent.
C)fell 20 percent.
D)was virtually unchanged.
Q3) The percent of workers belonging to a union in the United States
A)has been continuously declining since the 1950s.
B)has been continuously increasing since the 1950s.
C)has remained fairly constant since the 1950s.
D)rose sharply from 1950 to 1970 but has declined since.
Q4) In a strike, what does the union have to lose? What does management lose?
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Chapter 27: Appendix: Difficult Environmental Cases and the
Role of Government
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Q1) When a park is funded by visitors, but not by taxpayers in general,
A)there will be too few parks, because most people will not pay to use a park.
B)visitors will be better served, because poor service would lead to reductions in revenues.
C)park budgets will decline.
D)park quality will decline.
Q2) Which of the following is an effort to establish property rights and promote more efficient allocation of ocean fisheries?
A)Regulations limiting the length of the fishing season.
B)Regulations reducing the size of fishing boats and other equipment used in the industry.
C)Establishment of transferable individual fishing quotas.
D)Complete open access of ocean fishing to anyone who would like to enter the business.
Q3) Pollution charges will be efficient if
A)the charge is just equal to the cost borne by others from the pollution.
B)the charge is greater than the cost borne by others from the pollution.
C)the charge is less than the cost borne by others from the pollution.
D)none of the above.
Page 35
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