Economic Theory
Pre-Test Questions
Course Introduction
Economic Theory explores the foundational principles that govern how individuals, firms, and societies allocate scarce resources to satisfy unlimited wants. The course examines both microeconomic and macroeconomic perspectives, delving into topics such as consumer behavior, production and cost theory, market structures, and the determination of prices. It also investigates the functioning of markets, the role of government intervention, and the impact of policy decisions on economic outcomes. Emphasis is placed on developing analytical tools and models to understand and explain real-world economic phenomena, enabling students to critically assess and apply economic reasoning in various contexts.
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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Q1) Which of the following is true of resources?
A)Resources are inputs used to produce goods and services.
B)Human resources reflect the skills and productive knowledge of human beings.
C)With the passage of time, investment activities can increase the availability of resources.
D)All of the above are true.
Answer: D
Q2) Because information is costly to acquire,
A)people will rationally choose not to become fully informed when making decisions.
B)people will generally choose to become as fully informed as possible when making decisions.
C)people will generally choose to acquire no information that would be relevant to their decisions.
D)none of the above are true.
Answer: A
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Chapter 2: A: Some Tools of the Economist
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Q1) A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called A)socialism.
B)a market economy.
C)a corporate economy.
D)capitalism.
Answer: A
Q2) The opportunity cost of an action is
A)objective and will be the same for all individuals.
B)a measure of the undesirable aspects involved in the action.
C)applicable only to choices involving material goods like commodities.
D)the highest valued alternative forgone as the result of choosing an option.
Answer: D
Q3) With voluntary exchange,
A)both the buyer and seller will be made better off.
B)the buyer will be made better off, while the seller will be made worse off.
C)the seller will be made better off, while the buyer will be made worse off.
D)both the buyer and the seller will be made worse off.
Answer: A
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Chapter 2: B: Some Tools of the Economist
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Sample Questions
Q1) Dr. Jones, a dentist, is choosing between driving and flying from Pittsburgh to New York City. If Jones drove, she would have to close her office four hours earlier than if she flew by airplane. Her expected income (after taxes) from her practice is $50 per hour.
Assuming all other factors are equal, if Jones was a rational decision maker, she would drive if the price differential (air cost minus driving) was greater than A)$50.
B)$100.
C)$150.
D)$200.
Answer: D
Q2) After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.
Answer: Increased resources devoted toward these efforts must come away from the production of other goods, reducing the production of these other goods.
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Chapter 3: A: Supply, Demand, and the Market Process
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Q1) A technological breakthrough lowers the cost of manufacturing VCRs. As a result, the market changes to a new equilibrium because of
A)an upward movement along the demand curve for VCRs.
B)a rightward shift in the demand curve for VCRs.
C)a rightward shift in the supply curve for VCRs.
D)a shortage of VCRs.
Q2) If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm), it will generally
A)go out of business in the long run.
B)remain in business as long as the current conditions are unchanged.
C)experience an increase in its stock price because investors will be attracted to it.
D)attempt to expand the size of its operation.
Q3) If consumer purchases of a good are not very sensitive to the price of the good, this is illustrated by a
A)demand curve that is relatively flat (more horizontal).
B)demand curve that is relatively steep (more vertical).
C)supply curve that is relatively flat (more horizontal).
D)supply curve that is relatively steep (more vertical).
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Chapter 3: B: Supply, Demand, and the Market Process
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Q1) Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to fall.
Q2) Which of the following would be most likely to cause the demand for Miller beer to increase?
A)an increase in the price of Budweiser beer
B)a decrease in consumer income
C)a decrease in the price of barley used to make Miller beer
D)a decrease in the price of Miller beer
Q3) Economists maintain that the price of a product has no effect on demand. How can this be true?
Q4) According to Adam Smith, what is the primary source of a nation's wealth?
A)The amount of gold and silver in the government's possession.
B)A spirit of cooperation in which people share according to their means.
C)Strong central planning authorities.
D)The people's ability to produce products and trade in free markets.
Page 7
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Chapter 4: A: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. How much revenue would the $.40 gasoline tax raise?
A)$18 million
B)$36 million
C)$72 million
D)$100 million
Q2) An excise tax levied on a product will impose a smaller relative burden on consumers (and a larger relative burden on sellers) when
A)the supply of the product is relatively inelastic.
B)the supply of the product is relatively elastic.
C)the demand for the product is relatively elastic.
D)either a or c is true.
Q3) A $10 per unit government subsidy paid directly to sellers of heaters will result in
A)a downward shift in the demand curve for heaters by $10.
B)an upward shift in the demand curve for heaters by $10.
C)a downward shift in the supply curve for heaters by $10.
D)an upward shift in the supply curve for heaters by $10.
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Chapter 4: B: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Refer to Figure 4-18. In this market, which of the following price controls would be binding?
A)a price ceiling of $2.00, and it would cause a shortage
B)a price ceiling of $5.00, and it would cause a surplus
C)a price floor of $2.00, and it would cause a shortage
D)All of the above are correct.
Q2) Refer to Figure 4-24. The amount of the tax on each unit of the good is
A)P - P .
B)P - P .
C)P - P .
D)Q - Q .
Q3) Refer to Figure 4-21. The per-unit burden of the tax is
A)$4 on buyers and $4 on sellers.
B)$5 on buyers and $5 on sellers.
C)$4 on buyers and $6 on sellers.
D)$6 on buyers and $4 on sellers.
Q4) Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will this affect the market for automobiles?
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) Which of the following best explains why making automobiles completely safe is not efficient?
A)After some level of safety is reached, making cars even safer will not be worth the additional cost.
B)Because human life is priceless, automobile safety generally doesn't matter.
C)The benefit from additional automobile safety will generally rise as automobiles are made safer, more than offsetting the opportunity cost involved.
D)Economic efficiency suggests that automobiles should be made as safe as humanly possible.
Q2) When a good is nonexcludable,
A)it is impossible or very costly to exclude nonpaying customers from receiving the good.
B)individuals will have an incentive to become free riders.
C)it will be difficult for a private firm producing the good to generate revenue sufficient to cover the cost of production.
D)all of the above are true.
Q3) Is your economics textbook a public or private good? If you conclude that it is a private good, why do we have copyright laws?
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Chapter 6: The Economics of Collective Decision-Making
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Q1) Despite being a college graduate, Jack Adams cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Jack is A)irrational.
B)considering only the welfare of society and not his own personal interests.
C)not intelligent enough to understand the issues.
D)making a rational personal choice because knowing these things gives him little personal benefit.
Q2) When voters pay in proportion to the benefits received from an economic action of the government, if the government activity is productive,
A)all voters will gain.
B)only a smaller proportion of voters will gain.
C)less than a simple majority of voters will gain.
D)approximately 50 percent of the voters will gain.
Q3) Which of the following refers to when legislators trade votes on legislation?
A)logrolling
B)the special interest effect
C)rational ignorance
D)the shortsightedness effect
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Chapter 7: Consumer Choice and Elasticity
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Sample Questions
Q1) Bob goes out to dinner three times per week, usually either to the local steak house or a Chinese restaurant in town. If the steak house were to raise its prices, Bob would probably (1) be less inclined to eat at the steak house and more inclined to eat at the Chinese restaurant when he did go out and (2) eat out fewer times per week because at the higher prices he cannot afford to eat out as much.
A)Part 1 is an example of the substitution effect, part 2 of the income effect.
B)Part 1 is an example of the income effect, part 2 of the substitution effect.
C)Part 1 is an example of the law of diminishing marginal utility, part 2 of the substitution effect.
D)Part 1 is an example of the proportions hypothesis, part 2 of the income effect.
Q2) If the price of steak rises from $6 to $10 per pound, and the quantity purchased falls from 90 to 70 pounds, the price elasticity of demand (in absolute value) is
A)0.2.
B)0.5.
C)1.0.
D)2.0.
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Chapter 8: A: Costs and the Supply of Goods
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Sample Questions
Q1) The three basic legal forms of business enterprise are
A)monopolists, competitors, and enterprises.
B)vertical, horizontal, and conglomerate corporations.
C)conglomerates, multinationals, and partnerships.
D)proprietorships, partnerships, and corporations.
Q2) What amount must be earned to induce investors to continue to supply the funds necessary to maintain a firm's capital assets?
A)stockholder equity
B)the opportunity cost of capital
C)economic profit
D)accounting profit
Q3) During the short-run period of the production process, a firm will be
A)unable to vary any of its factors of production.
B)able to vary only some of its factors of production.
C)able to vary all of its factors of production.
D)able to vary the size of its plant.
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Chapter 8: B: Costs and the Supply of Goods
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Q1) Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.
Q2) 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?
Q3) 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?
Q4) 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?
Q5) 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?
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Page 14
Chapter 9: A: Price Takers and the Competitive Process
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Q1) If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will
A)be perfectly elastic (a horizontal line).
B)be perfectly inelastic (a vertical line).
C)slope upward to the right.
D)be more inelastic than the short-run supply curve for the product.
Q2) Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should
A)increase output
B)reduce output but not to zero
C)maintain the present rate of output
D)shut down
E)raise the price
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Chapter 9: B: Price Takers and the Competitive Process
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Q1) If the model of price-taking firms is so unrealistic and restrictive, why study it?
Q2) In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries
A)is "U" shaped.
B)is downward sloping over all levels of output.
C)exhibits constant returns to scale over a wide range of output.
D)exhibits diseconomies of scale beginning at a low rate of output.
Q3) 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?
Q4) 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?
Q5) In a competitive price taker market, a firm's short-run supply curve is its
A)average total cost curve above its average variable cost curve.
B)marginal cost curve above its average variable cost curve.
C)marginal cost curve above its average fixed cost curve.
D)entire marginal cost curve.
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Chapter 10: Price-Searcher Markets With Low Entry Barriers
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Q1) What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn?
A)zero
B)$20
C)$30
D)$100
Q2) Which of the following is a term that is sometimes used to describe markets with low entry barriers and firms that are price searchers?
A)pure competition
B)monopoly
C)monopolistic competition
D)oligopoly
Q3) Sellers in competitive price-searcher markets
A)face competition both from existing firms and potential new entrants.
B)face competition from existing firms but not from potential new entrants.
C)face competition only from potential new entrants and only in the long run.
D)can compete only by product quality since product prices are set by market forces.
Q4) What type of industry is the market for grocery products? Is over-capacity present?
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Chapter 11: A: Price-Searcher Markets With High Entry
Barriers
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Q1) A major problem with regulatory agencies is that they
A)have no real legal power over the industries they are supposed to regulate.
B)tend to be too tough on the firms they are regulating, forcing them into a loss position.
C)often underestimate the firm's cost of production and consequently force regulated firms into a loss position.
D)often come to represent the interests of established firms in the industry and use their power to limit competition.
Q2) When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called
A)rent-seeking.
B)collusion.
C)franchising.
D)resource investment.
Q3) "Market power" is an expression used to indicate that a firm has
A)no rivals.
B)the power to sell a given output at whatever price it chooses.
C)some freedom from the rigors of intense competition.
D)a monopoly over the product it produces.
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Chapter 11: B: Price-Searcher Markets With High Entry
Barriers
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Q1) Patent laws that allow the inventor to maintain monopoly rights to an invention increase the price of the product and A)increase the profitability of inventive activities, thereby speeding up technological developments.
B)increase the profitability of inventive activities, thereby slowing down technological developments.
C)decrease the profitability of inventive activities, thereby speeding up technological developments.
D)decrease the profitability of inventive activities, thereby slowing down technological developments.
Q2) Why does the U.S. government maintain a monopoly in the delivery of first-class mail? Does the Postal Service nevertheless face other forms of competition?
Q3) The Big River Power Company is a regulated monopolist with pricing structured such that the stockholders receive a "fair" rate of return based on the firm's unit costs. Can economic thinking predict how the company executive offices are likely to be furnished? Given a choice between Hawaii and downtown Cleveland (20 miles away), where would we expect the Board of Directors to meet?
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Page 19
Chapter 12: The Supply of and Demand for Productive Resources
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Q1) An increase in the price of a resource would cause
A)producers to substitute other inputs for the resource.
B)consumers to increase consumption of the goods that increase in price as the result of the higher resource price.
C)an increase in the demand for products that use the resource intensely.
D)a reduction in the price of goods produced with the resource.
Q2) Refer to Figure 12-4. As the number of workers increases,
A)total output increases, but at a decreasing rate.
B)marginal product increases, but at a decreasing rate.
C)marginal product increases at an increasing rate.
D)total output decreases.
Q3) Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?
A)1 worker
B)2 workers
C)3 workers
D)4 workers
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Q4) 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) Which of the following is true?
A)When workers are more productive, the demand for their services will be higher.
B)In order to earn a large income, one must provide large benefits to others.
C)High productivity (a large output per hour worked) is the key to high earnings for both individuals and countries.
D)All of the above are true.
Q2) As far as contributions to a professional sports team's bottom line are concerned, players generally receive
A)about what they are worth.
B)about half of what they are worth.
C)about twice what they are worth.
D)about ten times more than what they are worth.
Q3) The major determinant of an individual's income is
A)whether or not his family is wealthy.
B)his personality-if the coworkers and the boss like him.
C)how productive he is combined with demand for what he produces.
D)if he earns a salary or if he is paid by the hour.
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Chapter
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Q1) A student entering college wants to assess the value of investing in human capital.
To determine whether the investment will be profitable, she should compare the A)value of her total expected future earnings with the total of her direct and indirect costs of college.
B)present discounted value of future earnings with the total of her direct and indirect costs of her education.
C)present discounted value of her additional future earnings as the result of the college education with the present discounted value of only her direct costs of college.
D)present discounted value of her additional future earnings as the result of the college education with the present discounted value of her direct and indirect costs of college.
Q2) If the interest rate is 7 percent, what is the present value of $100 received two years from now.
A)$107
B)$114.49
C)$87.34
D)$93.45
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Chapter 15: Income Inequality and Poverty
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Q1) In 2007, the poorest 20 percent of families in the United States population earned approximately ____ percent of the before-tax total income. (Fill in the blank.)
A)1
B)4
C)9
D)12
Q2) Welfare data show that in the United States
A)most welfare recipients receive benefits only for a short time.
B)welfare encourages young women to have children.
C)children brought up on welfare tend to remain on welfare as adults.
D)having poor parents does not increase the chances of a child's being on welfare as an adult.
E)children of poor parents have a 50 percent chance of being middle-income adults.
Q3) Why not designate the poorest 10 percent of the population as the official measure of poverty?
Q4) Why don't we divide the economic pie evenly so that each person receives the same income?
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Chapter 16: Appendix: Government Spending and Taxation
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Q1) When the tax structure of a nation is progressive, as real incomes increase, the tax revenues of the government will A)decline.
B)increase by the same proportion as the increase in real income.
C)increase by a larger proportion than the increase in real income.
D)remain unchanged unless legislative action is undertaken.
Q2) The Earned Income Tax Credit provides a tax credit or rebate to A)businesses that undertake investment expenditures.
B)taxpayers with incomes greater than $100,000.
C)persons with low incomes who are working.
D)single parent families when the parent stays home to take care of the children.
Q3) Estimates from the U.S. Treasury Department suggest that the typical family in the lowest income quintile pays approximately what percent of their total income in federal taxes?
A)5 percent
B)25 percent
C)50 percent
D)76 percent
Q4) Discuss how size of government can negatively affect economic growth.
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Chapter 17: Appendix: the Economics of Social Security
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Q1) In 2009, the Social Security payroll tax did not apply to annual income above
A)$15,000.
B)$32,000.
C)$106,800.
D)$200,000.
Q2) On average, persons with more education tend to draw Social Security benefits for a A)longer period of time than average B)shorter period of time than average C)period of time that is comparable to the U.S. average D)longer period of time if they have a master's degree but a shorter period of time if they have a Ph.D.
Q3) The structure of the Social Security system is particularly advantageous to A)blacks.
B)those with life shortening diseases such as diabetes.
C)groups with below average earnings and above average life expectancy.
D)groups with above average earnings and below average life expectancy.
Q4) Briefly explain why the Social Security system will face a "crisis" in the coming years.
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Q1) A lower interest rate will increase the present value of future income and thereby
A)decrease the market value of stocks.
B)increase the market value of stocks.
C)have no effect on the market value of stocks.
D)decrease the discounted market value of stocks.
Q2) Which of the following is true?
A)Managed equity funds generally outperform indexed equity mutual funds.
B)Managed equity funds merely hold stocks in the same proportion they are represented in a broad stock market index such as the Standard & Poor's 500.
C)Indexed equity funds generally have lower management and operating costs than managed funds.
D)Indexed equity funds generally engage in more stock trading than managed funds.
Q3) The present value of $1 million to be received in the future will
A)increase if the interest rate rises.
B)increase if the payment is received at a more distant time in the future.
C)be greater than $1 million.
D)increase if the interest rate were to fall from 8 percent to 4 percent.
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Page 26
Chapter 19: Appendix: Great Debates in Economics: Keynes Versus Hayek
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Q1) What did Keynes and Hayek believe about government central planning?
A)Both believed that central planning could be used to allocate resources efficiently.
B)Both believed that perverse political incentives would undermine the ability of central planners to allocate resources efficiently.
C)Keynes believed that government central planning could improve on market outcomes; Hayek disagreed, arguing that both political incentives and insufficient information would undermine their ability to do so.
D)Keynes believe that central planning would fail because the policy-makers did not have sufficient information to plan efficiently; Hayek believed that efficient central planning was possible if political decisions were made democratically.
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Chapter 20: Appendix: the Crisis of 2008: Causes and Lessons for the Future
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Q1) An SEC rule change allowing investment banks to increase the leverage of their investment capital prompted many investment banks to A)increase the amount of assets held in relation to mortgage-backed securities being issued.
B)decrease the amount of assets held in relation to mortgage-backed securities being issued.
C)decrease the amount of mortgage-backed securities being offered.
D)reduce the ratio of mortgage loans to equity capital of the investment bank.
Q2) The increase of sub-prime (including Alt-A) loans as a share of the total from 2001-2005 was an important contributing factor to the economic crisis of 2008 because A)these loans initially reduced the demand for housing.
B)these loans initially reduced housing prices.
C)the default and foreclosure rates on these loans are several times higher than conventional loans to prime borrowers.
D)the default and foreclosure rates on these loans are considerably lower than conventional loans to prime borrowers.
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Chapter 21: Appendix: Lessons From the Great Depression
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Sample Questions
Q1) If fiscal policy were able to exert a significant impact on the economy during the Great Depression, we would expect
A)an increase in government expenditures and a reduction in budget deficits.
B)an increase in government expenditures and an increase in budget deficits.
C)a decrease in government expenditures and a reduction in budget deficits.
D)a decrease in government expenditures and an increase in budget deficits.
Q2) What prompted the large increase in tax rates in 1932 in the midst of an economic recession?
A)concern that inflation would rise due to increases in real output and aggregate demand
B)expansionary fiscal policy designed to stimulate aggregate demand
C)the Keynesian view that taxes should be increased during a recession
D)the view that the federal government should maintain a balanced budget
Q3) The Great Depression demonstrates that the appropriate fiscal and monetary policy to combat a recession would be
A)an increase in taxes and a contraction in the money supply.
B)a decrease in taxes and a contraction in the money supply.
C)a decrease in taxes and an expansion in the money supply.
D)an increase in taxes and an expansion in the money supply.
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Page 29
Chapter 22: Appendix: the Economics of Healthcare
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Sample Questions
Q1) When health insurance is purchased primarily through one's employer,
A)direct purchase of health insurance becomes cheaper.
B)the benefits of the healthcare insurance are fully taxable.
C)it is more costly for employees to switch jobs and move to areas where jobs are available.
D)the overall number of people without health insurance decreases.
Q2) Which of the following is true?
A)More than half of medical bills are paid for directly by consumers.
B)Healthcare insurance provided by one's employer is counted as personal income.
C)State mandated coverage of medical procedures like in-vitro fertilization, drug rehabilitation, and acupuncture, make health insurance more affordable.
D)Regulations prevent consumers from purchasing a health insurance plan offered in another state.
Q3) A 2.9 percent payroll tax (1.45 percent levied on both the employee and the employer) imposed on current workers is used to finance the
A)Medicaid program that provides healthcare for the poor.
B)hospitalization costs of Medicare beneficiaries.
C)cost of physician services supplied to the elderly.
D)healthcare costs of both the elderly and the poor.
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Page 30
Chapter 23: Appendix:education: Problems and Performance
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Q1) Which of the following is true of charter schools and voucher programs?
A)The students in these programs have clearly registered larger improvements in achievement scores than similar students in regular public schools.
B)As these programs have expanded, there has been a decline in the real expenditures per student in regular public schools.
C)As these programs have expanded, the unionization of teachers has increased because of the more intense competition in the education industry.
D)Parents with children in these programs report a higher degree of satisfaction with their schools than parents in regular public schools.
Q2) A school voucher program targeted towards low- and middle-income families would cause
A)racial and economic segregation among schools to fall.
B)per-pupil funding in the public schools to fall.
C)salaries for outstanding teachers to fall.
D)competition among schools to fall.
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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Page 31
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) Which of the following is true?
A)Due to anti-employment discrimination legislation that was passed in the early 1960s, there was a large increase in the earnings of women relative to men in the 1960s and 1970s.
B)The female/male earnings ratio for full-time workers rose substantially between 1980 and 2010.
C)The number of women preparing for careers as professionals has declined during the last two decades.
D)In 2010, only about 42 percent of those completing college degrees were women.
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Page 32
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) Resource markets are like any other market in that
A)the increase in quantity supplied in response to a higher price will generally be greater in the long run than in the short run.
B)the amount demanded of a resource is inversely related to its price.
C)higher prices encourage people to search for substitutes.
D)all of the above are correct.
Q3) Empirical evidence suggests that the relative scarcity of most resources is A)declining.
B)increasing slowly.
C)increasing rapidly.
D)largely unchanged.
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33
Chapter 25: Appendix: Do Labor Unions Increase the Wages of Workers
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Sample Questions
Q1) As the percentage of the labor force belonging to a union fell in the United States during the 1955 through early 2000 period, the share of national income going to labor
A)increased 10 percent.
B)remained approximately the same.
C)decreased 10 percent.
D)decreased 20 percent.
Q2) An increase in the percentage of the labor force that is unionized will cause average wages for all workers to rise because
A)union labor is more productive.
B)profit levels are lowered to increase wages.
C)strike threats promote wage increases.
D)This is a trick question because greater unionization does not imply higher average wages.
Q3) When a union successfully raises the wages of its members, it will also
A)increase total productivity, which will generally increase in proportion to the wage rate.
B)encourage employers to purchase more of the union labor.
C)increase the share of income allocated to labor as opposed to capital.
D)increase the employer's incentive to find substitutes for union labor.
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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) 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.
Q3) Which of the following is, so far, the most utilized method to reduce emissions of industrial pollution to politically chosen levels, while encouraging efficient choices by polluters?
A)government pollution charges or taxes
B)non-tradable emission standards that cap allowable pollution for each emitter
C)cap and trade emission permits
D)regulations that would effectively prohibit all emissions
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