Microeconomic Issues
Exam Materials
Course Introduction
This course explores key microeconomic concepts and their application to real-world issues, focusing on how individuals, households, and firms make decisions regarding the allocation of limited resources. Topics include consumer choice, production and cost analysis, market structures, market failures, the role of government intervention, and the impact of public policies on efficiency and equity. Through theoretical models and empirical examples, students will develop analytical tools to critically assess microeconomic problems and evaluate current economic events and policies affecting markets and society.
Recommended Textbook
Issues in Economics Today 8th Edition by Robert Guell
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48 Chapters
3693 Verified Questions
3693 Flashcards
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Page 2
Chapter 1: Economics: the Study of Opportunity Cost
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Using Figure 1.4 you can tell that
A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 9 units of soda and 1 unit of pizza.
Answer: A
Q2) The optimization assumption suggests that people make
A)irrational decisions.
B)unpredictable decisions.
C)decisions to make themselves as well off as possible.
D)decisions without thinking very hard.
Answer: C
Q3) In Figure 1.1, which labeled point indicates that there are sufficient resources and technology to produce the combination of goods represented by that point?
A)only A
B)only B and C
C)only D
D)A, B and C
Answer: D
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Page 3
Chapter 2: Supply and Demand
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204 Verified Questions
204 Flashcards
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Sample Questions
Q1) The increase in the number of sellers of a good would
A)move its supply curve to the right.
B)move its supply curve to the left.
C)cause a movement along the supply curve to a (higher price, higher quantity)point.
D)cause a movement along the supply curve to a (lower price, lower quantity)point.
Answer: A
Q2) In Figure 2.1, a "q/t" for quantity per unit time price would go in
A)Box 1.
B)Box 2.
C)Box 4.
D)Box 6.
Answer: D
Q3) If a good is normal and income decreases then
A)the demand curve will shift to the right.
B)the demand curve will shift to the left.
C)the supply curve will shift to the right.
D)the supply curve will shift to the left.
Answer: B
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4
Chapter 3: The Concept of Elasticity and Consumer and Producer Surplus
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Sample Questions
Q1) If the percentage change in quantity supplied is 0% and the percentage change in price is 10% then the supply for the good is
A)Elastic
B)Inelastic
C)Unit elastic
D)Perfectly inelastic
Answer: D
Q2) If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 15% then the good is A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.
Answer: B
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5
Chapter 4: Firm Production, Cost, and Revenue
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Sample Questions
Q1) Suppose a lawn-mowing business has a mower for which it paid $1000 and workers for which they pay $10 per hour. Suppose each mower can mow a lawn per hour.
A)Their average fixed cost is $1000.
B)Their variable cost per lawn is $10 + $1000/lawns mowed.
C)Their total fixed cost is $1000/lawns mowed.
D)Their average variable cost is $10 per lawn mowed.
Q2) In Figure 4.2 , the reason that point D is higher than point C and C is higher than B is that
A)it always costs more money to increase output.
B)small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost.
C)it is very difficult and very expensive to increase output once the capacity of the machinery has been reached.
D)there is waste.
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Chapter 5: Perfect Competition, Monopoly, and Economic
Versus Normal Profit
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Sample Questions
Q1) For a market to be characterized by monopoly, there must be
A)a large number of firms with no one able to influence price.
B)freedom of entry and exit.
C)indistinguishable products being sold.
D)a single seller
Q2) Suppose ten companies begin introducing new genetically engineered apples. Each has their own distinctive taste and brand name. This market would be described by A)perfect competition.
B)monopolistic competition.
C)oligopoly.
D)monopoly.
Q3) Economic theory would suggest that the profitability of an industry would be
A)directly related to the number of firms competing in the industry.
B)inversely related to the number of firms competing in the industry.
C)unrelated to the number of firms competing in the industry.
D)zero in the long run, regardless of market structure.
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Sample Questions
Q1) One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is
A)people substitute between goods.
B)things produced by people under 18 are not counted.
C)environmental quality is ignored.
D)quality has remained steady.
Q2) If a worker produces more because they have more (but not necessarily better)capital with which to work that will
A)Increase labor force productivity but not necessarily total factor productivity
B)Increase labor force productivity and total factor productivity
C)Increase neither labor force productivity nor total factor productivity
D)Increase labor force productivity but decrease total factor productivity
Q3) If the CPI were fixed then the fact that it is wrong by 0.8 percentage points means that over a ten year period it is wrong by
A)1.1 percentage points.
B)between 1.1 and 11 percentage points.
C)11 percentage points.
D)more than 11 percentage points.
Page 8
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Chapter 7: Interest Rates and Present Value
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Sample Questions
Q1) To determine whether an investment makes sense a business will compute the net present value and if the result is
A)negative they will make the investment.
B)positive they will make the investment.
C)positive they will not make the investment unless the interest rate rises.
D)positive they will not make the investment regardless of the change in interest rates.
Q2) If people (who used to neither borrow nor save)are now borrowing to put their kids through college then this will cause the equilibrium interest rate
A)to rise.
B)to fall.
C)to fluctuate wildly.
D)to remain constant.
Q3) The relationship between the rate of return earned on a bond and the length of time until the bond matures is called the
A)interest rate.
B)real interest rate.
C)calendar.
D)yield curve.
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9
Chapter 8: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label PI for "price index?"
A)Box 1
B)Box 4
C)Box 5
D)Box 6
Q2) An increase in taxes will cause
A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).
Q3) If Iraq were to become a stable oil producing friend of the U.S., this would likely
A)increase aggregate demand.
B)increase aggregate supply.
C)decrease aggregate demand.
D)decrease aggregate supply.
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Chapter 9: Fiscal Policy
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Sample Questions
Q1) Real economic growth during the first two years of President George W. Bush's second term was
A)approximately 8.7% per year.
B)higher than real economic growth during the first two years of President Bill Clinton's second term.
C)approximately 3.2% per year.
D)negative because of the 2001 recession.
Q2) The portion of the Obama stimulus package that increased spending is best thought of as
A)nondiscretionary fiscal policy.
B)discretionary (and expansionary)fiscal policy.
C)discretionary (and contractionary)fiscal policy.
D)monetary policy.
Q3) Fiscal Policy is controlled by
A)the Federal Reserve Board.
B)Congress and the President.
C)the Supreme Court.
D)private banks.
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11
Chapter 10: Monetary Policy
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104 Flashcards
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Sample Questions
Q1) If the reserve ratio is .05, the money multiplier can be as high
A)as 50.
B)as 20.
C)as 10.
D)as 5.
Q2) Banks
A)create money because they are the ones that print it.
B)create money because they take deposits and make loans.
C)have no role in the money creation process and never have.
D)have no role in the money creation process, though they once did.
Q3) The Federal Reserve governs U.S.
A)monetary policy.
B)discretionary fiscal policy.
C)nondiscretionary fiscal policy.
D)Supreme Court nominations.
Q4) The Federal Reserve's long standing tools includes
A)tax rate changes.
B)government spending policies.
C)changing the level of the targeted interest rate.
D)labor regulations.
Page 12
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Chapter 11: Federal Spending
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Sample Questions
Q1) Federal Spending in 2016 was
A)$4 trillion.
B)$4 billion.
C)$40 trillion.
D)$400 trillion.
Q2) The percentage of the federal budget devoted to Social Security has
A)increased dramatically over the last decade.
B)decreased dramatically over the last decade.
C)remained steady over the last decade.
D)has always been negligibly small.
Q3) Suppose Congress and the President are negotiating over whether to increase spending on defense or higher education, economists would suggest that they set the amount of spending
A)must be held constant.
B)where the total benefit to each is equal.
C)where the average amount spent per student equals the average amount spent per soldier.
D)on each program so that the marginal benefit of the last dollar spent on each area is equal.
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Page 13
Chapter 12: Federal Deficits, Surpluses, and the National Debt
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Sample Questions
Q1) The budget deficit/surplus projections for 2005 that were made in 2001 were wrong by
A)less than a billion.
B)several trillion.
C)several hundred billion.
D)several hundred trillion.
Q2) Many economists look at the Federal Budget and see that it should be broken into
A)an operating budget and a defense budget.
B)a capital budget and an everyday budget.
C)an operating budget and a capital budget.
D)a defense budget and a non-defense budget.
Q3) Following the financial collapse in late 2008, the deficit increased in part because of the
A)weakened state of the economy caused increased spending on unemployment compensation.
B)high short-term interest rates and restrictive monetary policy.
C)U)S. return to the gold standard.
D)massive expansion of foreign aid to Central American democracies.
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Chapter 13: The Housing Bubble
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Sample Questions
Q1) Location is a "fundamental" determinant of the price of any house.
A)True
B)False
Q2) Homeowner with good credit history usually will be
A)wise enough never to borrow any of their home equity for any purpose.
B)wise enough to borrow part of their home equity only for sensible goals, like a big new SUV.
C)able to borrow part of the equity in their home to achieve reasonable financial goals.
D)unaware that borrowing part of the equity in their home will increase their monthly payments.
Q3) A "bubble" in the housing market can be more easily fueled by
A)traditional mortgage loans.
B)cash-only financing requirements.
C)exclusive reliance upon banks as a source of credit.
D)"exotic" mortgages.
Q4) Monthly payments on "negative-amortization" mortgages typically increase over the life of mortgage.
A)True
B)False
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Chapter 14: The Recession of 2007-2009: Causes and Policy
Responses
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Sample Questions
Q1) The stimulus plan adopted in 2009 by newly-elected President Obama consisted of A)only tax cuts.
B)only spending increases on newly-created federal programs.
C)only attempts to shore up Medicaid, welfare and unemployment programs.
D)roughly equal tax cuts and spending increases, with additional spending to shore up existing federal programs.
Q2) In the recession of 2007-2009, the unemployment rate first began to increase sharply
A)in the first quarter of 2007.
B)in the third and fourth quarters of 2008.
C)in the first quarter of 2008.
D)in the fourth quarter of 2007.
Q3) A factor that might have contributed to the weakening of the U.S. economy in 2007-2009 was
A)historically low interest rates.
B)rapid growth of the money stock.
C)the impending expiration of the Bush Tax Cuts of 2003.
D)rising levels of federal government spending.
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Chapter 15: Is Economic Stagnation the New Normal
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Sample Questions
Q1) The sources of economic growth, as measured by increases in real per-capita GDP, include
A)An increase in the number of workers
B)An increase in the productivity of workers
C)An increase in economic freedom
D)All of these are sources of growth
Q2) Economic growth, as measured by increases in real per-capita GDP, was at its weakest during
A)1970s
B)1980s
C)1990s
D)2000s and 2010s
Q3) The percentage of the population in the middle-class (defined by Pew as having income between 67% and 200% of median family income)
A)declined from more than 60% in the 1970s to 50% in 2015
B)declined from more than 60% in the 1970s to 20% in 2015
C)remained constant at 60% from the 1970s to 2015
D)increased from the 1970s to 2015
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Chapter 16: Is the Fiscalsky Falling: An Examination of
Unfunded Social Security, Medicare, and State and Local Pension Liabilities
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Sample Questions
Q1) Economists Novy-Marx and Rauh contend that if San Fransisco wanted to adequately fund its pension systems for its public workers it would have to put on
A)a one-time tax of nearly $35,000 per household.
B)a one-time tax of nearly $350,000 per household.
C)an annual tax of nearly $35,000 per household.
D)an annual tax of only $35 per household.
Q2) If a defined benefit pension cannot, for whatever reason, make good on the promises to retirees, the
A)retirees are out of luck.
B)retirees get an extra payment from Social Security.
C)pensions are paid by the Pension Guaranty Trust Corporation.
D)retirees must sue their former employer.
Q3) If you overheard a worker say that she has moved up the ladder as far as she can with her current employer and she is going to take the job because they will continue making payments into her 401K you can be pretty sure she is
A)on a defined benefit pension program.
B)on a defined contribution program.
C)trapped in a Ponzi scheme.
D)being exempted from Social Security.
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Chapter 17: International Trade: Does It Jeopardize
American Jobs
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Sample Questions
Q1) Determining the comparative advantage of a country requires that you look at the economic notion of
A)opportunity cost.
B)ceteris paribus.
C)accounting and economic profit.
D)external costs.
Q2) A tariff will typically
A)increase the price, net of the tariff, that is received by sellers.
B)reduce the price, net of the tariff, that is received by sellers.
C)increase the price paid by consumers.
D)reduce the price, net of the tariff, that is received by sellers and increase the price paid by consumers.
Q3) Tariffs imposed upon U.S. rice imported into Japan tend to
A)harm Japanese consumers and help Japanese rice producers.
B)help U.S. consumers and harm Japanese rice producers.
C)harm U.S. consumers and harm Japanese rice producers.
D)help Japanese consumers and harm Japanese rice producers.
Q4) It is impossible to export or import services.
A)True
B)False
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Chapter 18: International Finance and Exchange Rates
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Sample Questions
Q1) In the market for euros, an increase in U.S. real interest rates tends to
A)cause no change in equilibrium price.
B)increase excess demand.
C)increase equilibrium price.
D)decrease equilibrium price.
Q2) Which of the following countries engages in a fixed exchange rate policy?
A)China
B)The U.S.
C)The United Kingdom
D)Japan
Q3) In the market for euros, an increase in the relative safety of U.S. investments tends to A)cause no change in equilibrium price.
B)increase excess demand.
C)decrease equilibrium price.
D)increase equilibrium price.
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Chapter 19: The European Debt Crisis
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Sample Questions
Q1) In which of the following countries did unemployment rate fall between 2009 and 2011?
A)Spain
B)Italy
C)Germany
D)Ireland
Q2) Which of the following policies did the United States undertake to mitigate the Great Recession?
A)It approached the European Central bank to purchase its debts at low rates.
B)It engaged in target asset relief programs.
C)It induced implosions in deficits through fiscal policies.
D)The Treasury sold mortgage-backed securities at record high prices.
Q3) In which year did Ireland's deficit to GDP ratio fall below -30 percent?
A)2008
B)2009
C)2010
D)2011
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Page 21
Chapter 20: Economic Growth and Development
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Sample Questions
Q1) If a country resolves its corruption issues that had inhibited the ability of local businesses to be as productive as possible, it will impact its economy by A)increasing aggregate demand.
B)decreasing aggregate demand.
C)increasing aggregate supply.
D)decreasing aggregate supply.
Q2) If a country faces starvation among its people and therefore cannot afford to improve its infrastructure (thereby inhibiting exports)it will impact its economy by A)increasing aggregate demand.
B)decreasing aggregate demand.
C)increasing aggregate supply.
D)decreasing aggregate supply.
Q3) In Figure 20.2, the increase in Real GDP is unlikely to A)result from capital accumulation.
B)occur repeatedly in the future.
C)occur in developed economies.
D)result from a better-educated workforce.
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Chapter 21: Nafta, Gatt, Wto: Are Trade Agreements Good
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Sample Questions
Q1) Many individuals around the world oppose the WTO because they believe it
A)unfairly favors the interests of developing countries at the expense of developed countries.
B)unfairly favors the interests of large corporations at the expense of workers.
C)encourages imposition of unnecessarily restrictive environmental protection regulations.
D)prevents young people around the world from entering the workforce as early in life as they choose.
Q2) In late 2008, President Bush proposed that a trade pact with Chile be tied to
A)a rescue package for the U.S. auto industry
B)an overhaul of the U.S. Postal Service
C)negotiations with Colombian drug lords
D)a bailout of the U.S. tobacco industry
Q3) Which of the following trade agreements includes Costa Rica?
A)NAFTA
B)CAFTA
C)AFL-CIO
D)All of these include Costa Rica.
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Chapter 22: The Line Between Legal and Illegal Goods
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Sample Questions
Q1) In Figure 22.1 and ignoring any possible externalities, the net benefit to society of this market is
A)0ACQ*
B)ABC
C)BP*C
D)0P*CQ*
Q2) The reason cigarette taxes would impact kids more than adults is that adult demand is _____ elastic than demand by kids.
A)more
B)less
C)as
D)neither more or less
Q3) In 2015, the fraction of fatal traffic accidents involving at least one person with blood alcohol level above the legal limit is approximately A)5%.
B)10%.
C)20%.
D)31%.
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Chapter 23: Natural Resources, the Environment, and Climate Change
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Sample Questions
Q1) Applying the concept of "clean enough" to climate change, an economist means the
A)A restoration of the climate to its pre-industrial state without regard to the consequences.
B)A reversal of climate change such that the average cost of the restoration equals the average benefit of the restoration.
C)A slowing down or reversal of climate change such that the marginal cost of the effort equals the marginal benefit of the effort.
D)A slowing down or reversal of climate change such that the total cost of the effort equals the total benefit of the effort.
Q2) Using present value analysis, an economist will argue that we do not have to worry about loggers harvesting young trees on private land.
A)Because it is more profitable for them to let the young trees grow.
B)Because it is not profitable for them to engage in any logging.
C)Because logging companies do not attempt to maximize profit.
D)Because young tree have no market value.
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Chapter 24: Health Care
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Sample Questions
Q1) Publicly provided health insurance for the poor will
A)raise the price of health care to the non-poor.
B)raise the level of health care consumed by the non-poor.
C)increase the total amount of health care consumed.
D)raise the price of health care to the non-poor and increase the total amount of health care consumed.
Q2) An insurance plan that carries a low annual premium but also a low annual maximum amount that insurance will cover is called a A)mini-med.
B)an HMO.
C)a PPO.
D)a fee for service provider.
Q3) If a person has a deductible of $300 and must pay $500 out of a $1,300 health care expense in a year, then their co-payment rate is A)5%.
B)10%.
C)20%.
D)50%.
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Chapter
Medicaid, Medicare, and the Child Health Insurance Program
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Sample Questions
Q1) Medicare covers all those
A)over 65.
B)eligible for Social Security benefits.
C)unable to pay its premiums.
D)who are both young and poor.
Q2) Medicare costs are high and rising at rapid rates because
A)elderly pay only a quarter of the true costs and are therefore less cost conscious.
B)medical technology is advancing and raising costs.
C)medical technology is advancing and raising costs while the elderly pay only a quarter of the true costs and are therefore less cost conscious.
D)the elderly have been shown to enjoy hospital food.
Q3) Under the most likely future scenario, the Medicare payroll tax would have to rise to
A)3.30% imposed upon employers.
B)3.30% imposed upon employers and 3.30% imposed upon employees.
C)6.60% imposed upon employees.
D)6.60% imposed upon employers.
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Chapter 26: The Economics of Prescription Drugs
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Sample Questions
Q1) "Restless Leg Syndrome" (RLS)was identified by GlaxoSmithKline in marketing Requip to
A)target a relatively poor segment of the patient population.
B)convince restless people that they might have a curable ailment.
C)shift the demand curve for Requip to the left.
D)all of the options are correct.
Q2) Drug companies tend to attribute higher drug prices on
A)the low percentage of attempts that actually result in revenue producing drugs.
B)high litigation costs on drugs that are ultimately shown to be dangerous.
C)doctors distributing too many free samples.
D)the low percentage of attempts that actually result in revenue producing drugs and high litigation costs on drugs that are ultimately shown to be dangerous.
Q3) A patent
A)is better for a writer of books than it is for an inventor of medicines.
B)makes a good that has recently been invented more expensive than it would otherwise be.
C)is never sought for inventions anymore.
D)makes inventing the good less appealing.
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28
Chapter
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Sample Questions
Q1) A written agreement where each party is bound to provide other parties with goods, services or financial consideration in exchange for other goods, services or financial considerations is a
A)patent.
B)copyright.
C)trademark.
D)tangible asset.
Q2) If someone steals your car, you take the claim to the A)police.
B)criminal courts.
C)civil courts.
D)FBI.
Q3) Concerns over proper incentives associated with bankruptcy caused
A)changes to the law in 2005
B)it to be abolished in 2010
C)it to be expanded in 2015 (allowing student loans to be discharged)
D)declared unconstitutional in 2016.
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Page 29
Chapter 28: The Economics of Crime
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Sample Questions
Q1) When blacks are murdered it is typically at the hands of A)whites.
B)other blacks.
C)an equal division of blacks and whites.
D)the races in rough proportion to their population.
Q2) Which of the following is not an example of a crime contemplated by the rational criminal model?
A)Rape.
B)Car theft.
C)Insurance fraud.
D)Murder for hire.
Q3) Among the simplest costs of crime to evaluate are typically the A)psychological trauma suffered by victims of sexual assault.
B)deterioration in quality of life due to physical injury.
C)risk that future productivity at work might be compromised by an injury.
D)wages lost due to missed work days following an assault.
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Chapter 29: Antitrust
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Q1) In the Microsoft case the company was accused of violating the law the prohibits A)firms from using their monopoly in one market to increase market share in another.
B)firms from attempting to undercut competitors' prices.
C)firms from successfully achieving monopoly status.
D)charging prices that are unfairly too high.
Q2) Standard Oil was broken into smaller businesses by the courts because A)it was too profitable.
B)it dominated every aspect of the oil and gasoline business. C)it's products were harmful.
D)it's owner agreed with the judge to lower prices.
Q3) In Figure 29.1 the deadweight loss associated with monopoly is A)ABC
B)EBC
C)P<sub>monopoly</sub>AB
D)FP<sub>PC</sub>C
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Chapter 30: The Economics of Race and Discrimination
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Q1) Looking at differences in median income to find evidence of current employment discrimination overlooks the fact that
A)men work fewer hours per week on average.
B)men work more hours per week on average.
C)woman have less unearned income.
D)men work fewer hours per week on average and woman have less unearned income.
Q2) The removal of legal barriers alone may not be sufficient to eliminate the pay gap between men and women because the increased competition may not be able to overcome
A)the wide gap in pay.
B)the indifference businesses have to profit.
C)customer preferences that lead employers to discriminate.
D)the indifference businesses have to profit and customer preferences that lead employers to discriminate.
Q3) The use of quotas in affirmative action are legal only when
A)necessary to achieve the employer's diversity goals.
B)court-mandated, through a verdict or consent decree.
C)the employer is a government agency.
D)publicly advertised in newspapers, television or radio.
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Chapter 31: Income and Wealth Inequality
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Q1) According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the upper middle and highest income class lose income, the middle class will ___
A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, but that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.
Q2) The U.S. claim to be "the land of opportunity" is not backed by recent data because a study by Miles Corak shows that:
A)it has very high capital gains tax rates.
B)it does not have a high value of intergenerational income elasticity.
C)there is a weak relationship between parental and child income in the U.S.
D)it has a very high level of income mobility.
Q3) When the housing bubble collapsed, _____.
A)the median household's wealth fell by 40%
B)the mean household's wealth fell by 40%
C)the median household's wealth increased by 15%
D)the mean household's wealth increased by 15%
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33
Chapter 32: Farm Policy
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Q1) Corn and beef prices are typically linked because
A)they are alternative outputs.
B)corn is an input to beef.
C)corn is a substitute for beef.
D)corn is a complement to beef.
Q2) If the market price for a crop is $4.00 a bushel and the price support is $3.00, then raising the price support to $3.50
A)will cause nothing to happen.
B)will cause the price received by farmers to rise.
C)will cause the price received by farmers to fall.
D)will cause the price paid by consumers to rise.
Q3) In Figure 32.1, at the supported price-quantity combination where production is unlimited, and government buys the excess, the money consumers pay producers is\ A)0ABQ<sub>D</sub>
B)0P*CQ*
C)0P<sub>floor</sub>BQ<sub>D</sub>
D)0HCQ*
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Page 34
Chapter 33: Minimum Wage
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Q1) The real minimum wage was at its all-time high
A)shortly after the increase in 1992.
B)shortly after the increase in 1968.
C)shortly after the increase in 1980.
D)at its inception in the 1930's.
Q2) It is generally true that modest increases in the minimum wage help workers that keep their jobs more than it hurts workers that lose their jobs.
A)True
B)False
Q3) Suppose you were to hear an economist defend the minimum wage on the grounds that she estimated that the demand for labor is nearly vertical, you would know her to be relying on the ____ argument.
A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus
Q4) It is possible to raise the minimum wage so high to hurt workers generally.
A)True
B)False
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Chapter 34: Ticket Brokers and Ticket Scalping
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Q1) Referring to Figure 34.2, the number of tickets that this promoter will choose to sell will
A)sell out the facility.
B)be more than capacity.
C)will be such that there are many empty seats.
D)sell out the facility and will be more than capacity.
Q2) Referring to Figure 34.2, the price that this promoter will choose will
A)sell out the facility.
B)be where the demand curve crosses the marginal cost curve.
C)will be such that there are many empty seats.
D)sell out the facility and will be where the demand curve crosses the marginal cost curve.
Q3) When ticket scalping is legal, economists insist that the market so created ensures that
A)the people who are willing to give up the most money will see the event.
B)the people who care the most in their hearts will see the event.
C)the promoter makes the most money possible.
D)the performers make the most money possible.
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Chapter 35: Rent Control
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Q1) The shortage that results from rent control will be greater
A)in the short run.
B)in the long run.
C)when demand is more elastic.
D)B and C
Q2) If a landlord can get everyone out of the apartment building and refurbish it they
A)must still only charge the rent that they were charging before the repairs.
B)can charge whatever rent they want, and increase it whenever they want.
C)can charge whatever rent they want, but it then becomes controlled at a higher rent.
D)can only charge a refurbishing fee that is also controlled.
Q3) If the rent controlled rent is above the equilibrium the result will be
A)that landlords will charge more than the equilibrium rent.
B)a shortage of rental apartments.
C)a surplus of rental apartments.
D)nothing different than if there were no rent control.
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Chapter 36: Economics of K-12 Education
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Q1) Most public school teachers are
A)free agents, negotiating their salaries each year as individuals.
B)members of a union, with pay determined by a scale recognizing only teacher quality.
C)members of a union, with pay determined by a scale recognizing only length of service and educational attainment.
D)members of a union, but must negotiate their pay as individuals.
Q2) Cherry picking is the act of
A)admitting the most expensive students, leaving the less expensive ones to public schools.
B)admitting students who are easy to educate, leaving the harder ones to public schools.
C)employing highly educated teachers, leaving the less educated ones to public schools.
D)employing highly experienced teachers, leaving the less experienced ones to public schools.
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Chapter 37: Economics of College and University Education
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Q1) Once the breakeven level of sales has been reached, each additional book sold earns _______ for the publisher.
A)a decreasing, but positive additional profit
B)a substantial, positive additional profit
C)nothing
D)a small, negative additional profit
Q2) Suppose a college education is choosing between an expensive school ($200,000 over 4 years)and a less expensive school ($40,000 over 4 years)the student should
A)Choose the more expensive school only if the present value of the difference in salary is $160,000 or more.
B)Choose the more expensive school only if the present value of the difference in salary is $160,000 or less.
C)Choose the more expensive school only if the difference in salary will total $160,000 or more.
D)Choose the more expensive school only if the difference in salary will total $160,000 or less.
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Chapter 38: Poverty and Welfare
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Q1) Most of the reduction in poverty rates since World War II occurred as a result of the A)1940s War On Poverty.
B)1996 welfare reforms.
C)end of "welfare as we know it".
D)1960s War On Poverty.
Q2) Which of the following is true?
A)The poverty rate among the elderly is greater than the poverty rate among children.
B)The poverty rate among men is greater than the poverty rate among women.
C)The poverty rate among blacks is greater than the poverty rate among whites.
D)The poverty rate among Hispanics is less than the poverty rate among whites.
Q3) The poverty rate is
A)that level of income sufficient to provide a family with a minimally adequate standard of living.
B)the percentage of people in households with income under the poverty line.
C)the total amount of money that would have to be transferred to households in poverty to raise them out of poverty.
D)the amount of money the poor must earn from work.
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Chapter 39: Head Start
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Q1) The newest evidence on Head Start suggests that ______ participants are less likely to be charged with a crime later in life than equally situated non-participants.
A)all
B)most
C)white
D)African-American
Q2) The income profile of the children enrolled in Head Start is such that it
A)mirrors the income profile of the general population.
B)mirrors the income profile of those in poverty.
C)suggests that enrollees are poorer than even those in poverty. D)suggests that enrollees are wealthier than the general population.
Q3) The academic studies that were the intellectual justification for Head Start suggested that for every dollar spent on the program ___ would be returned to society in the form of higher taxes and lower welfare and incarceration costs.
A)$1
B)$5
C)$50
D)$100
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Chapter 40: Social Security
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Q1) The net effect of savings of the asset substitution, induced retirement and bequest effects combined is that people save ________they would have without Social Security.
A)slightly less than
B)more than
C)the same as
Q2) During the 2008 Presidential campaign, candidate Barack Obama proposed
A)eliminating entirely the Social Security taxes paid by employers.
B)reducing by one-half the Social Security tax rates on employers.
C)raising the "income cap" for Social Security taxes from $106,800 to $250,000.
D)re-imposing the 6.2% (old-age)Social Security tax on incomes over $250,000 per year.
Q3) The amount single retirees receive in a monthly check if they retire at their retirement age is
A)their AIME.
B)their PIA.
C)constant throughout their lifetime.
D)the most the retiree can receive in interest without having part of their benefit reduced.
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Chapter 41: Personal Income Taxes
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Q1) If a household has a husband, wife and two kids, has a standard deduction of $12,600, its itemized deductions are $13,850 and personal exemptions of $16,000 (4*$4,000), then the first _____ of income is federal income tax free.
A)$28,600
B)$29,850
C)$37,100
D)$41,450
Q2) Horizontal equity means that
A)equal people are treated unequally.
B)equal people are treated equally.
C)people across the income scale are treated fairly with regard to ability to pay. D)people pay a flat rate.
Q3) An example of the "equity vs. simplicity" tradeoff is the tax treatment of A)capital gains.
B)earned income.
C)children. D)spouses.
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43
Chapter 42: Energy Prices
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Sample Questions
Q1) Although crude oil prices briefly fell below $55 per barrel in late 2006, they quickly rebounded and throughout much of 2007 remained well above
A)$60 per barrel.
B)$80 per barrel.
C)$100 per barrel.
D)$125 per barrel.
Q2) The large decrease in gasoline prices during 2014-2015 was attributable to A)hydraulic fracturing.
B)directional drilling.
C)hyperaccurate seismologic mapping.
D)all of these.
Q3) The run up in gasoline prices between 1999 and 2007
A)put them much above their long-term inflation-adjusted average.
B)put them about the same as their long-term inflation-adjusted average.
C)still had them much below their long-term inflation-adjusted average.
D)still had them slightly below their long-term inflation-adjusted average.
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Chapter 43: If We Build It, Will They Come and Other Sports Questions
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Q1) Suppose your community is considering using public money to build a new sports stadium for a new team that will only stay in the community if it is built for them. Suppose you are watching a news broadcast in which the supporters are saying that it is a good idea because, even though they don't go to the games, it is more fun to live in a town with a team and it is to live in a town without a team. The supporters are relying on the
A)stupidity of voters.
B)externality argument.
C)local substitution argument.
D)present value argument.
Q2) In NFL football, which of the following forms of revenue is not shared?
A)ticket receipts.
B)television revenue.
C)NFL licensing revenue.
D)luxury box revenue.
Q3) The extra revenue to a team associated with a player is called the player's A)reservation wage.
B)marginal revenue product.
C)average compensation.
D)minimum wage.
Page 45
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Chapter 44: The Stock Market Crashes
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Q1) Under the efficient market hypothesis, it is advisable to spend at least an hour a day altering your portfolio to take advantage of profit opportunities.
A)True
B)False
Q2) An important factor in stock prices that is separate from interest rates and profit expectations is
A)the expected price of the stock in the near future.
B)CEO desires.
C)Board of Directors' mandates on stock prices.
D)Securities and Exchange Commission mandates on stock prices.
Q3) Which of the following stock market increases is best explained by the notion of a bubble?
A)The late 1982 rally in which the DJIA doubled in 4 months.
B)The decade of the 1980s.
C)The U.S. stock market in the late 1920s.
D)The U.S. stock market's growth in 2009.
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Chapter 45: Unions
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Sample Questions
Q1) In Figure 45.1, the opportunity cost to workers of working at the equilibrium wage-labor combination is
A)OACL*
B)OW*CL*
C)OBCL*
D)ABC
Q2) Which of the following explains why public employees (more frequently than private employees)tend be in defined benefit programs?
A)They tend to begin and end their career with the same employer.
B)They tend to move from employer to employer.
C)They tend to fall for Ponzi schemes.
D)They have well-funded private savings plans.
Q3) The current percentage of the total work force represented by unions is approximately A)35%.
B)25%.
C)11%.
D)5%.
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Chapter
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Q1) Walmart has an impact on workers, even in states where they have few stores, because
A)their pricing policies compel firms to outsource production to low-cost foreign locations.
B)their web-stores are dominant.
C)they rarely buy from firms in states in which they have stores. D)they buy American only.
Q2) Workers at Walmart are paid ______ their unionized counterparts. A)much more than B)more than C)the same D)less than
Q3) When a new Walmart locates in an area, a business likely to be helped is a A)nearby gas station.
B)distant gas station.
C)nearby grocery store.
D)distant hospital.
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Page 48
Chapter 47: The Economic Impact of Casino Gambling
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Q1) The question of legality in daily fantasy comes down to whether it is a game of skill or chance. The argument that it is a game of skill is that
A)players can use a skillful and statistical understanding of the athletes they are choosing.
B)players can use the private knowledge that they are hot to time their bets.
C)players can use the private knowledge that they are cold to avoid making bets.
D)people with skill have better luck.
Q2) The perception that casinos have a dramatic impact on a local economy is A)without any foundation whatsoever.
B)reasonable, given their size but overstated given the degree of local substitution.
C)reasonable, and in fact, understated.
D)reasonable, and exactly on the mark.
Q3) If a new casino comes to a city that already has one, which economic impact has little to no "local substitution" offsets to consider
A)the construction costs.
B)the employment at the casino.
C)the employment at restaurants near the casino.
D)the purchase of souvenirs at the casino.
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Chapter 48: The Economics of Terrorism
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Q1) If the September 11<sup>th</sup> terrorist attacks had not occurred, it is unlikely that the war in Iraq would have
A)occurred at all.
B)been so protracted.
C)uncovered so many weapons of mass destruction.
D)divided Congress as it did.
Q2) The attacks of September 11, 2001 are a quintessential example of
A)a negative aggregate demand shock.
B)a positive aggregate demand shock.
C)a positive aggregate supply shock.
D)the rebound effect.
Q3) Using Figure 48.1, modeling the attacks of September 11, 2001 you would
A)use Panel 1 only with a shift from AD<sub>A</sub> to AD<sub>B</sub>.
B)use Panel 1 only with a shift from AD<sub>B</sub> to AD<sub>A</sub>.
C)use Panel 2 only with a shift from AS<sub>A</sub> to AS<sub>B</sub>.
D)use Panel 1 to model the aggregate demand shock (AD<sub>B</sub> to AD<sub>A</sub>)and Panel 2 to model the aggregate supply shock (AS<sub>B</sub> to AS<sub>A</sub>).
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