Chapter 2: Economic Models- Trade-Offs and Trade
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Q1) (Table: Comparative Advantage I) Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of herring for Finland is _____ box(es) of cell phones.
A) 10
B) 0.2
C) 5
D) 0.1
Answer: B
Q2) Wall Street is:
A) a district in New York City where all major investment companies have their headquarters.
B) a district in New York City where most fashion designers have their headquarters.
C) an area of San Francisco where imports are received from other countries and from which exports are shipped.
D) a street in Houston, Texas, where major oil companies have their headquarters.
Answer: A
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Chapter 3: Supply and Demand
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Q1) (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose vast new oilfields are discovered offshore of California and gasoline prices fall. Which panel BEST describes how this will affect the market for sport utility vehicles, a complement in consumption to gasoline?
A) panel A
B) panel B
C) panel C
D) panel D
Q2) Researchers find a new strain of genetically modified seeds that results in a higher yield for corn producers. Holding all other things constant, this research will:
A) shift the supply curve for corn left.
B) increase the quantity supplied of corn.
C) decrease the quantity supplied of corn.
D) shift the supply curve for corn to the right.
Q3) Why are economists so particular about the difference between an increase in quantity demanded and an increase in demand? Aren't they the same thing?
Q4) Why do many clothing stores have big after-Christmas sales on their merchandise?
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Chapter 5: Price Controls and Quotas- Meddling With Markets
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Q1) If the government imposes binding rent control:
A) rent will be set above the equilibrium price.
B) it may result in some landlords leaving the business because they cannot cover costs.
C) it will lead to rental units being higher in quality because landlords are guaranteed a high price.
D) it will cause a surplus of housing.
Q2) An increase in producer surplus would most likely occur if:
A) an effective price floor was imposed.
B) an effective price ceiling was imposed.
C) the market price of the good decreased.
D) no changes occurred in the market.
Q3) If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.
A)True
B)False
Q4) A price ceiling benefits all consumers.
A)True
B)False
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Chapter 6: Elasticity
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Q1) If demand is perfectly inelastic, changes in price leave total revenue unchanged.
A)True
B)False
Q2) (Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. The demand schedule _____ when the price increases from $4 to $6 _____ when it increases from $6 to $8.
A) is less elastic; than B) is more elastic; than C) has the same elasticity;; as D) is unit-elastic; and
Q3) (Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.
A) $24; $16
B) $14; $21
C) $16; $21
D) $10; $10
Q4) Suppose the cross-price elasticity between two goods is zero. What does this tell you about these two goods?
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Chapter 7: Taxes
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Q1) A progressive tax:
A) takes a larger share of the income of high-income taxpayers than of low-income taxpayers.
B) takes a smaller share of the income of high-income taxpayers than of low-income taxpayers.
C) takes the same share of the income of high-income taxpayers as it does of low-income taxpayers.
D) has no deadweight loss.
Q2) (Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $60,000 tax on yachts (collected from the producers), consumers will pay _____ of the tax and producers will pay _____.
A) $30,000; $30,000
B) $40,000; $20,000
C) $20,000; $40,000
D) $10,000; $50,000
Q3) In general, the incidence of an excise tax is shared between buyers and sellers.
A)True
B)False
Q4) What is the difference between a tax rate and a tax revenue?
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Chapter 9: The Rational Consumer
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Q1) Chuck spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The vertical for Chuck's budget line is _____ milkshakes.
A) 50
B) 10
C) 5
D) 100
Q2) Which of the following best describes the principle of diminishing marginal utility? As an individual consumes more of a good:
A) the total utility obtained will eventually fall.
B) the total utility obtained will eventually become negative.
C) the addition to total utility obtained from the nth unit of the good will be less than that obtained from the immediately preceding unit of the good.
D) the marginal utility will eventually become negative.
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Chapter 8: International Trade
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Q1) (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that P<sub>A</sub> is the autarky price and P<sub>W</sub> is the world price. Consumer surplus with international trade would be area:
A) W + X + Y.
B) Z.
C) W + X + Z.
D) W.
Q2) (Figure: The Markets for Melons in Russia II) Look at the figure The Market for Melons in Russia II. Suppose Russia opens to trade and finds the world price to be $10. Russia will:
A) import 30 units of melons.
B) export 30 units of melons.
C) not find it beneficial to trade.
D) import 40 units of melons.
Q3) If a market begins to engage in international trade, we can assume that:
A) producers in the exporting industry may be worse off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry may be worse off.
Q4) Explain the difference between comparative advantage and absolute advantage.
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Chapter 10: Decision Making by Individuals and Firms
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Q1) (Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fifth sweatshirt is:
A) $17.
B) $15.
C) $13.
D) $11.
Q2) Whenever marginal benefit is less than marginal cost, the decision maker should do _____ of the activity.
A) less
B) that exact amount
C) more
D) none
Q3) Part of the _____ associated with the Chicago Cubs baseball team is their batting cages used in practice.
A) labor
B) land
C) capital
D) entrepreneurship
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Page 12
Chapter 11: Perfect Competition and the Supply Curve
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Q1) (Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. If the market price is $4.50, profit at the profit-maximizing quantity of output is:
A) $2.00.
B) $4.50.
C) $5.00.
D) $34.00.
Q2) (Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. Which of the following is a point on the industry short-run supply curve?
A) P = $5; Q = 100.
B) P = $10; Q = 1,000.
C) P = $40; Q = 1,100.
D) P = $70; Q = 5,000.
Q3) Explain how the long-run perfectly competitive equilibrium is efficient.
Q4) Why are perfectly competitive firms described as price takers?
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Chapter 12: Monopoly
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Q1) Monopolists are engaging in price discrimination when they charge all customers the same price.
A)True
B)False
Q2) A monopolist _____ than a perfectly competitive industry. A) produces a larger quantity
B) charges a higher price
C) charges a lower price
D) earns less profit in the long run
Q3) (Figure: The Monopolist) Look at the figure The Monopolist. If this monopolist attempts to profit-maximize, it will produce _____ units and sell them at _____.
A) Q<sub>1</sub>; P<sub>1</sub>
B) Q<sub>2</sub>; P<sub>4</sub>
C) Q<sub>2</sub>; P<sub>2</sub>
D) Q<sub>3</sub>; P<sub>3</sub>
Q4) When a natural monopoly is regulated to charge a price equal to average total cost, producer surplus decreases, but total surplus increases.
A)True
B)False
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Chapter 13: Oligopoly
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Q1) (Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal and fixed cost of producing crude oil equals zero. Suppose that the two firms are maximizing industry profit and splitting the profit evenly. If both firms engage in noncooperative behavior, the industry output will be _____ barrels, and the price of crude oil will be _____.
A) 0; $160
B) 80; $80
C) 100; $60
D) 160; $0
Q2) (Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil is zero. Suppose that the two firms are maximizing industry profit and splitting the profit evenly. If firm 1 decides to cheat and increase production by 10 more barrels, the price of crude oil will be:
A) $0.
B) $70.
C) $80.
D) $160.
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Chapter 14: Monopolistic Competition and Product
Differentiation
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Q1) When a monopolistically competitive firm is making zero economic profits, it is producing so that the average total cost curve is tangent to the demand curve. At this output:
A) the firm is maximizing profits, and marginal cost must equal marginal revenue.
B) the firm is not maximizing profits, and a slight increase or decrease in output will lead to positive profits.
C) since economic profits are zero, the condition that marginal revenue equals marginal cost is irrelevant.
D) the condition that marginal revenue equals marginal cost continues to be relevant, but the marginal revenue and marginal cost curves need not intersect directly below the point of tangency between the average total cost curve and the demand curve.
Q2) Because most communities have a large number of similar but not identical substitutes, the market for financial planners is best considered to be:
A) a monopoly.
B) an oligopoly.
C) perfect competition.
D) monopolistically competitive.
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Chapter 15: Externalities
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Q1) With tradable emissions permits, if the demand for goods that produce emissions shifts to the left, the equilibrium price of permits _____ and the equilibrium quantity
A) increases; stays the same
B) falls; increases
C) falls; stays the same
D) increases; increases
Q2) Which of the following best describes tradable emissions permits?
A) tax system for internalizing emission costs to the market
B) subsidy system for encouraging production of goods with positive externalities
C) system of voluntary negotiations between polluters and damaged parties
D) licenses that can be bought and sold and that enable the holder to pollute up to a specified amount during a given period
Q3) The additional cost imposed on society as a whole by an additional unit of pollution is:
A) the marginal social benefit of pollution.
B) the marginal social cost of pollution.
C) the optimal Pigouvian tax.
D) a technology spillover.
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Chapter 16: Public Goods and Common Resources
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Q1) If the market produces an efficient level of a good, then we know that the good must be _____ and _____ in consumption.
A) nonexcludable; nonrival
B) nonexcludable; rival
C) excludable; nonrival
D) excludable; rival
Q2) National defense and clean air are similar in that both are _____, but they differ in that national defense is _____, while clean air is not.
A) rival in consumption; excludable
B) nonrival in consumption; excludable
C) excludable; rival in consumption
D) nonexcludable; nonrival in consumption
Q3) Television programs are nonrival because:
A) the supplier cannot prevent consumption by people who do not pay for it.
B) more than one person can consume the same unit of the good at the same time.
C) individuals ignore the effect of their use on the amount of the resource remaining for others.
D) the market suffers from inefficiently low consumption.
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Chapter 17: The Economics of the Welfare State
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Q1) Suppose ABC Health is a private health insurance company that offers an identical policy to all customers. Each customer pays a premium equal to the average consumer's annual medical expenses. This is a system that has the potential to fail because of the _____ problem.
A) adverse selection
B) income inequality
C) single-payer
D) equity versus efficiency
Q2) Which of the following countries has a health care system that directly employs health care workers and runs hospitals and clinics that are free to the public?
A) United States
B) Canada
C) France
D) Great Britain
Q3) Medicaid is funded by:
A) private charities.
B) the federal government only.
C) state governments only.
D) federal and state governments.
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Page 19
Chapter 18: Factor Markets and the Distribution of Income
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Q1) A decrease in the demand for pastry chefs may come about because of an increase in the:
A) concern for healthy living.
B) market wage rate for pastry chefs.
C) productivity of pastry chefs.
D) supply of other factors that pastry chefs use.
Q2) According to the efficiency wage model, all of the following are correct EXCEPT that efficiency wages:
A) reduce unemployment.
B) are a type of market failure.
C) are above the equilibrium wage.
D) may reduce worker turnover.
Q3) When interferences in the labor market raise the wage above the equilibrium level, employers may discriminate because there are more job applicants than jobs.
A)True
B)False
Q4) You overhear an economist refer to the price of leisure. What does this mean? How can leisure have a price?
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Chapter 19: Uncertainty, Risk, and Private Information
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Q1) (Scenario: Choosing Insurance) Refer to the information in the scenario Choosing Insurance. For $1,000 the Ramirez family can buy insurance that will cover the full cost of repairs. If family members are risk-averse and want to maximize their expected utility:
A) they will buy the insurance.
B) they will be indifferent between buying and not buying the insurance, since their expected income for purchasing other goods and services is $49,000, regardless of what they do.
C) they will buy the insurance as long as the utility of having a certain income of $48,000 to buy goods and services other than car repairs is higher than the utility associated with their expected income without insurance.
D) they will self-insure.
Q2) People faced with adverse selection use _____ to deal with it.
A) screening
B) signals
C) reputation
D) screening, signals, and reputation
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Chapter 20: Macroeconomics- the Big Picture
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Q1) Long-run economic growth is best measured by:
A) a sustained rise in the production of goods and services.
B) the growth of the money supply.
C) trade surpluses in the long run.
D) the rate of private saving.
Q2) Macroeconomics entails the study of the:
A) overall behavior of the economy.
B) individual decision makers.
C) market structures.
D) cost and production decisions by firms.
Q3) If a country has a trade deficit, does it indicate that the country has a serious problem?
A) No. Trade deficits occur when a country's investment spending is higher than its level of saving.
B) Yes. Trade deficits occur when a country has low productivity.
C) Yes. Trade deficits occur when a country does not have a comparative advantage in production.
D) Yes. Trade deficits occur when a country has a high budget surplus.
Q4) What is long-run economic growth, and why is it so important for a nation's economy?
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Chapter 21: Gdp and the Consumer Price Index
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Q1) (Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. How much is total government spending?
A) $20
B) $220
C) $370
D) $200
Q2) In the circular-flow diagram, the places where resources, especially capital and labor, are bought and sold are the:
A) product markets.
B) factor markets.
C) households.
D) firms.
Q3) (Table: Peanut Butter and Jelly Economy) Look at the table Peanut Butter and Jelly Economy. Nominal GDP in 2010 was:
A) $200.
B) $400.
C) $450.
D) $525.
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Chapter 22: Unemployment and Inflation
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Q1) (Figure: The Labor Market) Look at the figure The Labor Market. The size of the labor force at the equilibrium wage rate is:
A) 80,000.
B) 110,000.
C) 100,000.
D) 200,000.
Q2) (Table: Labor Force Data) Look at the table Labor Force Data. Suppose the labor force participation rate is 70%. The number of unemployed adults is:
A) 8 million.
B) 53 million.
C) 103 million.
D) 50 million.
Q3) (Table: Population Data for Estill County) Look at the table Population Data for Estill County. What is the labor force participation rate?
A) 64%
B) 81%
C) 17%
D) 79%
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Chapter 23: Long-Run Economic Growth
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Q1) The aggregate production function shows how productivity depends on natural resources and financial capital.
A)True
B)False
Q2) Which of the following is one reason for Latin America's lack of economic growth since 1920?
A) overspending on education
B) inability to compete with imported products
C) low savings and investment spending because government policies led to inflation, bank failures, and other disruptions
D) very poor natural resources
Q3) If real GDP grows at an annual rate of 1%, it will double in approximately _____ years.
A) 11
B) 23
C) 35
D) 70
Q4) Many impoverished nations struggle with diseases like malaria. How would reduction or elimination of malaria contribute to long-run economic growth?
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Chapter 24: Savings, Investment Spending
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Questions
Q1) (Figure: The Market for Loanable Funds III) Look at the figure The Market for Loanable Funds III. If the government in a closed economy finances deficits by selling bonds and it decides to decrease defense spending by $200 billion, the decrease in government spending will encourage _____ in additional private investment spending.
A) $400 billion
B) $200 billion
C) $100 billion
D) $10 billion
Q2) If stock prices follow a random walk, it means that stock prices are:
A) unpredictable.
B) increasing.
C) decreasing
D) constant.
Q3) The primary function of the financial system is to channel funds from savers to investors.
A)True
B)False
Q4) What are the three tasks of a financial system? Explain how a mutual fund performs these three tasks.
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Chapter 25: Fiscal Policy
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Q1) Spending promises made by governments that are effectively a debt, despite the fact that they are not included in the usual debt statistics, are known as:
A) implicit liabilities.
B) explicit liabilities.
C) implicit assets.
D) explicit assets.
Q2) (Figure: Fiscal Policy Choices) Look at the figure Fiscal Policy Choices. It would be appropriate to use expansionary fiscal policy to shift aggregate demand in _____ from _____.
A) panel (b); AD<sub>1</sub> to AD<sub>2</sub>
B) panel (a); AD<sub>2</sub> to AD<sub>1</sub>
C) panel (a); AD<sub>1</sub> to AD<sub>2</sub>
D) panel (b); AD<sub>2</sub> to AD<sub>1</sub>
Q3) In most years since 1970, the actual budget deficit has been more than 25% of GDP.
A)True
B)False
Q4) Most economists do not support a law that requires the federal budget to be balanced every year. Explain why.
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Chapter 26: Money, Banking, and the Federal Reserve System
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Q1) Debit cards:
A) are considered part of the money supply, since they allow access to a part of the money supply.
B) are not generally accepted as a medium of exchange.
C) are less liquid than stocks and bonds.
D) are a liability for the user of the card.
Q2) The federal funds rate is the interest rate at which:
A) banks borrow funds directly from the Federal Reserve.
B) banks borrow from other banks with excess reserves.
C) the influential companies borrow from banks.
D) households' savings are invested in the Federal Reserve.
Q3) The Glass-Steagall Act of 1933 gave the Reconstruction Finance Corporation the power to make loans to commercial banks but prohibited the Federal Reserve from making loans to commercial banks.
A)True
B)False
Q4) How did the banking crises of the early 1930s exacerbate the severity of the Great Depression?
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Q5) How was the financial crisis of 2008 similar to the Panic of 1907 and the S&L crisis?
Chapter 27: Monetary Policy
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Q1) If the Federal Reserve sets the federal funds rate on the basis of inflation and the output gap, then the Federal Reserve is following:
A) inflation targeting.
B) the Taylor rule.
C) money illusion.
D) the quantity theory.
Q2) According to the liquidity preference model, if the Federal Reserve increases the money supply, the equilibrium interest rate _____, and this leads to a(n) _____ in the quantity demanded of nonmonetary interest-bearing financial assets.
A) rises; increase
B) falls; decrease
C) rises; decrease
D) falls; increase
Q3) The Fed prints money only when it is conducting monetary policy.
A)True
B)False
Q4) The loanable funds model focuses on interest rates in the short run.
A)True
B)False
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Chapter 28: Inflation, Disinflation, and Deflation
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Q1) (Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, no inflation, and no expectation of inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation will:
A) fall to -2%.
B) not change.
C) rise to 2%.
D) rise to 4%.
Q2) Suppose actual aggregate output is equal to the potential output; the actual unemployment rate is:
A) equal to the natural rate of unemployment.
B) higher than the natural rate of unemployment.
C) zero.
D) equal to the cyclical rate of unemployment.
Q3) The central bank of a government can print more money to pay for government deficits. Why do some refer to this practice as imposing an inflation tax?
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Chapter 29: Crises and Consequences
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Q1) Fiscal austerity is expansionary fiscal measures, such as increases in government spending and decreases in taxes, designed to reduce unemployment.
A)True
B)False
Q2) Proponents argued that fiscal stimulus was appropriate after the 2008 financial crisis because:
A) austerity would only increase inflation and unemployment.
B) political instability in the Middle East was causing a depreciation of the euro and the dollar.
C) the lag associated with automatic stabilizers was too long.
D) the effectiveness of monetary policy was limited by the zero bound on interest rates.
Q3) Which of the following countries was known as the Celtic Tiger during much of the 1990s and 2000s?
A) China
B) France
C) India
D) Ireland
Q4) Explain how shadow banks, which don't take deposits, can have bank runs.
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Chapter 30: Macroeconomics- Events and Ideas
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Q1) Those who believe in the classical model suggest that expansionary policies would result in:
A) increases in output and the aggregate price level.
B) increases in output with no change in the aggregate price level.
C) increases in the aggregate price level with no change in output.
D) increases in unemployment and the output level.
Q2) In the classical model, an increase in the money supply will result in:
A) inflation only, without affecting aggregate output.
B) economic expansion, as aggregate output will increase.
C) higher interest rates, lower investment, and ultimately lower aggregate output.
D) recession only, without affecting the aggregate price level.
Q3) Milton Friedman and Anna Schwartz wrote:
A) The Great Depression.
B) The General Theory of Employment, Interest, and Money.
C) The Wealth of Nations.
D) A Monetary History of the United States, 1867-1960.
Q4) The economy is in a recession. The head of the President's Council of Economic Advisers is an ardent monetarist. What will this monetarist recommend or not recommend? Explain.
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Chapter 31: Open-Economy Macroeconomics
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Q1) After a hurricane devastates New Orleans, a Canadian charity sends $1 million to the United States to help the survivors rebuild their homes. In the U.S. balance of payments, this transaction causes the balance on the _____ account to _____.
A) current; decrease
B) current; increase
C) financial; decrease
D) financial; increase
Q2) If the current account is in surplus, the financial account must also be in surplus.
A)True
B)False
Q3) After a devaluation, all other things equal, a country's balance of payments on the current account will likely increase.
A)True
B)False
Q4) The 1944 Bretton Woods agreement established a system of fixed exchange rates among major currencies.
A)True
B)False
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Chapter 32: Graphs in Economics
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Q1) (Figure: Hot Drinks Sold and Temperature) Look at the figure Hot Drinks Sold and Temperature. If we move from point J to point L in the figure, the outside temperature has ______ degrees and the number of hot drinks sold has ______.
A) decreased by 30; increased by 30
B) increased by 20; decreased by 20
C) increased by 30; decreased by 30
D) increased by 40; decreased by 40
Q2) (Figure: Good X and Good Y) Look at the figure Good X and Good Y. If we move from point B to point C in the figure, the x-variable has ______ units and the y-variable has ______ units.
A) decreased by 2; increased by 15
B) increased by 2; decreased by 15
C) decreased by 15; increased by 2
D) increased by 15; decreased by 2
Q3) If a supply curve is represented by the equation Q = 10 + 2P, what is its slope?
A) 1/2
B) 1
C) 2
D) 5
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Chapter 33: Toward a Fuller Understanding
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Q1) The net present value (NPV) of an activity or project is equal to the _____ value of all of the revenues minus the _____ value of all of the costs associated with it. A) future; present
B) present; present C) present; future
D) future; future
Q2) You have won the lottery and have been given the choice of receiving $5 million today or $10 million after 10 years. Assume that the interest rate remains fixed at 10% per year for the entire 10-year period. You should choose:
A) $10 million after 10 years, since this is more than you would get if you invested $5 million for 10 years at an annual rate of interest of 10%.
B) $10 million after 10 years, since that is a larger amount than the present value of $5 million paid after 10 years.
C) $5 million today, since it would be worth more than $10 million after 10 years if the $5 million earned interest at the rate of 10% per year.
D) $10 million after 10 years, since it is the larger amount.
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Chapter 34: Consumer Preferences and Consumer Choice
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Q1) Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. His indifference curves for popcorn and pretzels are _____, and at the optimal consumption bundle his marginal rate of substitution of popcorn for pretzels is _____.
A) right angles; 3
B) right angles; 0.33
C) straight lines; 3
D) straight lines; 0.33
Q2) An indifference curve typically:
A) slopes downward.
B) shows combinations of two goods that yield equal money income.
C) slopes upward.
D) is concave.
Q3) Higher indifference curves represent:
A) less utility than lower indifference curves.
B) more utility than lower indifference curves.
C) the same level of utility as lower indifference curves.
D) unknown levels of utility compared to lower indifference curves.
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Chapter 35: Indifference Curve Analysis of Labor Supply
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Q1) (Figure: Davina's Labor Supply Choice) The figure Davina's Labor Supply Choice shows Davina's time allocation budget line when her hourly wage is $10 or $15 and she has 80 hours to allocate between labor and leisure; it also shows two of her indifference curves for income and leisure. When Davina earns $15 per hour, she works _____ hours and enjoys _____ hours of leisure.
A) 20; 60
B) 30; 50
C) 40; 40
D) 50; 30
Q2) Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To maximize utility, Kurt works 45 hours per week and Jim works 50 hours per week. The value of an additional hour of leisure is:
A) higher for Jim than for Kurt.
B) higher for Kurt than for Jim.
C) less than $100 for Kurt.
D) greater than $10 for Jim.
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