Applied Microeconomics
Midterm Exam
Course Introduction
Applied Microeconomics explores the practical application of microeconomic theories to real-world decision-making in households, businesses, and government. This course examines how individuals and firms allocate scarce resources, respond to incentives, and interact in various market structures. Topics include consumer behavior, production and cost analysis, market equilibrium, public policy, and the effects of government intervention. Through case studies and analytical tools, students learn to use economic reasoning to address issues such as pricing strategies, market failures, regulation, and welfare analysis, preparing them for problem-solving in diverse economic 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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Sample Questions
Q1) When economists use the term ceteris paribus, they are indicating that
A)the relationship between two economic variables cannot be determined.
B)the analysis is true for the individual but not for the economy as a whole.
C)all other variables except the ones specified are assumed to be constant.
D)their conclusions are based on normative economics rather than positive economic analysis.
Answer: C
Q2) When economists say a good is scarce, they mean
A)there are only a limited number of consumers who would be interested in purchasing the good.
B)the human desire for the good exceeds the amount freely available from nature.
C)most people in poorer countries do not have enough of the good.
D)the production of the good has no opportunity cost for society.
Answer: B
Q3) The Latin phrase "ceteris paribus" means
A)that one event causes another.
B)that one event is associated with, but not caused by, another.
C)that other potential causes are assumed to remain constant.
D)the way things should be.
Answer: C
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Chapter 2: A: Some Tools of the Economist
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Sample Questions
Q1) A nation with cheap, efficient communications is likely to be
A)richer, ceteris paribus, because transaction costs will be lower and trade greater.
B)richer only if production of goods is cheaper, too, since trade itself cannot create value.
C)poorer since it spends so much on communication instead of true productivity.
D)spending too much on communications, which adds nothing to the value of output.
Answer: A
Q2) When resources are being used wastefully or inefficiently, the A)production possibilities curve shifts inward.
B)production possibilities curve shifts outward.
C)economy is operating at a point inside its production possibilities constraint.
D)economy is operating at a point outside its production possibilities constraint.
Answer: C
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Chapter 2: B: Some Tools of the Economist
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Sample Questions
Q1) Refer to Table 2-4. Which of the following is correct?
A)In Lebos, the opportunity cost of producing one unit of food is equal to one unit of clothing.
B)In Slavia, the opportunity cost of producing one unit of food is equal to two units of clothing.
C)The opportunity cost of producing food in Lebos is less than the opportunity cost of producing food in Slavia.
D)All of the above are correct.
Answer: D
Q2) The process by which new products and methods of production are continuously replacing old ones is known as:
A)opportunity cost.
B)the production possibilities frontier.
C)creative destruction.
D)the fallacy of composition.
Answer: C
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Chapter 3: A: Supply, Demand, and the Market Process
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Q1) When economists say the demand for a product has decreased, they mean
A)the demand curve has shifted to the left.
B)the product price has increased, and as a consequence, consumers are buying less of the product.
C)consumers are now willing and able to buy more of this product at each possible price.
D)the demand curve has shifted to the right.
Q2) If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?
A)Take wheat from government storage and sell it.
B)Encourage farmers to use more fertilizer.
C)Lower the price of rye.
D)Subsidize purchases of farm equipment.
E)Encourage farmers to grow less wheat.
Q3) When a firm is earning economic profit, this indicates the firm is
A)increasing the value of the resources that it is using.
B)reducing the value of the resources that it is using.
C)supplying the market with a low quality product.
D)creating less value for consumers than another firm that is currently earning losses.
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Chapter 3: B: Supply, Demand, and the Market Process
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Q1) Market prices generally promote social cooperation because they
A)clarify the options available to people and encourage individuals to help others in exchange for income.
B)encourage government officials to levy taxes to provide people with the necessities of life.
C)eliminate scarcity by allowing prices to rise.
D)reward only altruistic actions, whereby, people seek to help others without the expectation of personal gain.
Q2) Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?
A)The price of orange juice will increase, and the quantity purchased will fall.
B)The price of orange juice will fall, and the quantity purchased will increase.
C)The price of orange juice will increase, and the quantity purchased will increase.
D)The price of orange juice will fall, and the quantity purchased will fall.
Q3) A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.
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Chapter 4: A: Supply and Demand: Applications and Extensions
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Q1) An income tax is defined as regressive if
A)the tax liability of those with higher incomes exceeds the tax liability of those with low incomes.
B)the tax liability of those with higher incomes is less than the tax liability of those with low incomes.
C)those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes.
D)those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes.
Q2) If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a
A)flat (elastic) demand curve and a steep (inelastic) supply curve.
B)steep (inelastic) demand curve and a flat (elastic) supply curve.
C)steep (inelastic) demand curve and steep (inelastic) demand curve.
D)flat (elastic) demand curve and a flat (elastic) supply curve.
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Chapter 4: B: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Refer to Figure 4-17. Suppose a price ceiling of $4.50 is imposed. As a result,
A)there is a shortage of 15 units of the good.
B)the demand curve will shift to the left so as to now pass through the point (Q = 35, P = $4.50).
C)the situation is very much like the one created by a binding minimum wage.
D)the quantity of the good that is bought and sold is the same as it would have been had a price floor of $7.50 been imposed.
Q2) In the mid-1940s, the marginal income tax rate in the top income tax bracket was 94 percent. In the 1960s, the top rate was lowered to 70 percent, and in the 1980s, the top rate was again lowered to 28 percent. The data show that as a result of these tax rate reductions, tax revenue (particularly from the rich) increased. This is consistent with the idea illustrated with the A)Laffer curve.
B)production possibilities curve.
C)supply of loanable funds curve.
D)demand for unskilled labor curve.
Q3) Joanne states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Joanne correct? Why or why not?
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 is true?
A)Consumption of a public good by one individual reduces the availability of the good for others.
B)It is extremely difficult to limit the benefits of a public good to only the people who pay for it.
C)Public goods are free to a society when they are produced by the government.
D)From an efficiency standpoint, a market will generally supply too much of a public good.
Q2) How does the text define economic efficiency? Is this an absolute or a relative definition? Would another type of definition be preferable? Why or why not?
Q3) Suppose the firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. How will the price and output of the chemical products in a competitive market compare with their values under conditions of ideal economic efficiency?
A)The price would be too low, and the output would be too large.
B)The price would be too high, and the output would be too large.
C)The price would be too low, and the output would be too small.
D)The price would be too high, and the output would be too small.
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Chapter 6: The Economics of Collective Decision-Making
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Q1) From the standpoint of society as a whole, rent seeking is
A)counterproductive because it takes resources away from the creation of wealth in the private sector.
B)counterproductive because it fails to alter public policy.
C)productive because each interest group gains more than they spend on rent-seeking activities.
D)productive because the resources used in rent seeking have no opportunity cost to society.
Q2) Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a government project. For which types of projects would government action most likely work well, undertaking only efficient projects and rejecting inefficient ones?
A)types A and B
B)types B and D
C)types B and C
D)types A and D
Q3) Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.
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Chapter 7: Consumer Choice and Elasticity
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Q1) When the price elasticity of demand is large, then
A)the product is more likely to be a necessity.
B)the responsiveness of quantity demanded to a change in price is small.
C)the percentage change in price divided by the percentage change in quantity demanded is large.
D)the responsiveness of quantity demanded to a change in price is large.
Q2) The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because
A)ice cream must be eaten quickly.
B)this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers.
C)the market is broadly defined.
D)other flavors of ice cream are good substitutes for this particular flavor.
Q3) If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be A)2.
B)elastic.
C)0.5.
D)inelastic.
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Chapter 8: A: Costs and the Supply of Goods
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Q1) Economists refer to historical costs (irreversible costs already incurred) as A)implicit costs.
B)sunk costs.
C)opportunity costs.
D)variable costs.
Q2) Whenever average total cost exceeds marginal cost,
A)average total cost is rising.
B)average total cost is falling.
C)marginal cost is rising.
D)marginal cost is falling.
Q3) When a firm increases its plant size in the long run and its per-unit costs fall, this is called
A)diminishing returns and is shown by the downward-sloping portion of the MP curve (or the upward-sloping portion of the MC curve).
B)constant returns to scale and is shown by the flat portion of the LRATC curve.
C)diseconomies of scale and is shown by the upward-sloping portion of the LRATC curve.
D)economies of scale and is shown by the downward-sloping portion of the LRATC curve.
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Chapter 8: B: Costs and the Supply of Goods
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Q1) 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?
Q2) James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?
Q3) Andy wants to maximize his grade-point average. Having spent six hours studying for his final exam in economics, Andy calculates his grade and discovers that even with a perfect score on the final, he will not pass the course. He decides to study two more hours so he will not have wasted the first six hours. Is this a good decision? Why or why not?
Q4) 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?
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Chapter 9: A: Price Takers and the Competitive Process
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Q1) Which of the following is a necessary condition for the presence of competition in a market?
A)government regulations that assure firms will make excess profits
B)suppliers that offer a homogeneous product
C)a price that always equals per-unit production costs
D)low barriers to entry into the market
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 $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, 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
Q3) Refer to Scenario 9-1. At Q = 1,000, the firm's profit amounts to A)-$200.
B)$1,000.
C)$3,000.
D)$4,000.
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Chapter 9: B: Price Takers and the Competitive Process
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Q1) If the demand for pizza falls, pizza suppliers will suffer economic losses, and some firms will leave the industry. Why is this considered good? Shouldn't we feel sorry for these business owners?
Q2) Tom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes their costs. Is he correct? Is there significance to this observation?
Q3) 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.
Q4) 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.
Q5) Why is it considered "ideal" for price to just equal marginal cost?
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Chapter 10: Price-Searcher Markets With Low Entry Barriers
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Q1) If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 are representative of the market, what will happen in the future?
A)Firms will go out of business, and the market price will rise.
B)The current market price will tend to persist into the future.
C)New firms will enter the market, and the market price will decline.
D)The firms in this industry probably will collude in order to increase their profitability.
Q2) If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?
A)-$10
B)$10
C)$17
D)$20
Q3) A price searcher confronts a downward sloping demand curve because
A)products in the market are differentiated.
B)there is no close competitor in the market.
C)the market is essentially monopolized.
D)the firm gains nothing if it lowers its price.
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Chapter 11: A: Price-Searcher Markets With High Entry
Barriers
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Q1) A natural monopoly is a market where
A)a single firm has control over a vital natural resource.
B)many smaller firms can produce the entire market output at the same per-unit cost as could one large firm.
C)a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.
D)many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.
Q2) Indicate the maximum profit (or minimum loss) a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.
A)profit of AIHE
B)profit of BKJC
C)losses of BKJC
D)losses of EHGF
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Chapter 11: B: Price-Searcher Markets With High Entry
Barriers
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Q1) As Adam Smith indicated, the trouble with monopoly is that
A)firms have no incentive to produce efficiently.
B)regardless of what is produced, the firm will use too many resources.
C)a producer has no incentive to keep his costs down.
D)the monopolist "understocks" the market and charges too high a price.
Q2) Which of the following is true for a firm that is a monopolist?
A)the firm will make an economic profit in the short run.
B)the firm will produce a smaller quantity of output than what would be best from the viewpoint of ideal economic efficiency.
C)the additional revenue that can be generated from an increase in output will exceed the firm's price.
D)the firm can charge whatever it wants for its product since consumers have no alternatives.
Q3) Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?
Q4) 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?
Page 19
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Chapter 12: The Supply of and Demand for Productive Resources
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Q1) Firms should hire additional units of a resource as long as the
A)marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced.
B)marginal product of the resource is less than the price of the resource.
C)price of the output produced is positive.
D)marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource.
Q2) The short-run supply of a human resource will be more elastic the
A)more elastic the demand for the product to be produced.
B)more inelastic the demand for the product to be produced.
C)lower the skill level necessary to perform the job.
D)harder it is to acquire the skill and knowledge necessary to provide the resource.
Q3) When the price of a resource increases, thereby causing the price of the final product to rise, consumers will purchase less of the final product. This is called the A)substitution in production effect.
B)substitution in consumption effect.
C)elasticity effect.
D)inelasticity effect.
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Chapter 13: Earnings, Productivity, and the Job Market
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Q1) Suppose technological improvements reduced the cost of producing automobiles by 50 percent, causing the price of automobiles to decline by a similar amount. Which of the following would necessarily result from this development?
A)Employment in the automobile industry would decrease.
B)Real income would increase.
C)Real income would decrease.
D)Both a and c are correct.
Q2) Two workers are employed in the same job by the same firm; however, they are paid different wage rates. This could be explained by differences in
A)the income effect
B)the price of the firm's output
C)their marginal products due to differences in ability
D)working conditions
E)risk
Q3) Automated production methods are only attractive when they
A)reduce labor productivity.
B)replace workers.
C)decrease per-unit costs of production.
D)lower wages.
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Chapter 14: Investment, the Capital Market, and the Wealth of Nations
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Q1) Additional investments in machines that enhance the ability to produce goods and services imply that
A)the owners of the investments will necessarily have to borrow funds.
B)the owners of the investments will necessarily have to reduce their current consumption.
C)someone will have to reduce current consumption.
D)future consumption will have to be reduced.
Q2) The yield that one can expect to receive on loanable funds without taking significant risk is called the A)risk premium.
B)pure interest yield.
C)inflationary premium.
D)nominal interest yield.
Q3) If the interest rate is 6 percent, the net present value of $100 to be received two years from now is
A)$79.72.
B)$86.
C)$89.
D)$100.
Q4) In a barter economy that had no form of currency, how could interest exist?
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Chapter 15: Income Inequality and Poverty
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Q1) Because the United States has a progressive tax system, the distribution of income after taking into account the effects of taxes and transfers is
A)less equal than the distribution of before-tax income.
B)more equal than the distribution of before-tax income.
C)exactly the same as the distribution of before-tax income.
D)none of the above.
Q2) Which of the following is true?
A)The best distribution of income can be determined objectively.
B)The transfer of income from one group to another is costly; it will generally reduce total output.
C)Positive economics can determine the variation in incomes that would be best for an economy.
D)The fairness of an income distribution is determined by its pattern (the measured degree of income inequality).
E)All of the above are true.
Q3) Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades. He concludes that the rich stay rich and the poor stay poor. Is this a valid conclusion, or has Andy missed something?
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Chapter 16: Appendix: Government Spending and Taxation
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Q1) Which of the following countries had the highest level of government expenditures as a share of GDP in 2007?
A)Ireland
B)United States
C)Sweden
D)Australia
Q2) Compared to the situation prior to 1980, the top marginal personal income tax rate imposed on the rich is now substantially
A)lower and so is the share of the revenue collected from them.
B)higher and so is the share of the revenue collected from them.
C)lower, but the share of the revenue collected from them is now higher.
D)higher, but the share of the revenue collected from them is now lower.
Q3) During the last four decades, defense expenditures have
A)accounted for approximately one-half of federal expenditures.
B)accounted for less than 10 percent of federal expenditures.
C)been increasing as a share of federal expenditures.
D)been declining as a share of federal expenditures.
Q4) As real incomes grow, what happens to federal tax revenues as a share of the economy?
Q5) Discuss how size of government can negatively affect economic growth.
Page 24
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Chapter 17: Appendix: the Economics of Social Security
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Q1) Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?
A)Yes; the federal government will be able to redeem these bonds in the future without raising taxes or increasing its borrowing.
B)Yes; the interest on these bonds will provide the federal government with a stream of net revenue in the future.
C)Yes, but only if the federal government holds these bonds until they mature.
D)No; the federal government cannot redeem the bonds without raising revenues for their redemption from other sources.
Q2) Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?
A)0 percent
B)2 percent
C)10 to 12 percent
D)15 to 20 percent
Q3) Briefly explain why the Social Security system will face a "crisis" in the coming years.
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Q1) The stock price of a firm is primarily a reflection of the
A)firm's current net earnings per share.
B)firm's expected future net earnings per share.
C)discounted value of the firm's expected future net earnings per share.
D)firm's current net earnings per share multiplied by the interest rate.
E)book value of the firm.
Q2) Which of the following is an advantage of an indexed equity mutual fund relative to a managed equity fund?
A)Indexed funds generally have better stock pickers.
B)Indexed funds engage in more detailed research.
C)Indexed funds have lower operating costs because they engage in less stock trading.
D)Indexed funds earn a significantly higher rate of return than a broad portfolio that represents the entire stock market.
Q3) Historically, which of the following has had the highest average annual rate of return?
A)corporate bonds
B)money market mutual funds
C)corporate stocks
D)U.S. Treasury bonds
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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) Which of the following contributed to the rising mortgage default and foreclosure rates and the eventual economic crisis of 2008?
A)tightened mortgage lending standards and the reduction of loanable funds during 2001-2005
B)the increase in the greed of Wall Street bankers and other commercial lenders
C)the substantial increase in sub-prime and adjustable rate mortgages as a share of the total during 2001-2006
D)the increase in the household savings rate during the two decades following 1985
E)the increase in fixed rate mortgages as a share of the total during the decade prior to the crisis
Q2) An analysis of housing prices between 1987 and 2008 indicates that prices
A)increased sharply in the five years leading up to the housing bust in 2007.
B)were relatively stable before dropping sharply in 2001.
C)rose steadily during the 1990s, but declined sharply beginning in 2001.
D)were erratic, but there was no discernable trend during either the 1990s or 2000-2006.
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Chapter 21: Appendix: Lessons From the Great Depression
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Q1) Analysis of the Great Depression indicates that
A)even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn.
B)even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s.
C)a reduction in tax rates could not prevent the economic downturn from spiraling into a depression.
D)the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies.
Q2) Which one of the following was a secondary effect of the stock market crash of 1929?
A)an increase in the money supply in the early 1930s
B)a decline in consumption expenditures because of the reduction in the wealth of stockholders
C)an increase in the supply of loanable funds as people transferred funds from the stock market into savings accounts
D)an increase in tax revenues as the sellers of stocks paid the capital gains tax on stocks that had appreciated during the 1920s
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Chapter 22: Appendix: the Economics of Healthcare
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Q1) Special savings accounts that individuals could pay into directly and then use to pay medical bills or purchase a catastrophic health insurance plan are known as A)flexible benefit accounts.
B)health savings accounts.
C)health-care savings bonds.
D)HMOs.
Q2) If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?
Q3) Economic theory indicates that as a larger share of medical services are paid for by a third party (for example, insurance companies or the government) rather than directly by the consumer,
A)consumers will have a stronger incentive to economize.
B)consumers will have a weaker incentive to economize and the prices of medical services will rise more rapidly than would otherwise be the case.
C)consumers will have a weaker incentive to economize, but medical service suppliers will have a stronger incentive to keep prices low.
D)the suppliers of medical services will have more incentive to economize.
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Chapter 23: Appendix:education: Problems and Performance
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Q1) What best explains why so many children attend public schools, instead of private schools?\
A)Public schools provide a significantly better education, as measured by SAT scores.
B)Public schools have nicer facilities and better sports programs.
C)When a student attends a public school they do not have to pay tuition.
D)Private schools have catered only to the wealthy and therefore ordinary Americans would not be welcome in private schools.
Q2) Compared to U.S. elementary and secondary schools, the international standing of U.S. colleges and universities is
A)much lower.
B)slightly lower.
C)virtually the same.
D)much higher.
Q3) Since 1970, real spending per student in American public elementary schools has A)fallen substantially.
B)fallen modestly.
C)not changed.
D)doubled
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Chapter 24: Appendix: Earnings Differences Between Men and Women
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Q1) Which of the following is true?
A)Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity).
B)On average, the number of hours worked per year by women in the labor force is greater than the hours worked by men in the labor force.
C)The female/male earnings ratio is substantially higher for never married persons than for those married with a spouse present.
D)As the proportion of women preparing for careers as professionals has increased in recent decades, the earnings of women have declined relative to those for men.
Q2) Given the traditional responsibility for monetary earnings in the family, men were more likely than women to
A)have continuous labor force participation.
B)move in order to get a higher-paying job.
C)accept jobs with long hours, uncertain schedules, and out-of-town travel.
D)do all of the above.
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Chapter 26: Appendix: the Question of Resource Exhaustion
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Q1) Non-renewable resources are those that
A)are not renewed by nature, but their supply can be easily expanded by humans.
B)are naturally renewed by nature; timber provides an example.
C)are not renewed by nature, at a significant rate.
D)cannot be recycled, by their very nature.
Q2) Water supply problems are generally the result of
A)missing or incomplete markets for water.
B)too much trading of water.
C)too few government subsidies to desalination.
D)all of the above.
Q3) While the price of a resource may increase sharply during some periods, the structure of ____ accompanying the price increase makes depletion highly unlikely and provides the seeds for future reversal.
A)government programs
B)foreign competition
C)incentives
D)taxation
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Chapter 25: Appendix: Do Labor Unions Increase the Wages of Workers
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Q1) The share of the labor force that was unionized increased from approximately 10 percent in 1930 to more than 30 percent in 1955. During these 25 years, the share of national income allocated to labor (in contrast to capital)
A)remained virtually constant.
B)increased approximately 10 percent.
C)increased between 15 and 25 percent.
D)increased 17.6 percent.
Q2) In 2008, approximately what percent of the nonagricultural workforce belonged to a union?
A)2 percent
B)12 percent
C)35 percent
D)98 percent
Q3) Which of the following groups is most highly unionized?
A)private wage and salary workers
B)government employees
C)technical, sales, and service workers
D)women
Q4) What common goals, if any, do labor and management share?
Page 34
Q5) List some factors that might make the threat of a strike more effective.
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Chapter 27: Appendix: Difficult Environmental Cases and the
Role of Government
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Q1) Which of the following is true?
A)All types of environmental problems can be solved merely by the enforcement of individual property rights.
B)Environmental regulation cannot improve environmental quality.
C)Income levels exert little impact on the demand for environmental quality.
D)Markets often result in outcomes that are inefficient when it is difficult to assign and enforce property rights.
Q2) Most of our environmental problems exist because of
A)a lack of enforced and easily traded property rights.
B)consumer ignorance.
C)profit maximization on the part of business firms.
D)the failure of political officials to regulate business activities.
Q3) Which of the following is the most efficient way to reduce pollution emissions?
A)emission standards that cap allowable pollution
B)government pollution charges or taxes
C)legislated regulations limiting the quantity of emissions allowed by each firm
D)enforcement of property rights, when those rights are well-defined and transaction costs are low
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