Microeconomics
Exam Answer Key
Course Introduction
Microeconomics is the study of how individuals, households, and firms make decisions regarding the allocation of scarce resources and how these decisions interact in specific markets to determine prices, production, and distribution of goods and services. The course covers fundamental concepts such as supply and demand, elasticity, consumer and producer behavior, market structures (including perfect competition, monopoly, oligopoly, and monopolistic competition), and the impacts of government intervention in markets. Through theoretical models and real-world examples, students develop analytical tools to understand and predict market outcomes, resource allocation, and the role of incentives in shaping economic behavior.
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) According to Adam Smith, individual self-interest
A)is a powerful force for economic progress when it is directed by competitive markets.
B)is a powerful force for economic progress when individuals are wisely directed by a strong central government.
C)is a major factor in retarding the economic progress of humankind.
D)could be either a positive or negative force for economic progress, depending on the moral influences of political leaders.
Answer: A
Q2) In economics, the benefit (or satisfaction) that an individual gets from an activity is called
A)scarcity.
B)utility.
C)opportunity cost.
D)ceteris paribus.
Answer: B
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Chapter 2: A: Some Tools of the Economist
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Q1) Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will
A)gain by channeling people's efforts away from unproductive middleman activity toward physical output.
B)lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities.
C)find that it is richer because the added transaction costs normally imposed by middlemen will be reduced.
D)gain because the value of total output will rise.
Answer: B
Q2) John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
A)Harry has a comparative advantage in ironing.
B)Harry has a comparative advantage in typing.
C)John has a comparative advantage in ironing.
D)Neither can gain from specialization and exchange.
Answer: A
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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)Lebos has the comparative advantage in both goods.
B)Slavia has the comparative advantage in food.
C)Lebos has the comparative advantage in food.
D)Lebos has the comparative advantage in clothing.
Answer: C
Q2) The production possibilities curve illustrates the basic principle that
A)an economy's capacity to produce increases in proportion to its population.
B)if the resources of an economy are being used efficiently, more of one good can be produced only if less of another is produced.
C)an economy will automatically seek the output at which all of its resources are fully employed.
D)the distribution of income among households is the major determinant of the economic welfare of a nation.
Answer: B
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Chapter 3: A: Supply, Demand, and the Market Process
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Q1) According to the law of supply,
A)producers are willing to supply larger amounts of a good as its price increases.
B)a direct relationship exists between the price of a good and the amount buyers choose to buy.
C)an inverse relationship exists between the price of a good and the amount buyers wish to buy.
D)an inverse relationship exists between the price of a good and the amount producers supply.
Q2) If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be A)vertical.
B)relatively inelastic.
C)relatively elastic.
D)robust.
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Chapter 3: B: Supply, Demand, and the Market Process
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Q1) Which of the following would increase the price of fitness equipment?
A)a reduction in consumer income
B)a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case
C)a decrease in the price of steel used to produce the equipment
D)all of the above
Q2) Suppose demand decreases and supply increases. Which of the following will happen?
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
Q3) Economists maintain that the price of a product has no effect on demand. How can this be true?
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Chapter 4: A: Supply and Demand: Applications and Extensions
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Q1) The burden of a tax will fall primarily on sellers when the A)demand for the product is highly inelastic and the supply is relatively elastic.
B)demand for the product is highly elastic and the supply is relatively inelastic.
C)tax is legally (statutorily) imposed on the seller of the product.
D)tax is legally (statutorily) imposed on the buyer of the product.
Q2) The benefit of a subsidy will go primarily to sellers when the A)demand for the product is highly inelastic and supply is relatively elastic.
B)demand for the product is highly elastic and the supply is relatively inelastic.
C)subsidy is legally (statutorily) granted to the seller of the product.
D)subsidy is legally (statutorily) granted to the buyer of the product.
Q3) Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?
A)the revenue the government derives from the tax
B)the tax paid by consumers
C)the tax paid by producers
D)the deadweight loss (or excess burden) created by the tax
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Chapter 4: B: Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Both price floors and price ceilings, when effective, lead to A)shortages.
B)surpluses.
C)an increase in the quantity traded.
D)a reduction in the quantity traded.
Q2) Refer to Figure 4-25. After the tax is levied, consumer surplus is represented by area A)A.
B)A + B + C.
C)D + E + F.
D)F.
Q3) Refer to Figure 4-24. The price that buyers pay after the tax is imposed is A)P .
B)P .
C)P .
D)impossible to determine from the figure.
Q4) The state of Florida is considering putting an excise tax on either good X or good Y. An economist discovers the supply of good X is more elastic than the supply of good Y, while the demand elasticities are identical. Which good should Florida tax in order to minimize the deadweight loss of the tax?
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Chapter 5: Difficult Cases for the Market and the Role of Government
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Sample Questions
Q1) After spending $400,000 to build your dream home, you recently discovered that after less than one year the foundation is cracking. Further investigation reveals that the contractor used substandard concrete. Is there a role for the public sector in this situation?
Q2) Which of the following is most likely to lead to the underpricing and overuse of an economic resource?
A)Human greed and selfishness.
B)Capital markets.
C)The absence of an enforceable property right.
D)The lack of understanding of pollution and its effects.
Q3) When production of a good generates external costs, the
A)demand curve for the good will overstate the true social benefits from consumption of the good.
B)demand curve for the good will understate the true social benefits from consumption of the good.
C)supply curve for the good will overstate the true social cost of producing the good.
D)supply curve for the good will understate the true social cost of producing the good.
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Page 10
Chapter 6: The Economics of Collective Decision-Making
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Q1) As methods of economic organization, the market and the public sector are similar in which of the following ways?
A)Income and power are distributed equally in both sectors.
B)In both sectors, economic activity is undertaken only when it satisfies the criterion for economic efficiency.
C)In both sectors, economic exchange is completely voluntary.
D)Someone must cover the cost associated with the provision of scarce goods in both sectors.
Q2) In a representative democracy, government action results from the A)choices of voters.
B)legislative decisions by politicians.
C)political action of organized interest groups.
D)complex interaction of all of the above.
Q3) The rational-ignorance effect is a result of
A)externalities that lead to an excess supply of information.
B)the limited incentive of the news media to cover political campaigns.
C)the expectation of individual voters that their vote will not be decisive.
D)the lack of a college education on the part of most voters in the United States.
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Chapter 7: Consumer Choice and Elasticity
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Q1) Between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is A)relatively inelastic.
B)approximately equal to -0.33.
C)approximately equal to -3.
D)both a andb.
Q2) If the price of apples increases, total expenditures on apples will decline if A)there are few substitutes for apples.
B)the supply of apples is inelastic.
C)the demand for apples is elastic.
D)apples are a normal good.
Q3) If demand price elasticity measures 2, this implies that consumers would
A)buy twice as much of the product if the price drops 10 percent.
B)require a 2 percent drop in price to increase their purchases by 1 percent.
C)buy 2 percent more of the product in response to a 1 percent drop in price.
D)require at least a $2 increase in price before showing any response to the price increase.
E)buy twice as much of the product if the price drops 1 percent.
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Page 12
Chapter 8: A: Costs and the Supply of Goods
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Sample Questions
Q1) Long-run diseconomies of scale exist over the range of output for which the long-run average cost curve is A)rises.
B)remains constant.
C)falls.
D)does not exist.
Q2) In Figure 8-8, which output minimizes per-unit cost?
A)4
B)6
C)7
D)8
Q3) Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,
A)her accounting profit will rise.
B)her accounting profit will fall.
C)her explicit costs will rise.
D)her economic profit from textbooks will fall.
E)her economic profit from textbooks will rise.
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Chapter 8: B: Costs and the Supply of Goods
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Q1) Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.
Q2) 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?
Q3) If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?
Q4) The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?
Q5) 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?
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Page 14
Chapter 9: A: Price Takers and the Competitive Process
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Q1) If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.
A)output, 15; total revenue, $45
B)output, 15; total revenue, $60
C)output, 17; total revenue, $68 (approx.)
D)output, 20; total revenue, $80
Q2) When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately A)zero.
B)$40.
C)$6,000.
D)$40,000.
Q3) Refer to Table 9-1. If the Tuckers are profit maximizers, how many tomatoes should they produce when the market price is $500 per ton?
A)6
B)7
C)8
D)9
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Chapter 9: B: Price Takers and the Competitive Process
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Q1) When an economist states that a firm is earning zero economic profit, this statement implies that the firm
A)will be forced out of business unless market conditions change.
B)is doing as well as it could in any other line of business.
C)is earning a zero rate of return on its assets.
D)could earn a higher rate of return in other industries.
Q2) Amy runs a business in a market where all firms are price takers. Bill suggests that she lower her price to attract even more business. Should Amy follow Bill's suggestion, or should she even consider raising her price?
Q3) The competitive price-taker model is usually used to illustrate the competitive process. If firms cannot choose their price, where is the competition?
Q4) Why is it considered "ideal" for price to just equal marginal cost?
Q5) Which of the following products would most closely fit the competitive price-taker model?
A)stereo systems-there are many reputable brands.
B)beer-it has many consumers.
C)eggs-there are many producers of this relatively homogeneous product.
D)automobiles-there are substantial economies of scale in production.
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Chapter 10: Price-Searcher Markets With Low Entry Barriers
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Q1) In competitive price-searcher markets, short-run economic losses will lead to
A)long-run economic losses.
B)the exit of firms from the market and the eventual restoration of zero long-run economic profits.
C)the entry of new firms into the market as old firms fail.
D)the entry of additional firms into the market, causing each firm to experience an increase in demand for its product.
Q2) If a market is contestable, the market will be characterized by
A)minimum-cost production methods and a competitive (normal) profit rate.
B)high barriers to entry and a small number of suppliers.
C)prices in excess of production costs and mergers leading to monopoly.
D)a large number of suppliers offering a homogeneous product.
Q3) Which of the following characteristics is true for a competitive price searcher but not for a price taker?
A)The firm earns zero profits in the long run.
B)The firm has an incentive to operate efficiently.
C)A reduction in market demand will lead to short-run losses.
D)Price is above marginal cost in long-run equilibrium.
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Chapter 11: A: Price-Searcher Markets With High Entry
Barriers
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Q1) Each member of a cartel
A)faces a temptation to cheat on the agreement because lowering its price slightly below the established price will usually increase the firm's sales and profit.
B)faces a temptation to cheat on the agreement because raising its price slightly above the established price will usually increase the firm's sales and profit.
C)has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually have no impact on the firm's sales and profit.
D)has no temptation to cheat on the agreement because raising its price slightly above the established price will usually decrease the firm's sales and profit.
E)has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually lower the firm's sales and profit.
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Chapter 11: B: Price-Searcher Markets With High Entry
Barriers
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Q1) 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?
Q2) The Big River Power Company is a regulated monopolist with pricing structured such that the stockholders receive a "fair" rate of return based on the firm's unit costs. Can economic thinking predict how the company executive offices are likely to be furnished? Given a choice between Hawaii and downtown Cleveland (20 miles away), where would we expect the Board of Directors to meet?
Q3) Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?
A)when the monopolist operates on the inelastic portion of the demand curve
B)when the monopolist is a profit maximizer rather than a revenue maximizer
C)when substantial diseconomies of scale are present
D)when substantial economies of scale are present
Q4) Which of the following is a characteristic of an oligopolistic industry?
A)interdependence of a firm's price and output decisions
B)low barriers to entry
C)small output of individual firms relative to the total market
D)a large number of competing firms
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Chapter 12: The Supply of and Demand for Productive Resources
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Q1) A decrease in the marginal product of labor would be represented by
A)increase in labor demand.
B)decrease in labor demand.
C)increase in the quantity demanded of labor.
D)decrease in the quantity demanded of labor.
E)an increase in wages.
Q2) Jim Smith runs a company that sells encyclopedia sets for $200 each. When he employs 5 workers, they can sell 20 sets per week, whereas only 17 sets are sold when 4 workers are employed. What is the weekly marginal revenue product of the fifth worker?
A)$3
B)$200
C)$600
D)$4,000
Q3) Which of the following is the best example of an investment in human capital?
A)the purchase of an industrial development bond
B)the purchase of company stock by a worker
C)a student working as a waiter to pay for college
D)a laid-off stockbroker who is taking nursing courses
Q4) There is an Italian soccer player who makes more than $10 million a year. Why?
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Chapter 13: Earnings, Productivity, and the Job Market
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Q1) Assume that empirical evidence shows a difference in mean earnings between two groups, say, majority and minority workers. What conclusion may be drawn?
A)The group with the lower earnings is being discriminated against.
B)The group with the lower earnings is less productive.
C)The group with the higher earnings has a larger quantity of human capital.
D)Any of the above statements could, either partially or entirely, explain the difference in the mean earnings.
Q2) Millionaires tend to be older than the general population because A)older workers generally have more education than younger workers.
B)many achieve millionaire status by saving from a relatively modest income, and this will take a lengthy period of time.
C)the earnings of most people peak during the retirement phase of life.
D)older people have less to do, and therefore, they have more time to come up with innovative ideas.
Q3) Joanne states: "The best way to increase the wages of workers is to increase worker productivity." Is Joanne correct? Why or why not?
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21
Chapter 14: Investment, the Capital Market, and the Wealth of Nations
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Q1) If people prefer to consume goods now rather than in the future, how does anyone save money?
Q2) If the interest rate were 10 percent, the net present value of $100 to be received one year from now would be
A)$90.
B)$90.91.
C)$100.
D)$110.
Q3) Most of the income of Americans comes from A)transfer payments.
B)individuals selling their labor services.
C)the ownership of bonds and corporate stocks.
D)the ownership of small businesses.
Q4) The current worth of future income after it is discounted, to reflect the fact that future dollars are worth less than current dollars, is called A)the net present value of the income.
B)arbitrage.
C)the inflationary premium.
D)the real interest rate.
22
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Chapter 15: Income Inequality and Poverty
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Q1) Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has
A)been virtually unchanged.
B)increased.
C)decreased.
D)fluctuated in a random pattern.
Q2) Assume that Jill is a single parent who is in poverty. She receives food stamps and Medicaid. For every $100 that she earns, Jill loses $20 of her food stamp benefits and $15 in her Medicaid benefits. Jill's implicit marginal tax rate from these two programs is
A)20 percent.
B)30 percent.
C)35 percent.
D)45 percent.
Q3) Which one of the following groups has a below-average incidence of poverty?
A)persons who are divorced or separated from their spouse
B)families headed by a female
C)persons 18 to 24 years of age
D)married-couple families
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Chapter 16: Appendix: Government Spending and Taxation
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Q1) How much does it cost to tax a dollar of revenue away from the private sector and transfer it to the government to finance a government program?
A)one dollar
B)less than one dollar because the administration of and compliance with the tax laws creates jobs for people
C)more than a dollar because collection of the taxes requires resources that would otherwise be available for private sector production
D)more than a dollar because of the excess burden resulting from the elimination of productive exchanges by the taxes
E)Both c and d are correct.
Q2) In 2006, the income tax payments of the poorest 50 percent of Americans accounted for approximately what percent of all federal income tax revenue?
A)3 percent
B)25 percent
C)50 percent
D)76 percent
Q3) Discuss how size of government can negatively affect economic growth.
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Chapter 17: Appendix: the Economics of Social Security
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Q1) If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?
A)No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits.
B)Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients.
C)Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit.
D)Yes, but only if the rapid growth led to a substantial increase in net exports.
Q2) The Social Security program is primarily a
A)compulsory retirement income program set up on sound insurance principles.
B)forced-savings program where workers save during their working years and receive the principal and interest on these savings at retirement.
C)program designed to tax current workers in order to provide benefits for current retirees.
D)voluntary savings program run by the government.
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Q1) Which of the following is true?
A)Investment in the stock market is a relatively foolproof method for an investor to earn a high rate of return during the next five years.
B)Current stock prices already reflect information that is known with a high degree of certainty.
C)Experts are able to predict changes in the direction of the broad stock market indexes with a high degree of accuracy.
D)While changes in the prices of specific stocks are difficult to predict, it is relatively easy to predict the future direction of the broad stock market.
E)Both c and d are true.
Q2) (I) The market for new issues of stock is called the primary market. (II) The New York Stock Exchange is an example of a secondary market in which previously issued shares are traded between investors.
A)I is true; II is false.
B)I is false; II is true.
C)Both I and II are true.
D)Both I and II are false.
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Chapter 19: Appendix: Great Debates in Economics: Keynes Versus Hayek
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Q1) According to the Keynesian view, capitalism
A)is a highly productive form of economic organization that works best when government intervention is least.
B)experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism.
C)experiences booms and busts that are primarily the result of inappropriate monetary policy.
D)experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy.
Q2) According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of A)fluctuations in aggregate demand.
B)the "animal spirits" of private investors.
C)excessive credit expansion and artificially low interest rates that trigger malinvestment.
D)the unwillingness of political decision-makers to follow the advice of macroeconomists who know how to alter fiscal policy in a manner that would virtually eliminate the ups and downs of the business cycle.
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Chapter 20: Appendix: the Crisis of 2008: Causes and Lessons for the Future
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Q1) The Fed's low short-term interest rate policy from 2002-2004, along with housing regulations promoting low down-payment loans to sub-prime borrowers, encouraged
A)conventional 30-year, fixed rate mortgages which have relatively high default and foreclosure rates.
B)conventional 30-year, fixed rate mortgages which have relatively low default and foreclosure rates.
C)adjustable rate mortgages which have relatively low default and foreclosure rates.
D)adjustable rate mortgages which have relatively high default and foreclosure rates.
Q2) Fannie Mae and Freddie Mac's dominance of the secondary mortgage market during 1995-2008 encouraged mortgage originators to
A)extend only 30-year, fixed-rate mortgages.
B)require higher down payments in order to obtain a home mortgage.
C)loosen lending standards as long as the mortgages were acceptable to Fannie Mae and Freddie Mac.
D)scrutinize the credit-worthiness of borrowers more carefully.
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Chapter 21: Appendix: Lessons From the Great Depression
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Q1) During the Great Depression of 1929-1933,
A)the Fed allowed the money supply to contract substantially.
B)the Fed increased the money supply sharply.
C)Congress cut tax rates sharply.
D)Congress cut tariffs substantially.
Q2) The New Deal policies of the Great Depression resulted in
A)a reduction in unemployment and an increase in real output.
B)a stable economic environment and an increase in investment.
C)economic uncertainty and prolonged unemployment.
D)a quick end to the depression once the policies had taken effect.
Q3) Analysis of the Great Depression indicates that
A)even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic plunge.
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 severity of the economic decline, if not its onset, was the result of perverse monetary, fiscal and regulatory policies.
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Chapter 22: Appendix: the Economics of Healthcare
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Q1) When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the
A)demand for the good will decline.
B)consumers of the good will have less and less incentive to economize on its use.
C)suppliers of the good will have a stronger incentive to provide the good at low prices.
D)prices of the good will tend to decline with the passage of time.
Q2) Which of the following would help control the future growth of healthcare prices and expenditures?
A)greater reliance on government financed healthcare reimbursement plans
B)an increase in the share of healthcare expenditures financed with low co-payment insurance
C)an increase in the share of healthcare cost paid for either directly or from personal medical savings accounts
D)the finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare
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Chapter 23: Appendix:education: Problems and Performance
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Q1) 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.
Q2) In 2008, how many states permitted public school choice in some or all school districts?
A)25
B)30
C)35
D)40
Q3) What are some of the criticisms of voucher programs? How would a voucher program be modified to address these concerns?
Q4) Increasing competition between schools will tend to
A)increase their cost.
B)decrease their cost.
C)decrease their quality.
D)do both b and c.
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Chapter 24: Appendix: Earnings Differences Between Men and Women
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Q1) If a firm refuses to hire any females due to a personal prejudice, its profits will
A)increase markedly.
B)decrease.
C)not be affected.
D)increase slightly.
Q2) When female/male earnings differentials are adjusted for age, education, language, and locational characteristics, the
A)differential between the earnings of males and those of females increases substantially.
B)differential between the earnings of males and those of females does not change much.
C)corrected earnings of males are equal to those of similar females.
D)corrected earnings of females are greater than those of similar males.
Q3) In 1961, ____ percent of college degrees were earned by women.
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Chapter 26: Appendix: the Question of Resource Exhaustion
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Q1) 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.
Q2) Generally, the demand for energy in the long run will be
A)approximately equal in elasticity to the demand for energy in the short run.
B)considerably less elastic than in the short run.
C)considerably more elastic than in the short run.
D)perfectly inelastic because we must have energy to survive.
Q3) What happens to a resource as it becomes scarcer?
A)The price rises and this increases the future supply relative to demand.
B)The price rises and this increases the future demand relative to supply.
C)The price falls and this increases the future supply relative to demand.
D)The price falls and this increases the future demand relative to supply.
Q4) When the price of gasoline increases substantially, many consumers will A)turn to fuel saving alternatives like hybrid vehicles.
B)drive less.
C)take public transportation.
D)all of the above are true.
Page 33
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Chapter 25: Appendix: Do Labor Unions Increase the Wages of Workers
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Q1) Which of the following is not a cause of the decline in unionization in the United States?
A)deregulation in transportation and communication industries
B)increased foreign competition
C)growth in the number of smaller firms
D)an increase in the number of workers wishing to be union members
Q2) Which of the following would be an expected result of substantially higher wages in the U.S. automobile industry?
A)an increase in the real wages of workers outside the industry
B)an increase in the price of automobiles produced in the United States
C)a reduction in the demand for foreign-produced automobiles
D)an increase in the profit rate of U.S. automobile producers
Q3) Firms will be much more willing to consent to significant wage increases when A)right-to-work laws are present.
B)the demand for the final product is weak.
C)the firm has low product inventory.
D)the demand for the final product is elastic.
Q4) What common goals, if any, do labor and management share?
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Q5) Why is it that the airline pilots union will likely be stronger and more effective than the fruit pickers union?
Chapter 27: Appendix: Difficult Environmental Cases and the
Role of Government
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Q1) When a park is funded by visitors but not by taxpayers in general,
A)there will be too few parks because most people will not pay to use a park.
B)visitors will be better served because poor service would lead to reductions in revenues.
C)park budgets will decline.
D)park quality will decline.
Q2) For a privately owned business in a competitive market setting,
A)reducing resource use while producing the same output adds to profit and typically reduces waste products and thus cuts pollution as well.
B)when property rights are well-defined and strictly enforced, the firm will be able to pollute air and water without having to bear the cost of the damages imposed on others.
C)wasteful use of resources results in more pollution but greater profit.
D)reducing pollution almost never pays.
Q3) When it comes to environmental policy,
A)choices are influenced by the costs and benefits that decision makers expect.
B)values are subjective, as in other areas of the economy.
C)policy choices often have unintended secondary effects.
D)all of the above are true.
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