Questions and Answers of Principles Of Microeconomics

Who has a greater opportunity cost of enjoying leisure—a janitor or a surgeon?a. the janitor because his wage is lowerb. the surgeon because his wage is higherc. whoever has the greater income
A person works more hours at a higher wage if the substitution effecta. equals zero.b. equals the income effect.c. is smaller than the income effect.d. is larger than the income effect.
Which of the following events will shift the labor supply curve to the right?a. More dads leave the work force to spend time raising children.b. Great new video games are introduced, enhancing the
A technological advance that increases the marginal product of labor shifts the labor- _________ curve to the _________.a. demand; leftb. demand; rightc. supply; leftd. supply; right
Around 1973, the U.S. economy experienced a significant _________ in productivity growth, coupled with a _________ in the growth of real wages.a. pickup; pickupb. pickup; slowdownc. slowdown;
A bakery operating in competitive markets sells its output for $20 per cake and rents ovens at $30 per hour. To maximize profit, it should rent ovens until the marginal product of an oven isa. 2/3
A storm destroys several factories, reducing the stock of capital. What effect does this event have on factor markets?a. Wages and the rental price of capital both rise.b. Wages and the rental price
Ted leaves his job as a high school math teacher and returns to school to study the latest developments in computer programming, after which he takes a higher-paying job at a software firm. This is
Marshall and Lily work at a local department store. Marshall, who greets customers as they arrive, is paid less than Lily, who cleans the bathrooms. This is an example ofa. a compensating
Barney runs a small manufacturing company. He pays his employees about twice as much as other firms in the area, even though he could pay less and still recruit all the workers he needs. He believes
A business consulting firm hires Robin because she was a math major in college. Her new job does not require any of the mathematics she learned, but the firm believes that anyone who can graduate
A mong full-time U.S. workers, white women earn about _________ percent less than white men, and black men earn about _________ percent less than white men.a. 5; 20b. 5; 40c. 20; 20d. 20; 40
It is difficult to measure to what extent discrimination affects labor market outcomes becausea. data on wages are crucial but not readily available.b. firms misreport the wages they pay to hide
The forces of competition in markets with free entry and exit tend to eliminate wage differentials that arise from discrimination bya. employers.b. customers.c. government.d. all of the above
Do the forces of economic competition tend to exacerbate or ameliorate racial discrimination?
In the United States today, the poorest fifth of the population earns about _________ percent of all income, while the richest fifth earns about _________ percent.a. 2; 70b. 4; 50c. 6; 35d. 8; 25
When comparing income inequality across nations, one finds that the United States isa. the most equal nation in the world.b. more equal than most nations but not the most equal.c. less equal than
Because consumption is largely determined by _________ income, consumption is _________ equally distributed than current income.a. permanent; moreb. permanent; lessc. transitory; mored. transitory;
A utilitarian believes that the redistribution of income from the rich to the poor is worthwhile as long asa. the worst-off members of society benefit from it.b. those contributing to the system are
Rawls’s thought experiment of the “original position”behind the “veil of ignorance” is meant to draw attention to the fact thata. most of the poor do not know how to find better jobs and
Libertarians believe thata. the government should aim to improve the well-being of the worst-off person in society.b. policy should aim for an income distribution that maximizes total happiness of
A negative income tax is a policy under whicha. all people with low income get government transfers.b. the government raises tax revenue without distorting incentives.c. everyone pays less than under
If the benefits from an antipoverty program are phased out as an individual’s income increases, the program willa. encourage greater work effort from the poor.b. lead to an excess supply of labor
Homer buys pizza for $10 and Pepsi for $2. He has income of $100. His budget constraint will shift inward ifa. the price of pizza rises to $12.b. the price of Pepsi falls to $1.c. his income rises to
Marge also buys pizza for $10 and Pepsi for $2. She has income of $200. Her budget constraint will experience a parallel outward shift ifa. the price of pizza falls to $5, the price of Pepsi falls to
At two points on an indifference curve,a. the consumer has the same income.b. the consumer has the same marginal rate of substitution.c. the bundles of goods cost the consumer the same amount.d. the
At any point on an indifference curve, the slope of the curve measures the consumer’sa. income.b. willingness to trade one good for the other.c. perception of the two goods as substitutes or
Bart and Lisa are both optimizing consumers in the markets for shirts and hats, where they pay $100 for a shirt and $50 for a hat. Bart buys 8 shirts and 4 hats, while Lisa buys 6 shirts and 12 hats.
Maggie buys peanut butter and jelly, both of which are normal goods. When the price of peanut butter rises, the income effect induces Maggie to buy _________ peanut butter and _________ jelly.a.
Ned buys wine and bread. When the price of wine rises, the substitution effect induces Ned to buy _________ wine and _________ bread.a. more; moreb. more; lessc. less; mored. less; less
Mr. Burns buys only lobster and chicken. Lobster is a normal good, while chicken is an inferior good.When the price of lobster rises, Mr. Burns buysa. less of both goods.b. more lobster and less
If Edna buys more pasta when the price of pasta increases, we can infer that for Ednaa. pasta is a normal good for which the income effect exceeds the substitution effect.b. pasta is a normal good
Maude’s labor-supply curve slopes upward if, for Maude,a. leisure is a normal good.b. consumption is a normal good.c. the income effect on leisure exceeds the substitution effect.d. the
Consumption when young and consumption when old are both normal goods for Seymour, a worker saving for retirement. When the interest rate falls, what happens to Seymour’s consumption when old?a. It
Raj consumes only cheese and crackers.a. Could cheese and crackers both be inferior goods for Raj? Explain.b. Suppose that cheese is a normal good for Raj while crackers are an inferior good. If the
Darius buys only milk and cookies.a. In year 1, Darius earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. Draw Darius’s budget constraint.b. Now suppose that all prices increase by
Because Elaine has a family history of significant medical problems, she buys health insurance, whereas her friend Jerry, who has a healthier family, goes without. This is an example ofa. moral
George has a life insurance policy that pays his family $1 million if he dies. As a result, he does not hesitate to enjoy his favorite hobby of bungee jumping. This is an example ofa. moral hazard.b.
Before selling anyone a health insurance policy, the Kramer Insurance Company requires that applicants undergo a medical examination. Those with significant preexisting medical problems are charged
Dr. Wexler displays her medical degree in her office waiting room, hoping patients will be impressed that she attended a prestigious medical school. This is an example ofa. moral hazard.b. adverse
The Condorcet paradox illustrates Arrow’s impossibility theorem by showing that pairwise majority votinga. is inconsistent with the principle of unanimity.b. leads to social preferences that are
Georgette is about to win reelection as class president against her challenger Billie. But then Rossana enters the race as well, pulling votes from Georgette and allowing Billie to prevail. The
Two political candidates are vying for town mayor, and the key issue is how much to spend on the annual Fourth of July fireworks. Among the 100 voters, 40 want to spend $30,000, 30 want to spend
One documented deviation from rationality is that many peoplea. tend to be excessively confident in their own abilities.b. change their mind too quickly when they get new information.c. give too much
The experiment called the ultimatum game illustrates that peoplea. play the Nash equilibrium in strategic situations.b. are motivated by the desire for instant gratification.c. care about fairness,

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