Question 18

A shopper has the following marginal utility schedule for milk and candy. Milk costs $2 a carton and candy costs $1 a bag. The shopper has $4. How many cartons of milk will he buy? Note the next question uses the same numbers and asks how many bags of candy he will buy.

• 1.5
• 0.5
• 1
• 2

Question 19

using the same numbers as the preceding question, how many bags of candy will be buy

• 1
• 3
• 0.5
• 2

Question 20

The tragedy of the commons is that a fishing area that is open to use to everybody with no restrictions will often have what happen?

• it will be kept secret to all but a few
• it will not be used at all
• it will be the source of fierce fights between the users
• it will be fished o extinction

Question 21

Which of the following is an example of a public good?

• a police car
• a streetlight
• a pet dog
• both a police car and a pet

Question 22

who is rationally ignorant in the theory of public choice called rational ignorance?

• the typical special interest representative
• the typical voter
• the typical congressman
• the typical journalist

Question 23

what is the reason for voting in the theory of rational ignorance

• people get fined if they do not vote
• the voter knows his vote will help determine the outcome of the election
• the voter gets satisfaction (utils) from the process
• people get paid to vote

Question 24

A person has the following schedule of utility for income/money. They have an income of S8 each year. They own a car that is worth $3. if they crash their car. they must replace ii immediately and thus have $3 less from their income to spend on goods. What is their total utility over 2 years if they do not crash their car in year one and do crash it in year 2.

Dollars$5S6$7$8

Marginal Utility 10864

Total utility70788488

• 176 utils
• 158 utils
• 14 utils
• 88 utils

Question 25

Using the same numbers as in the previous question. now the person is offered car insurance. They must pay $2 to the insurance company every year. and in return. the insurance company will replace the car for free ii it crashes. The person does not crash in year 1 and does crash in year 2. What is their total utility over the two years with insurance?

• 16 utils
• 166 utils
• 156 utils
• 158 utils

Question 26

Going by your answers to the previous 2 questions will this person buy the insurance or not'

• He will buy it for year 2, but not for year 1.
• yes
• There isn't enough information to tell
• no

Question 27

A donut and an apple are each $2. The donut has 15 utils and the apple has 10 utils. but the shopper is on a diet (which is already included in the above numbers). Can we still be sure he will buy the donut?

• no
• yes

Question 28

which of the following is a good example of an externality?

• a person smokes in a crowded restaurant
• a drunk person drives his car off a cliff and kills himself
• a person smokes and gets cancer
• a person loses all their money gambling

Question 29

a government creates a welfare program with a guaranteed income of $15,000 and a benefit reduction rate of 20%. what will the payment be to someone earning $10,000?

• $13,000
• $23,000
• $2,000
• $15,000

Question 30

for the same program as in the previous question ( a guaranteed income of $15,000 and a benefit reduction rate of 20%), at what private income will the welfare payment drop to $0

• $75,000
• $15,000
• Whatever the poverty level is
• $300

Question 31

which if the following represents an externality?

• having to pay for food in a supermarket
• having to drive a long way to get to school
• playing your music loudly in an apartment building which bothers your neighbors
• having a usually good meal at a restaurant

Question 32

Why was the marginal revenue product of workers falling in the short-run in our model of the labor market?

• the more workers at this job, the less special the job was
• the workers fired were getting worse
• price of the product was falling as workers made more
• workers had diminishing marginal returns

Question 33

why is the creation of roads a responsibility of the government, but the creation of cars a responsibility of private companies (Ford, Chrysler, and GM)

• cars are public goods and roads are not
• trick question - the government is responsible for creating both
• they both are public goods, but the government chooses not to make cars
• roads are public goods and cars are not

Question 34

what is the defining property of a public good?

• it is produced by the government
• its production does not actually make anyone better off, so it will only exist if the government forces it to be made
• it is a good used by the general public
• it is difficult to stop someone who has not paid for the good from using the good

Question 35

John has a job that is currently paying him $5,000. The government starts a program of paying everyone the amount of money needed to get them to the poverty line, which is $15,000. what is the likely result of this program?

• john earns $5,000 and gets paid $15,000
• john earns $15,000 and gets paid $0
• john earns $0 and gets paid $15,000
• john earns $5,000 and gets paid $10,000

Question 36

what is the poverty line?

• $25,000
• the annual salary of a part time, minimum wage employee working 20 hours a week
• the specific amount of income one requires for a basic standard of living
• the income that someone making zero income is considered to need to stay alive.

Question 37

what does marginal productivity theory of factor input prices state?

• under competition, factor inputs are paid their total revenue product
• under competition, factor inputs are paid their marginal revenue product
• under monopoly, factor inputs are paid the price set by government regulators
• under monopoly, factor inputs are paid their marginal revenue product

Question 38

why did people have so many children in the middle ages?

• the government grafted so many children into the army that it was necessary to have many so some would be available to work the farm
• most countries had a law that married couples had to have a certain minimum number of children
• there was no retirement plan and children often didn't reach adulthood. so the more kids you had the better retirement you would have with their support
• the government paid you for each child you had

Question 39

rational ignorance allows congressmen to do what?

• try to match policies to what pleases the median voter
• follow policies that help the average voter to the detriment of special interests
• vote against the interest of most voters in favor of special interest organizations, and fain votes
• avoid using television ads as the voter is ignorant of what he says in his TV adds anyway

Question 40

why do some people have higher income

• natural ability
• education
• discrimination
• all of the other 3 answers are correct

Question 41

which of the following is a nonexcludable good

• freeways
• electronics
• vehicles
• clothing

Question 42

what is the increase in total cost caused by buying one more input called?

• all of the other 3 answers are correct
• marginal factor cost
• public goods
• positive externalities

Question 43

what is logrolling

• the situation in which average voters all agree to vote for a package of otherwise unrelated laws that they individually favor
• the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor
• the study of political-choice-making using the same tools we use in the rest of economics: rational self-interest
• when one politician votes for a law that would affect the one who voted for him negatively, but that voter doesn't know about it because he would have had to have spent a lot of time researching to find out

Question 44

a person will continue to take more of a good as long as MU>0 for which type of goods?

• goods he has to pay for, but not free goods
• never
• freed goods
• both free goods and goods he has to pay for

Question 45

a shopper at the store buys the combination of goods that they will give them the highest what?

• public utility
• marginal utility
• private utility
• total utility

Question 47

which value for the benefit reduction rate of a welfare program gives the recipients the highest incentive to keep working?

• 20%
• 10%
• 30%
• 100%

Question 48

Which of these is an externality situation?

a) buying a hot at Sonic because you love hot dogs

b) studying hard on a test to get a good grade

c) speeding in your car on the freeway so that there is a good chance of an accident with another driver.

d) watching a scary movie on Netflix

Question 49

a) how does the government get around the free rider problem for public goods

it forces people to pay through the power of taxation

b) when something is made by the government, it is made for free, so there is no problem fo who pays

c)the government has the power to exclude people from using public goods even when private companies can't

d) people will voluntarily contribute to the government when they would not voluntarily pay a private business

Question 50

what happens to the marginal revenue product as more workers are hired when the company is in the region of diminishing marginal returns

• it could either rise, fall, or stay the same
• it rises
• it stays the same
• it falls

Question 51

A worker is making $20,000. The government announces it will pay everyone whatever is necessary to reach the poverty line of $15.000. What can we say about this worker?

a) Since he is earning more than the poverty line, he would certainly choose to continue working.

b) It is very possible that he would stop working

Question 52

What does a cold day do to the utility of a jacket compared to a hot day?

a) lowers it

b) raises it

c) The utility of an item can not be changed by circumstance, so it stays the same

Question 53

To end poverty, a welfare program would have to have what?

a) A guaranteed income level of $0

b) A benefit reduction rate of 0%.

c) A guaranteed income level above the poverty line

d) A benefit reduction rate of 100%

Question 54

The general name for externalities. public goods. and the tragedy of the commons is what?

a) Market failure.

b) Market expubtrag.

c) Market economy.

d) Market perfection.

Question 54

Does money have a diminishing marginal utility?

a) Yes. because of limited storage space.

b) No. because while people may get tired of eating donuts. they never get tired of

c) No. because nothing has diminishing marginal utility.

d) Yes. because the goods It buys have diminishing marginal utility.

Question 56

Which of these was the liberal solution to the problem of poverty?

a) Don't have children till you are married.

b) Get a job.

c) Finish school.

d) More generous welfare programs.

Question 57

Why does the signaling theory of education believe that a college degree increases a worker's value to an employer?

a) College has taught the potential worker many valuable labor skills.

b) Actually the signalling theory predicts a college degree lowers the value of a worker to a business.

c)It signals this worker is willing and able to learn.

d)The student has made valuable labor contacts with his fellow students.