Question 1

People who believe that consumer sovereignty is a reasonable ideal are likely to agree that:

Accepted Answer

A)  people sometimes need to be protected from themselves. 
B)  people's wants are plastic and easily manipulated by advertising. 
C)  people often have self-control problems that make it difficult to figure out exactly what they do want and what is best for themselves. 
D)  people should be allowed to do whatever they want as long as no one else is hurt. 
A)  people sometimes need to be protected from themselves. 
B)  people's wants are plastic and easily manipulated by advertising. 
C)  people often have self-control problems that make it difficult to figure out exactly what they do want and what is best for themselves. 
D)  people should be allowed to do whatever they want as long as no one else is hurt.

Question 2

The most likely reason politicians don't appear to economists to look at policy issues in a cost/benefit framework is that:

Accepted Answer

A)  politicians are not economists. 
B)  politicians don't make rational decisions. 
C)  the marginal costs and marginal benefits facing the politician are not necessarily the ones facing society. 
D)  politicians are focusing on the long-run effects of policies rather than the short-run effects. 
A)  politicians are not economists. 
B)  politicians don't make rational decisions. 
C)  the marginal costs and marginal benefits facing the politician are not necessarily the ones facing society. 
D)  politicians are focusing on the long-run effects of policies rather than the short-run effects.

Question 3

If government's goal is to raise tax revenue and limit efficiency loss, taxation is most effective when:

Accepted Answer

A)  demand or supply is inelastic. 
B)  demand or supply is elastic. 
C)  demand is inelastic and supply is elastic. 
D)  supply is inelastic and demand is elastic. 
A)  demand or supply is inelastic. 
B)  demand or supply is elastic. 
C)  demand is inelastic and supply is elastic. 
D)  supply is inelastic and demand is elastic.

Question 4

Using earnings potential in court cases to place a value on human life implies that a person who earns a high income is more valuable than a person who earns a low income.

Accepted Answer

A) True 
 B)False

Question 5

If resources are allocated efficiently in a market economy:

Accepted Answer

A)  the way final goods and services are distributed does not matter to society. 
B)  the outcome may not be socially desirable if distributional issues are also important. 
C)  the outcome will always be socially desirable. 
D)  each person's utility is maximized, and so the result is Pareto optimal. 
A)  the way final goods and services are distributed does not matter to society. 
B)  the outcome may not be socially desirable if distributional issues are also important. 
C)  the outcome will always be socially desirable. 
D)  each person's utility is maximized, and so the result is Pareto optimal.

Question 6

Government intervention may create more problems than it is designed to solve.

Accepted Answer

A) True 
 B)False

Question 7

People make decisions every day that reflect a finite (as opposed to infinite) valuation of their own lives.

Accepted Answer

A) True 
 B)False

Question 8

Assume that running in a marathon increases a person's risk of dying from almost negligible to about 1 in 50,000. If people know this risk and still choose to run marathons, economists would most likely conclude that people:

Accepted Answer

A)  are irrational. 
B)  place no value on their lives. 
C)  place a finite value on their lives. 
D)  have self-control problems. 
A)  are irrational. 
B)  place no value on their lives. 
C)  place a finite value on their lives. 
D)  have self-control problems.

Question 9

Both liberal and conservative economists believe that:

Accepted Answer

A)  people are little influenced by sociological effects. 
B)  they have nothing in common. 
C)  economic incentives are important. 
D)  that people make choices without reasoning. 
A)  people are little influenced by sociological effects. 
B)  they have nothing in common. 
C)  economic incentives are important. 
D)  that people make choices without reasoning.

Question 10

For government to correct for the failure of market outcome, it must do all of the following except:

Accepted Answer

A)  recognize the problem. 
B)  act only if the marginal costs exceed the marginal benefits. 
C)  have the will to do something positive about the problem. 
D)  have the ability to do something positive about the problem. 
A)  recognize the problem. 
B)  act only if the marginal costs exceed the marginal benefits. 
C)  have the will to do something positive about the problem. 
D)  have the ability to do something positive about the problem.

Question 11

The primary problem with estimating elasticity of demand is that:

Accepted Answer

A)  data on the prices firms charge are unavailable. 
B)  data on the quantities firms sell are unavailable. 
C)  real-world changes in quantity demanded are the result of changes in price only. 
D)  real-world changes in quantity demanded are the result of changes in many variables other than price alone. 
A)  data on the prices firms charge are unavailable. 
B)  data on the quantities firms sell are unavailable. 
C)  real-world changes in quantity demanded are the result of changes in price only. 
D)  real-world changes in quantity demanded are the result of changes in many variables other than price alone.

Question 12

When society achieves economic efficiency, it is:

Accepted Answer

A)  maximizing producer surplus but not consumer surplus. 
B)  maximizing consumer surplus but not producer surplus. 
C)  producing a specified amount of output at the highest possible cost. 
D)  producing a specified amount of output at the lowest possible cost. 
A)  maximizing producer surplus but not consumer surplus. 
B)  maximizing consumer surplus but not producer surplus. 
C)  producing a specified amount of output at the highest possible cost. 
D)  producing a specified amount of output at the lowest possible cost.

Question 13

Which of the following statements is true?

Accepted Answer

A)  Liberal and conservative economists differ less often than laypeople think they do. 
B)  Conservative economists focus on incentives, and liberal economists do not. 
C)  Liberal economists focus on individual choice, and conservative economists do not. 
D)  Most economists discredit individuals' abilities to choose reasonably. 
A)  Liberal and conservative economists differ less often than laypeople think they do. 
B)  Conservative economists focus on incentives, and liberal economists do not. 
C)  Liberal economists focus on individual choice, and conservative economists do not. 
D)  Most economists discredit individuals' abilities to choose reasonably.

Question 14

Anna is expecting a child but has decided that she is not ready to be a mother. She chooses to sell her newborn to Bob and Sue, a couple who have been unable to conceive a child of their own but want one desperately. This is an example of a trade that:

Accepted Answer

A)  would never be permitted in any society. 
B)  may benefit each party but cannot be considered efficient. 
C)  may benefit each party but may not be permitted in a society that believes selling babies is morally wrong. 
D)  should be permitted as long as each party enters into the agreement voluntarily. 
A)  would never be permitted in any society. 
B)  may benefit each party but cannot be considered efficient. 
C)  may benefit each party but may not be permitted in a society that believes selling babies is morally wrong. 
D)  should be permitted as long as each party enters into the agreement voluntarily.

Question 15

Public choice economists focus on:

Accepted Answer

A)  how the invisible hand achieves harmony and equilibrium through the market. 
B)  the tensions among social classes. 
C)  economic incentives faced by politicians. 
D)  cultural and historical aspects of the market. 
A)  how the invisible hand achieves harmony and equilibrium through the market. 
B)  the tensions among social classes. 
C)  economic incentives faced by politicians. 
D)  cultural and historical aspects of the market.

Question 16

If the demand for cigarettes is inelastic, a per-unit tax on cigarettes will cause the quantity demanded to:

Accepted Answer

A)  fall proportionally more than the increase in price caused by the tax. 
B)  fall proportionally less than the increase in price caused by the tax. 
C)  rise proportionally more than the increase in price caused by the tax. 
D)  rise proportionally less than the increase in price caused by the tax. 
A)  fall proportionally more than the increase in price caused by the tax. 
B)  fall proportionally less than the increase in price caused by the tax. 
C)  rise proportionally more than the increase in price caused by the tax. 
D)  rise proportionally less than the increase in price caused by the tax.

Question 17

Governments that impose sin taxes on goods they believe are harmful to the consumer may not take into account deadweight loss because:

Accepted Answer

A)  producer surplus increases when sin taxes are instituted. 
B)  the demand curve reflects individuals' desire but not their ability to purchase. 
C)  the consumer surplus that is lost may not reflect the consumer's welfare. 
D)  individuals are self-interest-seeking rational beings. 
A)  producer surplus increases when sin taxes are instituted. 
B)  the demand curve reflects individuals' desire but not their ability to purchase. 
C)  the consumer surplus that is lost may not reflect the consumer's welfare. 
D)  individuals are self-interest-seeking rational beings.

Question 18

"The consumer is sovereign. Businesses produce what people want. The problem today is that because of externalities, often the decisions of firms do not reflect consumer preferences." The speaker is implying:

Accepted Answer

A)  both market failure and failure of market outcome. 
B)  market failure but not failure of market outcome. 
C)  failure of market outcome but not market failure. 
D)  neither market failure nor failure of market outcome. 
A)  both market failure and failure of market outcome. 
B)  market failure but not failure of market outcome. 
C)  failure of market outcome but not market failure. 
D)  neither market failure nor failure of market outcome.

Question 19

One reason economists have many different views on social policy is that:

Accepted Answer

A)  economic policy is an exact science. 
B)  policy proposals must be based on precise evidence. 
C)  policy proposals are based on various models that focus on different aspects of a problem. 
D)  economic policy cannot involve value judgments. 
A)  economic policy is an exact science. 
B)  policy proposals must be based on precise evidence. 
C)  policy proposals are based on various models that focus on different aspects of a problem. 
D)  economic policy cannot involve value judgments.

Question 20

A liberal economist would never recommend that policy makers cut union wages.

Accepted Answer

A) True 
 B)False

Exam 23: Microeconomic Policy, Economic Reasoning, and Beyond

People who believe that consumer sovereignty is a reasonable ideal are likely to agree that:

The most likely reason politicians don't appear to economists to look at policy issues in a cost/benefit framework is that:

If government's goal is to raise tax revenue and limit efficiency loss, taxation is most effective when:

Using earnings potential in court cases to place a value on human life implies that a person who earns a high income is more valuable than a person who earns a low income.

If resources are allocated efficiently in a market economy:

Government intervention may create more problems than it is designed to solve.

People make decisions every day that reflect a finite (as opposed to infinite) valuation of their own lives.

Assume that running in a marathon increases a person's risk of dying from almost negligible to about 1 in 50,000. If people know this risk and still choose to run marathons, economists would most likely conclude that people:

Both liberal and conservative economists believe that:

For government to correct for the failure of market outcome, it must do all of the following except:

The primary problem with estimating elasticity of demand is that:

When society achieves economic efficiency, it is:

Which of the following statements is true?

Anna is expecting a child but has decided that she is not ready to be a mother. She chooses to sell her newborn to Bob and Sue, a couple who have been unable to conceive a child of their own but want one desperately. This is an example of a trade that:

Public choice economists focus on:

If the demand for cigarettes is inelastic, a per-unit tax on cigarettes will cause the quantity demanded to:

Governments that impose sin taxes on goods they believe are harmful to the consumer may not take into account deadweight loss because:

"The consumer is sovereign. Businesses produce what people want. The problem today is that because of externalities, often the decisions of firms do not reflect consumer preferences." The speaker is implying:

One reason economists have many different views on social policy is that:

A liberal economist would never recommend that policy makers cut union wages.

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

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