When two goods are perfect complements, the indifference curves are
A. straight lines.
B. right angles.
In a state where voters directly decide the size of the education budget, 25 percent want no increase, 30 percent want a decrease, 10 percent want a small increase, and 35 percent want a large increase. If the median voter theorem applies here, what budget decision will result?
A. No increase
C. Small increase
D. Large increase
The wage difference between jobs that require education and those that don’t
A. isn’t likely to be related to productivity differences.
B. encourages workers to bear the cost of acquiring education.
C. is a barrier to obtaining an education.
D. doesn’t affect the supply of workers in the different labor markets.
When leisure is a normal good, the income effect from an increase in wages is manifest in
A. a desire to consume more leisure.
B. a desire to consume less leisure.
C. the backward-bending portion of labor supply.
D. a shift in labor demand.
The liberalism doctrine suggests that the focus of social policy would be to
A. elevate the well-being of all workers.
B. elevate the well-being of those at the bottom of the income distribution.
C. ensure an egalitarian distribution of income.
D. expropriate the factors of production from the capitalist class.
Employers who operate in competitive product markets and choose to practice
discrimination in hiring workers
A. will survive if they increase production and garner a larger market share.
B. will eventually earn zero economic profits.
C. are likely to eventually go out of business.
D. will survive as long as they’re willing to have a smaller market share.
Goods that are difficult to substitute for each other will likely exhibit indifference curves that
A. are less bowed.
B. cross less frequently.
C. are more bowed.
D. have a slope close to –1.
There’s an increasing gap in wages between unskilled and skilled workers in the United
States. One hypothesis to explain the gap is that when the United States increased its
participation in world markets, specialization and the pursuit of comparative advantage
A. fall in domestic demand for unskilled labor.
B. rise in domestic demand for unskilled labor.
C. fall in domestic supply of unskilled labor.
D. rise in domestic supply of unskilled labor.
An example of a transitory change in income is
A. the increase in income that results from a job promotion linked to your education.
B. the increase in income of California orange growers due to an orange-killing frost
C. the annual cost-of-living adjustment to your salary.
D. an increase in income from personal investments.
When the income and substitution effects work in opposite directions,
A. it’s possible that the law of demand is violated.
B. the substitution effect is always positive.
C. the income effect is always positive.
D. Giffen goods aren’t possible.
In a labor market where employers are cutting wages to control costs, from whose
standpoint will the selection be “adverse”?
A. Good workers
B. Poor workers
As a result of the tradeoff between income equality and incentives to work, an optimal
A. will rarely fall short of a full egalitarian society.
B. is consistent only with transfers to the middle class.
C. always falls short of a full egalitarian society.
D. can never be funded through taxes on wage income.
The amount of a commodity that an individual is consuming
A. is affected only by prices.
B. affects the rate at which he or she is willing to trade.
C. is affected only by income.
D. won’t affect the marginal rate of substitution.
Technology is an important factor in explaining the high incomes of superstars because
A. technology is available that can limit access to the superstars.
B. only technologically literate superstars can earn super incomes.
C. technology accounts for differences in incomes within all occupations.
D. technology makes it possible for the best producer to supply every customer at low cost.
The notion of utility is fundamental to utilitarianism and describes the
A. method whereby wealth is stored as flat currency.
B. method by which society chooses to allocate resources.
C. optimal distribution of wealth in society.
D. level of satisfaction derived from a person’s circumstances.
An optimizing consumer will select a consumption bundle in which utility is maximized
A. as long as prices are minimized.
B. when income is maximized.
C. if indifference curves are linear.
D. subject to constraints imposed by the budget.
Taxi drivers in large cities are likely to earn more than taxi drivers in rural areas earn.
One reason for this wage differential could be that
A. driving in a large city is more fun than driving in a rural area.
B. driving in a large city is easier than driving in a rural area.
C. a taxi driver in a large city is unlikely to hit or be hit by an animal.
D. driving a taxi in a large city is more dangerous than driving in a rural area.
Which of the following statements about minimum-wage laws is correct?
A. Minimum-wage laws force a market imbalance between the supply and demand for
B. Minimum-wage laws increase the efficiency of labor markets.
C. Minimum-wage laws are typically associated with a rise in employment among the
D. Minimum-wage laws are most effective at alleviating poverty when labor demand is
The slope of the budget constraint reveals information about the
A. level of income of the consumer.
B. relative price of commodities represented on the axes.
C. preferences of a consumer.
D. endowment of productive resources.
If John says, “I didn’t want to waste my life deciding where to study, since Adam Smith
College seemed good enough,” John is
B. concerned about fairness.
C. a satisficer.
D. inconsistent over time.