28. Which of the following is an example of a negative externality?

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A) A Japanese company begins to produce cars, which causes American workers to lose their jobs.
B) An employee of a chemical company spills acid on his arm, causing severe damage.
C) John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.
D) Sally buys coffee at McDonald's, spills some on her, and burns her arm.
E) Jack attempts to fix his roof, falls off, and breaks his leg.

29. If a chemical factory causes noxious fumes to be emitted in the neighborhood, a third party would be:
A) workers at the factory.
B) factory managers.
C) chemical customers.
D) local homeowners.
E) owners of the factory.

30. Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:
A) poor planning.
B) intentional damages.
C) excessive costs.
D) excessive losses.
E) the economic activity of others.

31. Which if the following is the best example of a public good?
A) Bread.
B) Fish in the ocean.
C) Scrambled satellite broadcasts.
D) National defense.

32. Elasticity has which special meaning for economists?
A) b and c.
B) A ratio of percentage changes.
C) How easily prices adjust to market changes.
D) How price changes as quantities demanded change.
E) When consumers will no longer react to price changes.

33. Exhibit 5-5 Demand curve for computers

In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:
A) elastic.
B) inelastic.
C) unitary elastic.
D) nonelastic.

34. Which of the following is true for a lower price elasticity of demand coefficient?
A) The market is broadly defined.
B) The quantity demanded is more responsive.
C) Few substitutes exist.
D) Many substitutes exist.
E) All of these.

35. The Smith family buys much more macaroni when someone in the family is laid off. This means that the Smiths' ____ is negative.
A) demand curve for macaroni
B) income elasticity for macaroni
C) Engel's law
D) income
E) price elasticity of demand for macaroni

36. If the cross-elasticity of demand for two goods is negative, this means that:
A) only the poor will buy the goods.
B) they are normal goods.
C) the goods are substitutes.
D) the goods are complements.

37. When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:
A) 0.67.
B) 1.5.
C) 2.5.
D) 3.2.
E) 5.0.

38. As the period for firms to expand output is lengthened, the elasticity of the market supply curve will:
A) approach zero.
B) increase.
C) decrease.
D) remain the same since time does not affect the elasticity of market supply.

39. A perfectly elastic supply curve is expressed graphically as a(n):
A) downward sloping line or curve.
B) upward sloping line or curve.
C) vertical line.
D) horizontal line.

40. A law requiring sellers to pay the government a tax per pack on cigarettes has the effect of:
A) shifting the supply curve to the right.
B) shifting the demand curve to the right.
C) shifting the supply curve to the left.
D) shifting the demand curve to the left.

41. Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true?
A) The full tax is always passed on to the consumer no matter how flat (elastic) the demand curve is.
B) The full tax is always passed on to the seller no matter how flat (elastic) the demand curve is.
C) The smaller the portion of a sales tax that is passed on to the consumer.
D) It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller.

42. Consumers tend to maximize:
A) marginal utility.
B) marginal utility per dollar.
C) total utility.
D) money holdings.
E) consumer surplus.

43. At the point where total utility is at its peak, marginal utility is:
A) zero.
B) positive.
C) negative.
D) positive, but declining.
E) positive, but increasing.

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1a