1.   a relatively high base income in a cash assistance program __________.

a.  reduces the incentive to work

b. increases the incentive to work

c. does not affect the incentive to work

d. will reduce the incentive to work through the substitution effect, but will increase the incentive to work through the income effect

2.   Suppose at the start of an election season two candidate with extreme positions are running against each other.  the median voter model predicts that each candidate will become more moderate because __________.

 a.  voters with extreme views will not switch loyalties, but voters in the middle will vote for the candidate whose views are closest to his or her own.

b. median voters will refuse to vote for a candidate who holds extreme views

c. the debates convince each candidate that the other position has some good points

d. voters with extreme views are less likely to vote than are voters with moderate views

3.   An electrician licensing program in the state of North Carolina requires each electrician to obtain a license and renew it each year.  Which of the following is a result of having the licensing program in North Carolina?

a. a decrease in total surplus

b. excess demand for electrical service

c. an increase in the quality of electricians

d. all of the above

4.   The self-interest model of government ___________.

a. suggests that government officials are selfish

b. explains why there are limits on government taxation and spending

c. shows why some government projects take place even if the costs exceed the benefits

d. all of the above

5.   In a constant cost industry, an increase in price causes

a. some firms to exit the industry

b. quantity supplied to remain constant

c. some firms to enter the industry

d. price controls

6.   Suppose the only input used in the generation of solar energy is sunlight, which has a zero cost.  the average total cost of producing electricity is______.

a. zero

b. equal to the marginal cost

c. equal to the average cost

d. immeasurably high

7.   Over decades of choices, the dopamine system is used to learn the benefits for a wide variety of products, with benefit valuations that can be used _________ for new purchases and ________________ for repeat purchases.

a. directly; directly

b. directly; indirectly

c. indirectly; directly

d. indirectly; indirectly

8.   When the EPA requires that specific abatement equipment be installed in cars _____________.

a. total vehicle emissions might increase 

b. total vehicle emissions must decrease, and the most efficient technology is used

c. total emissions will remain the same, but the most efficient technology must be used

d. total emissions must decrease, but the technology may not be the most efficient

9.   Suppose Smith's oil refinery and Jones's paper mill both pollute a river, and both firms operate under a system of marketable pollution permits.  if it costs Smith $45 to reduce pollution by 500 gallons per day, and Jones can reduce costs by $65 by increasing pollution by 500 units per day ____________.

a. the firms cannot gain by trading the right to pollute

b. both firms can benefit if Smith trades the right to increase pollution by 500 gallons to Jones for $30

c. both firms can benefit if Smith trades the right to increase pollution by 500 gallons to Jones for $50

d. both firms can benefit if Jones trades the right to increase pollution by 500 gallons to Smith for $30