Microeconomics Chapter 1 : Practice Problems

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
a. The government raises the minimum wage to $10.00 per hour. Some workers find jobs at the higher wage making these workers better off. Some workers find no job at all because few firms want to hire low-productivity workers at this high wage.

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
b.The government places rent controls on apartments restricting rent to $300.00 per month. Few landlords are willing to produce an apartment at this price causing more homelessness. Some-low-income renters are able to rent an apartment more cheaply.

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
c. The government raises the tax on gasoline by $2.00 per gallon. The deficit is reduced, and people economize on their use of gasoline. there is a boom in bicycle sales.

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
d. The government declares marijuana and cocaine illegal. The price of illegal drugs increases, creating more gangs and gang warfare. Due to the high price of illegal drugs, fewer street drugs are consumed.

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
e. The government prohibits the killing of wolves. The wolf population increases. Sheep and cattle herds suffer losses.

People respond to incentives. Governments can alter incentives and, hence, behavior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated.For each of the following public policies, determine which result was likely the unintended result and which was the unintended consequence.
f. The government bans imports of sugar from South America.South American sugar beet growers can't repay their loans to U.S. banks and turn to more profitable crops such as coca leaves and marijuana. U.S. sugar beet growers avoid a financial crisis.

Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each of the items listed below?
a. Susan can work full time or go to college. She chooses college.

Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each of the items listed below?
b. Susan can work full time or go to college. She chooses work.

Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each of the items listed below?
c. Farmer Jones has 100 acres of land. He had plant corn, which yields 100 bushels per acre, or he can plant beans, which yield 40 bushels per acre. He chooses to plant corn.

Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each of the items listed below?
d. Farmer Jones has 100 acres of land. He had plant corn, which yields 100 bushels per acre, or he can plant beans, which yield 40 bushels per acre. He chooses to plant beans.

Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each of the items listed below?
e. In a and b above and c and d above, which is the opportunity cost of which college for work or work for college? corn for beans or beans for corn?