14. Which of the following is a normative statement?

    1. Firm a works more efficiently than firm b

    2. A perfectly competitive firm needs not consider its competitors' actions to maximize profits

    3. Substitution effect cannot be positive in a world of two goods, given usual assumptions

    4. All of the above

    5. None of the above

15. If the economy is operating on the production possibilities frontier,

1. Allocations in the economy are Pareto efficient.

2. It can attain some point outside the frontier if the government redistributes income in the economy.

3. There are no idle resources in the economy.

4. It does not imply that it has achieved production efficiency.

5. None of the above.

16. Consider Robinson and Friday producing tanks and fighter jets on their island. Both goods are needed to counteract rabbits that destroy their crops. Assume that only labor is a limiting resource in production. Unit labor requirements (in worker-days per unit) are given in the table below:

	Robinson	Friday
Tanks	10	24
Fighter jets	15	25

1. Robinson should produce both tanks and jets in some proportion, while Friday should only produce tanks

2. Robinson should produce both tanks and jets in some proportion, while Friday should only produce jets

3. Robinson should produce both tanks and jets in some proportion, while Friday should not take part in production

4. Robinson should specialize in tanks, leaving jets for Friday

5. Robinson should specialize in jets, leaving tanks for Friday

17. Mike is a tax accountant. He receives $80 per hour doing tax returns. He can type 5 000 characters per hour into spreadsheets. He can hire an assistant who types 2 500 characters per hour. Which of the following statements are true?

1. Mike should hire the assistant as long as he pays the assistant less than $25 per hour.

2. Mike should hire the assistant as long as he pays the assistant less than $40 per hour.

3. Mike should hire the assistant as long as he pays the assistant less than $50 per hour.

4. Mike should hire the assistant as long as he pays the assistant less than $80 per hour.

5. Mike should not hire an assistant.

18. Scarcity is correctly described by which of the following statements:

1. Scarcity exists if there are more uses for resources than can be satisfied at one time.

2. Scarcity exists if decisions must be made about alternative uses for resources.

3. Scarcity would not exist in a society in which people wanted to help others instead of themselves.

1. Only A is true

2. Only b is true

3. Only C is true

4. A, B, and C are true

5. A and C are true

19. Suppose you find $50. If you choose to use the $50 to go to the football game, your opportunity cost of going to the game is

1. nothing, because you found the money.

2. $50 (because you could have used the $50 to buy other things).

3. $50 (because you could have used the $50 to buy other things) plus the value of the time spent at the game.

4. $50 (because you could have used the $50 to buy other things) plus the value of the time spent at the game, plus the cost of the soda and hot dog you consumed at the game.

5. none of the above.

20. Consider a firm that buys its inputs (K and L) on competitive markets, and sells its output on a competitive market. K costs r per unit, and L costs w per unit. Assume that output and inputs are perfectly divisible, and the profit-maximizing output Y requires the firm to use positive amounts of K and L. Then we can assert that, if this firm actually maximizes profit: