Archives

1 WHAT’S NEW IN THE SEVENTH EDITION: There is an additional example about marginal benefits and marginal costs. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  that economics is about the allocation of scarce resources.  […]

8 ❖ Chapter 1/Ten Principles of Economics © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. a. Definition of market failure: a situation […]

182 Chapter 10 Externalities WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “What Should We Do about Climate Change.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: what an externality […]

190 ❖ Chapter 10/Externalities © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. pollution, issue permits for that amount, and allow the firms […]

197 r 11 WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: the defining characteristics of public goods and common resources. why private markets […]

Chapter 11/Public Goods and Common Resources ❖ 203 IV. Conclusion: The Importance of Property Rights A. With both public goods and common resources, the market outcome will be inefficient because of the lack of well-defined property rights. B. This absence […]

208 WHAT’S NEW IN THE SEVENTH EDITION: All tables have been updated to the most recently available numbers. A new In the News box on “Tax Expenditures” has been added. LEARNING OBJECTIVES: By the end of this chapter, students should […]

Chapter 12/The Design of the Tax System ❖ 215 Activity 2—Tax Alternatives Type: In-class assignment Topics: Taxes and fairness Materials needed: None Time: 20 minutes Class limitations: Works in any size class Purpose The impact of taxes can be examined […]

221 WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: what items are included in a firm’s costs of production. the link between a […]

Chapter 13/The Costs of Production ❖ 231 IV. Costs in the Short Run and in the Long Run A. The division of total costs into fixed and variable costs will vary from firm to firm. B. Some costs are fixed […]

241 WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: what characteristics make a market competitive. how competitive firms decide how much output to […]

Chapter 14/Firms in Competitive Markets ❖ 251 6. Therefore, the process of entry or exit ends only when price and average total cost become equal. 7. This implies that the long-run equilibrium of a competitive market must have firms operating […]

262 WHAT’S NEW IN THE SEVENTH EDITION: A new In the News box on “Price Discrimination in Higher Education” has been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand: why some markets have only one seller. […]

272 ❖ Chapter 15/Monopoly D. The Analytics of Price Discrimination 1. Perfect price discrimination describes a situation where a monopolist knows exactly the willingness to pay of each customer and can charge each customer a different price. 2. Without price […]

280 ❖ Chapter 15/Monopoly © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. c. If the government were to build the bridge, it […]

287 stic Competition WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: what market structures lie between monopoly and competition. competition among firms that […]

Chapter 16/Monopolistic Competition ❖ 295 2. Critics of brand names argue that they cause consumers to perceive differences that do not really exist. 3. Economists have defended brand names as a useful way to ensure that goods are of high […]

304 Chapter 16 Oligopoly WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News box on ”Should the N.C.A.A Be Taken to Court?” LEARNING OBJECTIVES: By the end of this chapter, students should understand: what outcomes are […]

Chapter 17/Oligopoly ❖ 313 b. The winner was the program that received the fewest total years in jail. c. The winning strategy, called “tit-for-tat,” occurred where a player would start out cooperating and then do whatever the other player did […]

321 8 roduction WHAT’S NEW IN THE SEVENTH EDITION: The tables and values have been updated to the most recently available numbers. The In The News feature on “The Economics of Immigration” has been updated. LEARNING OBJECTIVES: By the end […]

Chapter 18/The Markets for the Factors of Production ❖ 331 Figure 1 4. The income of the owners of land and capital is determined by the value of the marginal contribution of land and capital to the production process. An […]

340 mination WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “Higher Education as an Investment” and values and tables have been updated. LEARNING OBJECTIVES: By the end of this chapter, students should understand: […]

346 ❖ Chapter 19/Earnings and Discrimination 2. Also, if the government mandates discriminatory practices, then the wage differentials between the groups will continue to exist. 3. Case Study: Discrimination in Sports a. Studies of sports teams suggest that racial discrimination […]

15 w WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “Actual Economists and Virtual Realities.” Figure A-1 has been updated. LEARNING OBJECTIVES: By the end of this chapter, students should understand: how economists […]

Chapter 2/Thinking Like an Economist ❖ 25 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. a. An example of this is a […]

352 WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “International Differences in Income Redistribution.” The introductory section has been updated and tables and values have been updated. LEARNING OBJECTIVES: By the end of […]

358 ❖ Chapter 20/Income Distribution and Poverty 3. Critics of the minimum wage also point out that many teenagers earning the minimum wage are from middle-class families, so that a high minimum wage does a bad job of targeting the […]

363 WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: how a budget constraint represents the choices a consumer can afford. how indifference curves […]

Chapter 21/The Theory of Consumer Choice ❖ 373 a. First, the consumer moves from the initial optimum (point A) to point B. The consumer is equally happy at either of these points, but the marginal rate of substitution at point […]

382 ❖ Chapter 21/The Theory of Consumer Choice © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. initial indifference curve at point C. […]

391 WHAT’S NEW IN THE SEVENTH EDITION: A new Case Study on Left-Digit Bias has been added and a new In the News feature on “Can Brain Science Improve Economics?” has been added. LEARNING OBJECTIVES: By the end of this […]

398 ❖ Chapter 22/Frontiers of Microeconomics D. The Median Voter Is King 1. Example: A society is deciding how much money to spend on a public good. Each voter has a most-preferred budget and prefers outcomes closer to his preferred […]

33 WHAT’S NEW IN THE SEVENTH EDITION: There is a new In The News feature on “Economics within a Marriage.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  how everyone can benefit when people trade with […]

Chapter 3/Interdependence and the Gains from Trade ❖ 41 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. fish, but if he can […]

51 WHAT’S NEW IN THE SEVENTH EDITION: The In the News feature “Price Increases after Disasters” has been updated with a new article. LEARNING OBJECTIVES: By the end of this chapter, students should understand: what a competitive market is. what […]

Chapter 4/The Market Forces of Supply and Demand ❖ 61 6. If the actual market price is higher than the equilibrium price, there will be a surplus of the good. a. Definition of surplus: a situation in which quantity supplied […]

Chapter 4/The Market Forces of Supply and Demand ❖ 71 Quick Check Multiple Choice 1. b 2. b 3. d 4. b 5. a 6. c Problems and Applications 1. a. Cold weather damages the orange crop, reducing the supply […]

Chapter 4/The Market Forces of Supply and Demand ❖ 77 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Because computer software is […]

85 WHAT’S NEW IN THE SEVENTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: the meaning of the elasticity of demand. what determines the elasticity of demand. the […]

94 ❖ Chapter 5/Elasticity and Its Application © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. the percentage change in quantity supplied divided […]

104 WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “President Chávez versus the Market.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: the effects of government policies that place a […]

112 ❖ Chapter 6/Supply, Demand, and Government Policies E. Elasticity and Tax Incidence 1. When supply is elastic and demand is inelastic, the largest share of the tax burden falls on consumers. 2. When supply is inelastic and demand is […]

121 rkets WHAT’S NEW IN THE SEVENTH EDITION: There is a new In the News feature on “The Invisible Hand Can Park Your Car.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: the link between buyers’ willingness […]

Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 131 Figure 3 3. Figure 3 shows the supply and demand for turkey. The price of turkey is P 1, consumer surplus is CS, and producer surplus is PS. Producing more […]

Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 137 producer surplus, while the decline in the price reduces producer surplus. Because consumer surplus rises by B + C + D and producer surplus rises by F + G – […]

144 Chapter 8 of Taxation WHAT’S NEW IN THE SEVENTH EDITION: A new In the News box on “The Tax Debate” has been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  how taxes reduce consumer […]

152 ❖ Chapter 8 /Application: The Costs of Taxation SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Figure 1 shows the supply and demand curves for cookies, with equilibrium quantity Q 1 and equilibrium price P 1. When the government imposes […]

160 WHAT’S NEW IN THE SEVENTH EDITION: A new In the News feature on “Threats to Free Trade” has been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand: what determines whether a country imports or exports […]

170 ❖ Chapter 9/Application: International Trade SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Since wool suits are cheaper in neighboring countries, Autarka would import suits if it were to allow free trade. 2. Figure 1 shows the supply and demand […]

176 ❖ Chapter 9/Application: International Trade 6. a. Figure 10 shows the market for grain in an exporting country. The world price is PW . Figure 10 b. An export tax will reduce the effective world price received by the […]

1) Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are […]

1) Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari’s behavior demonstrates the law of a.price. b.supply. c.demand. d.income. 2) Suppose that a […]

1) Efficiency in a market is achieved when a.a social planner intervenes and sets the quantity of output after evaluating buyers’ willingness to pay and sellers’ costs. b.the sum of producer surplus and consumer surplus is maximized. c.all firms are […]

1) When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation […]

1) An example of a transitory change in income is the a.annual cost of living adjustment to your salary. b.increase in income that results from a job promotion linked to your education. c.increase in income of California orange growers that […]

1) Economists generally agree that the most important tax in the U.S. economy is the a.investment tax. b.sales tax. c.property tax. d.labor tax. 2) Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for […]

1) Scenario 13-9 Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 […]

1) The use of the coordinate system allows a.for the display of the flows of dollars, goods and services, and factors of production in an economic system. b.for the display of how labor and other resources are organized in the […]

1) The marginal rate of substitution is the slope of the indifference curve. a.True b.False 2) Figure 7-10 Which area represents producer surplus when the price is P1? a.BCG b.ACH c.ABGD d.DGH Answer: a 3) Suppose that Angelo and Sonia […]

1) Which of the following is an example of a factor of production? a.rent b.interest c.land d.Social Security payments 2) Which market structure would likely have the highest concentration ratio? a.Monopoly b.Oligopoly c.Monopolistic competition d.Perfect competition Answer: a 3) In […]

1) Bob’s Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true? a.The price of Bob’s bison burgers will be less than Bob’s […]

1) If a worker respond to an increase in the opportunity cost of leisure by taking more leisure, then her labor supply curve is a.upward sloping. b.backward sloping. c.horizontal. d.vertical. 2) Scenario 18-7 Suppose the following events occur in the […]

1) Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision? a.asymmetric information b.political economy c.behavioral economics d.industrial organization 2) […]

1) Scenario 20-6 Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax […]

1) In 2012, the total income of all U.S. residents was approximately $120 billion. a.True b.False 2) Table 15-3 Consider the following demand and cost information for a monopoly. To maximize profit, the monopolist sets price at a. $10. b.$15. […]

1) Two goods are substitutes when a decrease in the price of one good a.decreases the demand for the other good. b.decreases the quantity demanded of the other good. c.increases the demand for the other good. d.increases the quantity demanded […]

1) For a country that is considering the adoption of either a tariff or an import quota on a particular good, an important difference is that a.an import quota has no effect on consumer surplus, while a tariff decreases consumer […]

1) If marginal cost exceeds marginal revenue, the firm a.is most likely to be at a profit-maximizing level of output. b.should increase the level of production to maximize its profit. c.should reduce its average fixed cost in order to lower […]

1) What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to […]

1) If the income effect counteracts the substitution effect, we know that the good in question is a(n) a.complementary good. b.inferior good. c.luxury good. d.normal good. 2) Table 12-13 The table below provides information on the 4 households that make […]

1) Refer to Figure 9-17. When comparing no trade to free trade, the gains from trade amount to a. $400. b. $600. c. $750. d. $1,000. 2) When two variables move in the same direction, the curve relating them is […]

1) After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries, a.the domestic price of coffee will be greater than the world price of coffee. b.the domestic price of coffee […]

1) Figure 8-3 The vertical distance between points A and C represents a tax in the market. The amount of the tax on each unit of the good is a.P3 – P1. b.P3 – P2. c.P2 – P1. d.P4 – […]

1) The relationship between advertising and product differentiation is a.positive; the more differentiated the product, the more a firm is likely to spend on advertising. b.negative; the more differentiated the product, the less a firm is likely to spend on […]

1) Figure 21-8 Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y? a. $3.33 b. $5 c. $15 d. $30 2) Table 12-20 The […]

1) The pollution market failure is an example of the free rider problem. a.True b.False 2) A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost […]

1) A rational decisionmaker takes an action if and only if a.the marginal benefit of the action exceeds the marginal cost of the action. b.the marginal cost of the action exceeds the marginal benefit of the action. c.the marginal cost […]

1) A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies a.enhance equality. b.enhance efficiency. c.increase the reward for working hard. d.All of the above are correct. 2) Assume […]

1) Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income. a.True b.False 2) Relationship Between Years of Education and Annual Income The graph above is a a.bar […]

1) Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. Refer to Table 18-11. The marginal product of labor begins to diminish […]

1) Deciding that A causes B when in fact B causes A is a mistake called omitted variable bias. a.True b.False 2) At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. […]

1) Suppose an influenza pandemic were to significantly decrease the population of a country. We would predict a decrease in the marginal product of land in that country. a.True b.False 2) Which of the following illustrates the concept of a […]

1) Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Which of the following represents Iceland’s production possibilities frontier when 100 labor hours are available? a. b. c. d. Answer: 2) If […]

1) A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures a.can earn economic profits in the short run. b.can earn economic profits in the long run. c.charge a […]

1) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier If the production possibilities frontier shown for Merve is for 8 hours of work, then how long does it take Merve to make one purse? a.1/2 hour b.2 hours c.4 hours d.8 […]

1) In the market for apples in a certain country, consumer surplus increases and total surplus increases when that country a.abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of apples. b.abandons a no-trade policy, adopts a […]

1) In conducting their research, economists face an obstacle that not all scientists face; specifically, in economics, it is often impractical to a.make use of theory and observation. b.rely upon the scientific method. c.conduct laboratory experiments. d.find articles or books […]

1) The philosopher John Rawls argued that a.people would choose a more equal distribution of income if they had to determine an economic distribution system before knowing their place in it. b.people would choose income inequality to allow the maximum […]

1) The indifference curves for perfect substitutes are straight lines. a.True b.False 2) Unemployment could cause this economy to produce at which point(s)? a.L, M b.N, O, P, Q c.N, O, P d.Q Answer: c 3) The consumer’s optimum is […]

1) Figure 9-11 Producer surplus in this market after trade is a.C. b.C + B. c.A + B + D. d.B + C + D. 2) Which of the following statements is not correct? a.The government may use antitrust laws […]

1) When two goods are perfect complements, the indifference curves are right angles. a.True b.False 2) Critics of the minimum wage argue that a.labor demand is inelastic so firms can adjust production. b.too many older employees benefit at the expense […]

1) Which of the following factors does not affect the value of a worker’s marginal product? a.discrimination against a particular group of workers by a firm’s customers b.a worker’s level of disposable income c.a worker’s level of human capital d.compensating […]

1) Why do some policymakers support a consumption tax rather than an earnings tax? a.The average tax rate would be lower under a consumption tax. b.A consumption tax would encourage people to save earned income. c.A consumption tax would raise […]

1) Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about a.the size of labor taxes. b.the importance of labor taxes imposed by the federal government relative to […]

1) Figure 10-19 Note that the lines labeled €Demand€ and €Social Value€are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of […]

1) Consumer surplus is equal to the a.Value to buyers – Amount paid by buyers. b.Amount paid by buyers – Costs of sellers. c.Value to buyers – Costs of sellers. d.Value to buyers – Willingness to pay of buyers. 2) […]

1) Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie’s opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan’s opportunity cost of one apple pie is 1/4 gallon of ice cream, […]

1) A similarity between monopoly and monopolistic competition is that in both market structures a.strategic interactions among sellers are important. b.there are a small number of sellers. c.sellers are price makers rather than price takers. d.there are only a few […]

1) Table 18-7 Refer to Table 18-7. It is apparent from this table that increasing marginal product a.occurs only after the first worker is hired. b.occurs only after the second worker is hired. c.occurs only after the third worker is […]

1) If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase. a.True b.False 2) Under which of the following scenarios would a park be considered a club good? a.Visitors to […]

1) The largest budgetary expense for a typical state or local government is a.public order and safety. b.welfare. c.highways. d.education. 2) The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of […]

1) Wages of doctors tend to be higher than wages of bankers. Which of the following is a compensating differential explaining the difference in wages? a.Doctors have the stress of being responsible for other peoples’ lives while bankers do not. […]

1) All of the following are transfer payments except a.welfare payments. b.unemployment compensation. c.personal income taxes. d.Social Security. 2) An increase in the overall level of prices in an economy is referred to as a.the income effect. b.inflation. c.deflation. d.the […]

1) Suppose that everyone prefers to live in a society without poverty. Further suppose that some private charities are successful in reducing poverty. People who do not contribute to the charities a.receive no external benefit from private antipoverty programs. b.decrease […]

1) Which of the following is an example of a welfare program? a.Temporary Assistance for Needy Families (TANF). b.Capital Gains Tax (CGT). c.Life Cycle Transfers (LCT). d.North American Free Trade Agreement (NAFTA). 2) along a linear, downward-sloping demand curve decreases […]

1) Average variable cost is equal to total variable cost divided by quantity of output. a.True b.False 2) For a typical firm, fixed costs increase in direct proportion to the increases in output. a.True b.False Answer: False 3) Figure 14-13 […]

1) An increase in the value of the marginal product of labor has the effect of increasing the a.demand for labor. b.wage. c.quantity of labor employed. d.All of the above are correct. 2) Scenario 20-5 Suppose the government implemented a […]

1) By driving onto a congested road for which no toll is charged, a driver a.contributes to the overuse of a common resource. b.contributes to a negative-externality problem. c.is inflicting additional time cost on all of the other drivers. d.All […]

1) The federal healthcare spending program that specifically targets the poor is called a.Medicaid. b.Medicare. c.National Institutes of Health. d.Blue Cross/Blue Shield. 2) Which of the following is not an example of a barrier to entry? a.Mighty Mitch’s Mining Company […]

1) In the short run, a firm operating in a competitive industry will shut down if price is a.less than average total cost. b.less than average variable cost. c.greater than average variable cost but less than average total cost. d.greater […]

1) The goal of requiring licenses for hunting and fishing is a.to reduce the use of a common resource. b.to ensure that the people hunting and fishing are qualified. c.to generate revenue for the government. d.to monitor compliance with federal […]

1) In the employer-worker relationship, the employer is regarded as the “principal” and the worker is regarded as the “agent.” a.True b.False 2) When a relevant variable that is not named on either axis changes, a.there will be a movement […]

1) If the current allocation of resources in the market for hammers is inefficient, then it must be the case that a.producer surplus exceeds consumer surplus in the market for hammers. b.consumer surplus exceeds producer surplus in the market for […]

1) Adibok knows that it produces and sells high quality athletic shoes. Wurkout knows that it produces and sells low quality athletic shoes. According to the signaling theory of advertising, a.both Adibok and Wurkout have incentives to spend large amounts […]

1) Figure 7-24 Refer to Figure 7-24. At equilibrium, consumer surplus is a. $18. b.$36. c.$54. d.$72. 2) A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total […]

1) The decisions of buyers and sellers that affect people who are not participants in the market create a.market power. b.externalities. c.profiteering. d.market equilibrium. 2) A local manufacturing plant that emitted sulfur dioxide was forced to stop production because it […]

1) A society consists of three individuals: Larry, Margaret, and Nina. In terms of income and utility, Larry is currently best-off, Margaret ranks in the middle, and Nina is worst-off. Which of the following statements is correct? a.Utilitarianism suggests that […]

1) One method used to control the ability of firms to capture monopoly profit in the United States is through a.government purchase of products produced by monopolists. b.government distribution of a monopolist’s excess production. c.enforcement of antitrust laws. d.regulation of […]

1) At a price of $24, there is a a.surplus of 4 units. b.surplus of 8 units. c.shortage of 4 units. d.shortage of 8 units. 2) A popular resort restaurant will maximize profits if it chooses to stay open during […]

1) In a December 2007 New York Times column Paul Krugman argued in favor of a.protectionism based on the national-security argument. b.protectionism based on the infant-industry argument. c.protectionism based on the unfair-competition argument. d.keeping world markets relatively open. 2) Figure […]

1) Which of the following trade-offs does the production possibilities frontier illustrate? a.If an economy wants to increase efficiency in production, then it must sacrifice equality in consumption. b.Once an economy has reached the efficient points on its production possibilities […]

1) A ‘satisficer” is a person who a.always chooses the best course of action. b.often chooses the worst course of action. c.makes decisions that are merely good enough. d.studies both economics and psychology. 2) Government intervention is necessary to correct […]

1) Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth. a.True b.False 2) Which of the following is not a characteristic […]

1) Economists sometimes give conflicting advice because a.graduate students in economics are encouraged to argue with each other. b.economists have different values and scientific judgment. c.economists acting as scientists do not like to agree with economists acting as policy advisers. […]

1) A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the […]

1) If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly. a.True b.False 2) Devin works as […]

1) Figure 18-7 Refer to Figure 18-7. Which of the following would shift the labor supply curve from S1 to S2? a.technological progress b.a decrease in the price of the firm’s output c.a change in workers’ attitudes toward the work-leisure […]

1) Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier a.her tax obligation divided by her average tax rate. b.the increase in taxes she would pay as a percentage of the rise in her income. c.her tax obligation divided by her income. […]

1) A good will have a more inelastic demand, the a.greater the availability of close substitutes. b.broader the definition of the market. c.longer the period of time. d.more it is regarded as a luxury. 2) An equilibrium occurs in a […]

1) If the price increases in the region of the demand curve between points A and B, we can expect total revenue to a.increase. b.stay the same. c.decrease. d.first increase, then decrease until total revenue is maximized. 2) Corrective taxes […]

1) Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The […]

1) Along the elastic portion of a linear demand curve, total revenue rises as price rises. a.True b.False 2) Tradable pollution permits a.have prices that are set by the government. b.will be more valuable to firms that can reduce pollution […]

1) When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm’s decision? a.The cost of something is what you give up to get it. b.A […]

1) Some states do not have a state income tax. a.True b.False 2) In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers? a.to […]

1) Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What […]

Ten Principles of Economics 81 6. Trade between the United States and Guatemala a. benefits both the United States and Guatemala. b. is a losing proposition for the United States because Guatemalan labor is less expensive than U.S. labor. c. […]

Ten Principles of Economics 41 59. Consider Mandy’s decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, […]

Ten Principles of Economics Multiple Choice – Section 00: Introduction 1. The English word that comes from the Greek word for “one who manages a household” is a. market. b. consumer. c. producer. d. economy. ANSWER: d POINTS: 1 DIFFICULTY: […]

Ten Principles of Economics 101 47. According to Adam Smith, the success of decentralized market economies is primarily due to a. the basic benevolence of society. b. society’s legal system. c. individuals‘ pursuit of self-interest. d. partnerships that are forged […]

192 Ten Principles of Economics Scenario 1-5 Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on […]

Ten Principles of Economics 61 99. It costs a furniture company $8,750 to produce 25 tables. The company’s total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then a. its average cost […]

Externalities Multiple Choice – Section 00: Introduction 1. In a market economy, government intervention a. will always improve market outcomes. b. reduces efficiency in the presence of externalities. c. may improve market outcomes in the presence of externalities. d. is […]

Externalities 2663 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multiple Choice – Section 03: Private Solutions to Externalities 1. Externalities can […]

Externalities 2703 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24. To determine the optimal level of output in a market with […]

Externalities 2503 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9. The supply curve for a product reflects the a. willingness to […]

Externalities 2683 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43. Suppose that Company A’s railroad cars pass through Farmer B’s corn […]

Externalities 2643 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 79. Which of the following require firms to pay to pollute? (i) […]

Externalities 2623 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40. Suppose planting flowering shrubs creates a positive externality equal to $7 […]

Externalities 2563 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 122. One drawback to industrial policy is that a. technology spillovers are […]

Externalities 2583 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 163. Refer to Figure 10–11. “The social value of the last unit […]

Externalities 2543 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 81. If we know that the supply curve for good x fails […]

Externalities 2523 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 42. Negative externalities occur when one person’s actions a. cause another person […]

Externalities 2603 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multiple Choice – Section 02: Public Policies toward Externalities 1. Refer to […]

Externalities 2719 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4. Sheryl sits on her patio and plays her guitar while her […]

Public Goods and Common Resources 2815 80. Refer to Table 11–3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient level of police protection to provide? a. 9 person-hours b. 18 person–hours […]

Public Goods and Common Resources Multiple Choice – Section 00: Introduction 1. For private goods allocated in markets, a. prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. b. prices guide […]

Public Goods and Common Resources 2895 13. You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment that you get from watching the movie is not rival in consumption. a. True b. False […]

2914 Public Goods and Common Resources 7. Are common resources excludable? Are they rival in consumption? ANSWER: No, common resources are not excludable. Yes, they are rival in consumption. POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.50 – LO: 11-1 […]

Public Goods and Common Resources 2795 42. The difference between specific knowledge and general knowledge is that a. the creation of general knowledge is usually more profitable for the creator. b. specific knowledge is excludable, while general knowledge is not […]

Public Goods and Common Resources 2835 118. A town engineer comes to the city council with a proposal to install a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is […]

Public Goods and Common Resources 2755 39. Which of the following goods is excludable but not rival in consumption? a. a congested toll road b. fire protection in a small town c. a tornado siren d. whales in the ocean […]

Public Goods and Common Resources 2875 74. Many species of animals are common resources, and many must be protected by law to keep them from extinction. Why is the cow not one of these endangered species even though there is […]

Public Goods and Common Resources 2775 Multiple Choice – Section 02: Public Goods 1. Because public goods are a. excludable, people have an incentive to be free riders. b. excludable, people do not have an incentive to be free riders. […]

Public Goods and Common Resources 2855 32. Three business people meet for lunch at an Indian restaurant. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost […]

3168 The Design of the Tax System 12. “Income security” programs comprised 33 percent of the federal government’s spending in 2011. Give a few examples of the programs included in this category. ANSWER: Social Security, unemployment insurance, welfare payments POINTS: […]

The Design of the Tax System 3111 48. Which of the following statements is correct? a. Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. b. Horizontal equity is the idea […]

The Design of the Tax System 3011 54. Refer to Scenario 12-3. How much total consumer surplus do Regina and Roger collectively receive from consuming cheesecake? a. $3 b. $6 c. $9 d. $13 ANSWER: d POINTS: 1 DIFFICULTY: Difficulty: […]

The Design of the Tax System Multiple Choice – Section 00: Introduction 1. Who observed that “in this world nothing is certain but death and taxes”? a. Mark Twain b. P.T. Barnum c. Ben Franklin d. Richard Nixon 2. In […]

The Design of the Tax System 3131 88. In 2009, the top 1 percent of income earners a. made about 13 percent of all income. b. paid about 22 percent of all taxes. c. made over 2.5 times the percentage […]

The Design of the Tax System 3071 183. Refer to Table 12-10. If Willie has $170,000 in taxable income, his marginal tax rate is a. 25%. b. 28%. c. 33%. d. 35%. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING […]

The Design of the Tax System 2991 14. When the government taxes labor earnings we can expect people to a. work more so they can keep the same standard of living. b. work less and enjoy more leisure. c. quit […]

The Design of the Tax System 3031 99. Refer to Scenario 12-4. The taxpayer faces a. an average tax rate of 22.5 percent when her income is $30,000. b. an average tax rate of 22.0 percent when her income is […]

The Design of the Tax System 3051 Table 12-4 Income Tax rate $0 to $40,000 25% $40,000 to $100,000 40% Over $100,000 60% 142. Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000? […]

The Design of the Tax System 3091 6. Suppose New York City passes a local “big gulp” tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the […]

The Design of the Tax System 3151 40. Tax evasion is illegal, but tax avoidance is legal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.56 – LO: 12–2 NATIONAL STANDARDS: United States – BUSPROG: […]

The Design of the Tax System 2951 34. The government taxes corporate income on the basis of a. profit. b. the amount the firm receives for the goods or services it sells. c. the number of employees. d. All of […]

The Design of the Tax System 2971 75. When government receipts exceed total government spending during a fiscal year, the difference is a. a budget surplus. b. a budget deficit. c. the national debt. d. automatically refunded. ANSWER: a POINTS: […]

The Costs of Production 3323 2. In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a a. car factory. b. pin factory. c. washing machine factory. […]

The Costs of Production Multiple Choice – Section 00: Introduction 1. Analyzing the behavior of the firm enhances our understanding of a. what decisions lie behind the market supply curve. b. how consumers allocate their income to purchase scarce resources. […]

The Costs of Production 3243 121. Refer to Scenario 13-13. Christine could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her […]

The Costs of Production 3343 57. There is general agreement among economists that the long–run time period exceeds one year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.62 – LO: 13-4 NATIONAL STANDARDS: United […]

The Costs of Production 3303 34. If a firm experiences constant returns to scale at all output levels, then its long–run average total cost curve would a. slope downward. b. be horizontal. c. slope upward. d. slope downward for low […]

The Costs of Production 3223 79. Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie’s annual opportunity cost […]

The Costs of Production 3357 Scenario 13-22 Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and […]

The Costs of Production 3263 39. Refer to Table 13-2. What is the marginal product of the fourth worker? a. 300 units b. 200 units c. 100 units d. 50 units ANSWER: d POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: […]

The Costs of Production 3283 78. Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve? a. Producing an additional cookie is always […]

The Costs of Production 3203 37. Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba’s annual opportunity […]

Firms in Competitive Markets Multiple Choice – Section 00: Introduction 1. A firm has market power if it can a. maximize profits. b. minimize costs. c. influence the market price of the good it sells. d. hire as many workers […]

Firms in Competitive Markets 3611 16. A firm’s incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Easy […]

Firms in Competitive Markets 3511 182. Refer to Figure 14-5. When market price is P2, a profit-maximizing firm‘s losses can be represented by the area a. (P4 – P2) × Q2. b. (P2 – P1) × (Q2-Q1). c. At a […]

Firms in Competitive Markets 3431 25. Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning? a. $0.50 b. $7.50 c. $10 d. There is insufficient data to determine the firm’s profit. ANSWER: d […]

Firms in Competitive Markets 3411 77. Firms operating in competitive markets produce output levels where marginal revenue equals a. price. b. average revenue. c. total revenue divided by output. d. All of the above are correct. ANSWER: d POINTS: 1 […]

Firms in Competitive Markets 3627 64. If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic. a. True b. False ANSWER: False POINTS: […]

Firms in Competitive Markets 3491 145. Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest […]

Firms in Competitive Markets 3551 13. Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on […]

Firms in Competitive Markets 3471 102. Refer to Scenario 14-2. To maximize its profit, the firm should a. increase its output. b. continue to produce 1,000 units. c. decrease its output but continue to produce. d. shut down. ANSWER: a […]

Firms in Competitive Markets 3531 219. When determining whether to shut down in the short run, a competitive firm should ignore (i) fixed costs. (ii) variable costs. (iii) sunk costs. a. (iii) only b. (i) and (iii) only c. (ii) […]

Firms in Competitive Markets 3451 64. Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75 per loaf. At this new price, what is Bob’s profit-maximizing […]

Firms in Competitive Markets 3571 50. Which of the following statements is not correct? a. In a long–run equilibrium, marginal firms make zero economic profit. b. To maximize profit, firms should produce at a level of output where price equals […]

Firms in Competitive Markets 3391 36. Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Because of firm location or product differences, some firms can […]

Firms in Competitive Markets 3591 89. In the transition from the short run to the long run, the number of firms in a competitive industry is a. fixed. b. increasing at a constant rate. c. decreasing. d. able to adjust […]

Monopoly 3901 23. A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.72 […]

Monopoly 3721 74. Refer to Figure 15-4. The demand curve for a monopoly firm is depicted by curve a. A. b. B. c. C. d. D. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.72 – LO: 15-2 NATIONAL […]

Monopoly 3781 188. A reduction in a monopolist‘s fixed costs would a. decrease the profit-maximizing price and increase the profit–maximizing quantity produced. b. increase the profit-maximizing price and decrease the profit–maximizing quantity produced. c. not effect the profit-maximizing price or […]

Monopoly Multiple Choice – Section 00: Introduction 1. A competitive firm a. and a monopolist are price takers. b. and a monopolist are price makers. c. is a price taker, whereas a monopolist is a price maker. d. is a […]

Monopoly 3841 42. Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket? a. $25,000 b. $50,000 c. $75,000 […]

3932 Monopoly 31. Refer to Table 15-22. The marginal revenue becomes negative with the production of which unit of output? ANSWER: 70th POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.71 – LO: 15-1 NATIONAL STANDARDS: United States – BUSPROG: Analytic […]

Monopoly 3881 23. One problem with government operation of monopolies is that a. a benevolent government is likely to be interested in generating profits for political gain. b. monopolies typically have rising average costs. c. the government typically has little […]

Monopoly 3861 81. If a monopolist can practice perfect price discrimination, the monopolist will a. eliminate consumer surplus. b. eliminate deadweight loss. c. maximize profits. d. All of the above are correct. ANSWER: d POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING […]

Monopoly 3921 78. In many countries, the government chooses to “internalize” the monopoly by owning monopoly providers of goods and services. (In some cases these firms are “nationalized,” and the government actually buys or confiscates firms that operate in monopoly […]

Monopoly 3761 Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. Price Output Total Costs $5 0 $3 $4 5 $8 $3 10 $20 $2 15 $33 $1 20 $53 […]

Monopoly 3701 32. For a monopoly firm, which of the following equalities is always true? a. price = marginal revenue b. price = average revenue c. price = total revenue d. marginal revenue = marginal cost ANSWER: b POINTS: 1 […]

Monopoly 3661 33. A fundamental source of monopoly market power arises from a. perfectly elastic demand. b. perfectly inelastic demand. c. barriers to entry. d. availability of “free” natural resources, such as water or air. ANSWER: c POINTS: 1 DIFFICULTY: […]

Monopoly 3821 57. Refer to Scenario 15-4. The profit-maximizing monopolist will earn profits of a. $6,400. b. $3,200. c. $1,600. d. $800. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Challenging LEARNING OBJECTIVES: ECON.MANK.15.73 – LO: 15-3 NATIONAL STANDARDS: United States – […]

Monopoly 3681 74. Refer to Figure 15–2. Which of the following reasons describes the fundamental barrier to entry for the monopoly in the figure? a. monopoly resources b. government regulation c. the production process d. Both a and b are […]

Monopoly 3801 23. A monopoly market a. always maximizes total economic well-being. b. always minimizes consumer surplus. c. generally fails to maximize total economic well-being. d. generally fails to maximize producer surplus. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING […]

Monopoly 3741 Table 15-4 A monopolist faces the following demand curve: Price Quantity $30 0 $25 2.5 $20 5 $15 7.5 $10 10 $5 12.5 $0 15 110. Refer to Table 15-4. If the monopolist produces 10 units, what is […]

Monopolistic Competition Multiple Choice – Section 00: Introduction 1. Which of the following is a characteristic of monopolistic competition? a. ownership of a key resource by a single firm b. free entry c. identical product d. patents 2. The market […]

Monopolistic Competition 4161 15. A monopolistically competitive market is like a competitive market in that a. both market structures feature easy entry by new firms in the long run. b. the main objective of firms in both market structures is […]

Monopolistic Competition 4141 49. Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that a. have elastic demand curves. b. are very different from […]

Monopolistic Competition 4181 54. Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.80 – LO: 16-3 NATIONAL STANDARDS: United […]

Monopolistic Competition 4121 7. Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell a. highly–differentiated consumer goods. b. goods produced by natural monopolies. c. agricultural products. d. products with a limited shelf […]

Monopolistic Competition 4101 225. Monopolistic competition is an inefficient market structure because a. price exceeds marginal cost. b. it has a deadweight loss, just as monopoly does. c. at the equilibrium, some consumers will value the good at more than […]

Monopolistic Competition 3961 40. Refer to Table 16-2. Which industry has the lowest concentration ratio? a. Industry J b. Industry K c. Industry L d. Industry M ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Challenging LEARNING OBJECTIVES: ECON.MANK.15.78 – LO: 16-1 […]

Monopolistic Competition 4081 182. When a monopolistically competitive firm is in long–run equilibrium, a. price is equal to average total cost. b. price is equal to marginal cost. c. price is equal to marginal revenue. d. the firm operates at […]

Monopolistic Competition 4001 31. If “too much choice” is a problem for consumers, it would occur in which market structure(s)? a. perfect competition b. monopoly c. monopolistic competition d. perfect competition and monopolistic competition ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: […]

4198 Monopolistic Competition 20. Refer to Figure 16-12. If this firm profit–maximizes, what price will it charge? ANSWER: $58 POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.79 – LO: 16–2 NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC: Monopolistic […]

Monopolistic Competition 4041 107. Refer to Figure 16–10. If the firm were to produce 154.92 units of output, a. efficient scale would be realized. b. ATC would be at its minimum value. c. the firm would sustain a loss of […]

Monopolistic Competition 3981 83. Of the following market structures, which are considered imperfectly competitive? I. Perfect competition II. Monopoly III. Monopolistic competition IV. Oligopoly a. III only b. II and III c. III and IV d. II, III, and IV […]

Monopolistic Competition 4061 143. Refer to Scenario 16-3. How much profit will Peter earn each day if he chooses the price and quantity that maximize his profit? a. $176 b. $208 c. $225 d. $352 ANSWER: a POINTS: 1 DIFFICULTY: […]

Monopolistic Competition 4021 70. Refer to Figure 16-4. Assume the firm in the figure is currently producing 20 units of output and charging $925. The firm a. will increase its profits if it raises its price and reduces its production […]

Oligopoly 4433 47. Ford and General Motors are considering expanding into the Vietnamese automobile market. Devise a simple prisoners’ dilemma game to demonstrate the strategic considerations that are relevant to this decision. ANSWER: The answer should present two strategies for […]

Oligopoly 4313 21. Refer to Table 17-13. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. If they both agree to cooperate […]

4446 Oligopoly Table 17–32 Suppose that Angelina and Brad own the only two professional photography stores in town. Each must choose between a low price and a high price for senior photo packages. The annual economic profit from each strategy […]

Oligopoly 4353 98. Refer to Figure 17-3. The dominant strategy for Hector is to a. clean, and the dominant strategy for Bart is to clean. b. clean, and the dominant strategy for Bart is to refrain from cleaning. c. refrain […]

Oligopoly 4333 58. Refer to Scenario 17-4. In 1971, Congress passed a law that banned cigarette advertising on television. If cigarette companies are profit maximizers, it is likely that a. neither company opposed the ban on advertising. b. Brown Inc. […]

Oligopoly 4253 64. Refer to Table 17-7. Assume there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. What price will […]

Oligopoly 4393 9. Which government entity is charged with investigating and enforcing antitrust laws? a. the U.S. Justice Department b. the U.S. Commerce Department c. the U.S. Treasury Department d. the Bureau of Alcohol, Tobacco, and Firearms ANSWER: a POINTS: […]

Oligopoly 4293 139. The theory of oligopoly provides another reason that free trade can benefit all countries because a. increased competition leads to larger deadweight losses. b. as the number of firms within a given market increases, the price of […]

Oligopoly 4373 135. Refer to Table 17-26. If both firms follow a dominant strategy, Firm A’s profits (losses) will be a. $–12m b. $-24m c. $–60m d. $–100m ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.84 – LO: […]

Oligopoly 4273 98. Refer to Table 17-12. Suppose we observe that the price of a gallon of gasoline in Driveaway is $5; we observe as well that a particular seller’s profit is $150. Given this observation, which of the following […]

Oligopoly 4233 Table 17-2 Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They […]

Oligopoly 4413 50. Refer to Scenario 17-5. If the restaurant is unable to use tying, what is the profit-maximizing price to charge for a salad? a. $16 b. $14 c. $12 d. $7 ANSWER: d POINTS: 1 DIFFICULTY: Difficulty: Moderate […]

Oligopoly Multiple Choice – Section 00: Introduction 1. Which of the following statements about oligopolies is not correct? a. An oligopolistic market has only a few sellers. b. The actions of any one seller can have a large impact on […]

The Markets for the Factors of Production 4679 True/False and Short Answer 1. A firm’s demand for labor is derived from its decision to supply a good in another market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: […]

The Markets for the Factors of Production 4639 68. Consider the labor market for short-order cooks. A labor-augmenting technological change such as a faster food processor will cause a. both equilibrium wages and equilibrium employment to increase. b. both equilibrium […]

The Markets for the Factors of Production 4559 189. Refer to Scenario 18-2. If the price of fresh Pacific salmon were to decrease significantly, it is most likely that Gertrude would a. reduce her demand for crew members. b. hire […]

The Markets for the Factors of Production 4539 152. Refer to Table 18-9. Suppose this firm charges a price of $5 per unit of output and pays workers a wage equal to $160 per day. How many workers should this […]

The Markets for the Factors of Production 4479 28. Juanita is trying to convince the owner of a jewelry store to hire her. She argues that she could help the shop sell an additional three rings per day for a […]

The Markets for the Factors of Production 4499 69. Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage and that labor is the only input that varies […]

The Markets for the Factors of Production Multiple Choice – Section 00: Introduction 1. In 2012, the total income of all U.S. residents was about a. $10 billion. b. $15 billion. c. $10 trillion. d. $15 trillion. ANSWER: d POINTS: […]

The Markets for the Factors of Production 4579 2. For a worker, the opportunity cost of an hour of leisure a. rises by $8 when his wage rises by $8 per hour. b. falls by $8 when his wage rises […]

The Markets for the Factors of Production 4699 61. The marginal product of land depends on the quantity of land that is available. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.91 – LO: 18-4 […]

The Markets for the Factors of Production 4659 28. Assume all capital is owned by firms, rather than by households. Under this assumption, capital is paid according to the value of its marginal product a. only if this income is […]

The Markets for the Factors of Production 4711 19. Refer to Figure 18-12. If the shop charges $120 per repair, then what is the value of the marginal product of the third mechanic? ANSWER: The marginal product of the third […]

The Markets for the Factors of Production 4519 110. Refer to Table 18-1. Suppose that the firm pays its workers $50 per day. Each unit of output sells for $20. How many days of labor should the firm hire? a. […]

The Markets for the Factors of Production 4599 42. Which of the following events would shift a labor supply curve? (i) immigration of high-skilled workers (ii) immigration of low-skilled workers (iii) changes in the number of women willing to work […]

The Markets for the Factors of Production 4619 30. Consider the labor market for short-order cooks. An increase in the wages paid to fast-food workers will cause a. both equilibrium wages and equilibrium employment to increase in the market for […]

Earnings and Discrimination 4903 11. The human-capital theory of education maintains that workers who complete specific levels of education enhance their productivity through education. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.93 – LO: […]

Earnings and Discrimination 4823 203. Sometimes wages are set above the equilibrium level when firms pay a. workers with more seniority higher wages than newly-hired workers. b. efficiency wages to reduce turnover. c. compensating differentials to workers who work the […]

Earnings and Discrimination 4763 83. Refer to Scenario 19-1. Ferris is carefully considering the options that each recruiter presents. On the basis of knowledge obtained in his economics class, Ferris concludes that a. the lifeguard job will be more fun […]

Earnings and Discrimination 4883 81. If firms are competitive, then labor-market discrimination a. cannot exist in either the short run or the long run. b. will be more of a problem than if the market were monopolistic or imperfectly competitive. […]

Earnings and Discrimination 4743 41. Jobs that involve pleasant work, as opposed to jobs that involve unpleasant work, usually pay a. higher wages, because jobs that involve pleasant work typically require more education than do jobs that involve unpleasant work. […]

Earnings and Discrimination 4803 163. Which of the following statements represents the idea behind signaling in education? a. Education can turn an unproductive person into a productive person. b. Education increases the marginal productivity of naturally productive workers. c. More […]

Earnings and Discrimination 4863 36. Which of the following is an example of labor-market discrimination? You may assume that worker A and worker B have identical characteristics except for the ones listed. A firm offers a higher salary to worker […]

Earnings and Discrimination 4783 122. The difference in wages paid to major–league baseball players and minor-league baseball players is most likely due to a. differences in chance. b. differences in natural ability. c. the fact that the players‘ union is […]

4922 Earnings and Discrimination 67. The National Collegiate Athletic Association (NCAA) has long argued that nationally-prominent college athletes are compensated with an investment in human capital that far exceeds the monetary reward of playing professional sports. Examine this argument in […]

Earnings and Discrimination 4843 241. The theory of efficiency wages challenges the assumption that a. workers are efficient. b. workers have an incentive to shirk their responsibilities to their employers. c. wages must always adjust to balance labor supply and […]

Earnings and Discrimination Multiple Choice – Section 01: Some Determinants of Equilibrium Wages 1. When the supply of workers is plentiful, one would predict that market wages would be a. determined outside the domain of economic theory. b. determined solely […]

Thinking Like an Economist Multiple Choice – Section 00: Introduction 1. Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but […]

Income Inequality and Poverty 5021 131. In the United States, a typical worker‘s income peaks around age a. 70. b. 60. c. 50. d. 40. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.96 – LO: 20-1 NATIONAL STANDARDS: […]

Income Inequality and Poverty 5101 43. Which of the following is not correct? a. Welfare is a broad term that includes a variety of government programs designed to help poor people. b. Since the early 1970s, welfare benefits adjusted for […]

Income Inequality and Poverty 5041 172. Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality? a. in-kind transfers b. economic life cycle c. transitory income d. All […]

Income Inequality and Poverty 5121 10. A U.S. family earning $80,000 would be in the top 20 percent of income distribution in 2011. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.96 – LO: 20-1 […]

Income Inequality and Poverty 5061 37. The maximin criterion is attributed to which political philosophy? a. utilitarianism b. liberalism c. libertarianism d. repubicanism ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.97 – LO: 20-2 NATIONAL STANDARDS: United States […]

Income Inequality and Poverty 4961 Table 20-3 The Distribution of Income in Edgerton Group Annual Family Income Top Fifth $88,000 and over Fourth Fifth $76,000 – 87,999 Middle Fifth $44,000 – 75,999 Second Fifth $28,000 – 43,999 Bottom Fifth Under […]

Income Inequality and Poverty 5001 94. The poverty line is adjusted each year to reflect changes in the a. number of people currently on public assistance. b. level of prices. c. nutritional content of an “adequate” diet. d. size of […]

Income Inequality and Poverty 4981 63. The poverty rate is a. a measure of income inequality across families. b. the percentage of the population whose family income falls below a specified level. c. an absolute level of income set by […]

5152 Income Inequality and Poverty 28. The regular pattern of income variation over a person’s life is called the . ANSWER: life cycle POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.96 – LO: 20-1 NATIONAL STANDARDS: United States – BUSPROG: […]

Income Inequality and Poverty 5141 62. Explain what is meant by “in-kind transfer” programs. Briefly outline the advantages and disadvantages of an in–kind transfer program. ANSWER: An in-kind transfer program distributes specific goods and services to individuals who meet some […]

Income Inequality and Poverty 5081 6. When designing public policies, which income group would philosopher John Rawls argue needs the most attention? a. Individuals located in the bottom fifth of the income distribution. b. Individuals located at the average income […]

Income Inequality and Poverty Multiple Choice – Section 00: Introduction 1. In the United States, labor earnings are about what percent of total income? a. 75 percent b. 70 percent c. 67 percent d. 50 percent ANSWER: c POINTS: 1 […]

The Theory of Consumer Choice 5359 8. Refer to Figure 21-30. Suppose Budget Constraint B applies. If the consumer’s income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers? ANSWER: […]

The Theory of Consumer Choice 5263 93. If the income effect counteracts the substitution effect, we know that the good in question is a(n) a. complementary good. b. inferior good. c. luxury good. d. normal good. ANSWER: b POINTS: 1 […]

The Theory of Consumer Choice 5243 51. A consumer has preferences over two goods, X and Y. Suppose we graph this consumer’s preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on […]

The Theory of Consumer Choice 5203 73. The slope of the budget constraint is determined by the a. relative price of the goods measured on the axes. b. relative price of the goods measured on the axes and the consumer’s […]

The Theory of Consumer Choice 5343 43. Shelley wins $1 million in her state’s lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her. a. […]

The Theory of Consumer Choice 5183 33. Refer to Figure 21-7. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B is 50. What is the price of a DVD? a. […]

The Theory of Consumer Choice 5223 10. Refer to Figure 21-18. Bundle C represents a point where a. MRSxy > Py/Px. b. MRSxy = Px/Py. c. MRSxy < Px/Py. d. MRSxy > Px/Py. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Challenging […]

The Theory of Consumer Choice 5283 Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 131. Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve’s […]

The Theory of Consumer Choice Multiple Choice – Section 00: Introduction 1. Which of the following does not represent a tradeoff facing a consumer? a. choosing to purchase more of all goods b. choosing to spend more time on leisure […]

The Theory of Consumer Choice 5303 25. Which of the following is an example of a Giffen good? a. fish in Japan b. rice in the Chinese province of Hunan c. pork in India d. Both a and b are […]

The Theory of Consumer Choice 5323 62. Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns […]

Frontiers of Microeconomics 5423 84. A brand of wine is priced at only $5 per bottle, far below the market price of most high quality wines. Before any reputation exists for the wine, consumers buy very little of this inexpensive […]

Frontiers of Microeconomics 5443 16. Under majority rule, the order in which items are voted on is a. unimportant, and this is a lesson of the Condorcet paradox. b. unimportant, and this is a lesson of Arrow’s impossibility theorem. c. […]

Frontiers of Microeconomics 5563 29. The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow’s properties of a desirable voting system, pairwise majority voting will always satisfy transitivity. a. True b. False ANSWER: False […]

Frontiers of Microeconomics 5483 85. Arrow’s impossibility theorem shows that no voting system can satisfy which of the following properties? a. unanimity and transitivity only b. transitivity and independence of irrelevant alternatives only c. no dictators and transitivity only d. […]

Frontiers of Microeconomics 5543 39. According to behavioral economics, participants in a half-marathon are likely to have trained a. more than they planned and run faster than they anticipated. b. more than they planned but run slower than they anticipated. […]

Frontiers of Microeconomics 5577 Scenario 22-6 Shana owns a boutique that sells high-end women’s clothing and accessories. Katie works part- time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that […]

Frontiers of Microeconomics 5403 39. Employers can try to overcome the moral–hazard problem involving their employees by a. paying their employees more often. b. paying their employees below-equilibrium wages since the employees will likely shirk some of their responsibilities. c. […]

Frontiers of Microeconomics 5463 Table 22-7 Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. […]

Frontiers of Microeconomics 5503 126. Assume there are 4065 voters in a certain small town and let x = the preferred number of dollars charged monthly to support local parks. For Voters 1-1050, x = $10; for voters 1051-2121, x= […]

Frontiers of Microeconomics Multiple Choice – Section 00: Introduction 1. Which of the following is not correct? a. Economics is a study of the choices that people make and the resulting interactions they have with one another. b. In areas […]

Frontiers of Microeconomics 5523 159. Economic policy that appears to be ideal in an economics textbook may not be the final policy that is approved by elected politicians because a. sometimes a politician’s self interest may conflict with the national […]

The Market Forces of Supply and Demand 1087 24. Refer to Table 4-15. Assuming these are the only four suppliers in this market and the function for market demand is QD=1000-100P, where QD is the quantity demanded and P is […]

The Market Forces of Supply and Demand 1055 62. Individual supply curves are summed vertically to obtain the market supply curve. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.19 – LO: 4-3 NATIONAL STANDARDS: […]

Elasticity and Its Application 1297 54. A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. […]

Elasticity and Its Application 1317 89. If the price elasticity of supply is zero, then a. supply is more elastic than it is in any other case. b. the supply curve is horizontal. c. the quantity supplied is the same, […]

Elasticity and Its Application 1157 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1158 Elasticity and Its Application Table 5-4 The following […]

Elasticity and Its Application 1197 188. Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is a. ignoring the law of demand. b. assuming that the demand […]

Elasticity and Its Application 1217 226. Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of a. $20 and $40. b. $40 and$50. c. $40 and$60. d. $50 and$70. ANSWER: c POINTS 1 DIFFICULTY: Difficulty: […]

Elasticity and Its Application 1177 148. Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna’s demand for gas is represented by demand curve a. […]

Elasticity and Its Application 1237 Figure 5-13 10. Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to a. 0.71. b. 0.85. c. 1.18. d. 1.40. ANSWER: b POINTS: […]

Elasticity and Its Application 1357 36. If a firm is facing elastic demand, then the firm should decrease price to increase revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.23 – LO: 5-1 NATIONAL […]

Elasticity and Its Application 1117 33. Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports […]

Elasticity and Its Application 1337 32. In the early 1970s, OPEC’s goal was to a. decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. b. increase the world-wide price of […]

1376 Elasticity and Its Application 7. Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the […]

Elasticity and Its Application 1137 Table 5-1 Good Price Elasticity of Demand A 1.9 B 0.8 73. Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5–1? a. A is a luxury and […]

Supply, Demand, and Government Policies 1435 71. When a binding price floor is imposed on a market to benefit sellers, a. every seller in the market benefits. b. all buyers and sellers benefit. c. every seller who wants to sell […]

Supply, Demand, and Government Policies 1635 14. A price ceiling is a legal minimum on the price at which a good or service can be sold. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.27 – […]

Supply, Demand, and Government Policies 1495 168. Refer to Table 6-5. Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market? a. 0 units b. 30 units […]

Supply, Demand, and Government Policies 1475 137. Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be a. no surplus. b. a surplus of 10 units. c. a surplus of […]

1694 Supply, Demand, and Government Policies 12. Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus? ANSWER: A price floor set at […]

Supply, Demand, and Government Policies 1535 17. If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the demand curve. b. upward shift of the demand curve. c. decrease in […]

Supply, Demand, and Government Policies 1455 105. Refer to Figure 6-6. In which of the following cases would sellers have to develop a rationing mechanism? a. a price ceiling set at $8 b. a price ceiling set at $6 c. […]

Supply, Demand, and Government Policies Multiple Choice – Section 00: Introduction 1. Which of the following is not correct? a. Economists have two roles: scientist and policy adviser. b. As scientists, economists develop and test theories to explain the world […]

Supply, Demand, and Government Policies 1515 208. The minimum wage has its greatest impact on the market for a. female labor. b. older labor. c. black labor. d. teenage labor. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.27 – […]

Supply, Demand, and Government Policies 1575 94. Refer to Figure 6-22. The price paid by buyers after the tax is imposed is a. $3.00. b. $3.50. c. $5.00. d. $6.00. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.28 – […]

Supply, Demand, and Government Policies 1595 130. Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed? a. $16 b. between $16 […]

Supply, Demand, and Government Policies 1615 170. Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective […]

Supply, Demand, and Government Policies 1655 74. In an unregulated labor market, the wage adjusts to balance labor supply and labor demand. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.27 – LO: 6-1 NATIONAL STANDARDS: […]

Supply, Demand, and Government Policies 1555 59. If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will a. not change, and the […]

Supply, Demand, and Government Policies 1675 133. Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: […]

Consumers, Producers, and the Efficiency of Markets 1893 58. Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus due to new producers entering the market would […]

Consumers, Producers, and the Efficiency of Markets 1753 67. Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? a. $6. b. $2. c. $8. d. $4. ANSWER: […]

Consumers, Producers, and the Efficiency of Markets 1793 141. Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market a. decreases. b. is unchanged. c. increases. d. may increase, decrease, or remain […]

Consumers, Producers, and the Efficiency of Markets 1953 41. Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 80 units of the good are produced and sold, then producer surplus […]

Consumers, Producers, and the Efficiency of Markets 1853 106. The marginal seller is the seller who a. cannot compete with the other sellers in the market. b. would leave the market first if the price were any lower. c. can […]

Consumers, Producers, and the Efficiency of Markets 1913 95. Refer to Figure 7-27. If the government mandated a price increase from P1 to a higher price, then a. total surplus would decrease. b. consumer surplus would increase. c. total surplus […]

Consumers, Producers, and the Efficiency of Markets 1833 70. Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the additional producer surplus to initial producers? a. $15,000 b. $3,750 c. $7,500 d. $30,000 ANSWER: […]

Consumers, Producers, and the Efficiency of Markets 1933 133. Which of the following is not equal to total surplus? a. consumer surplus – producer surplus b. buyers’ willingness to pay – sellers’ costs c. value to buyers – amount paid […]

1970 Consumers, Producers, and the Efficiency of Markets 7. Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, what is the change in total consumer surplus in the market? ANSWER: Consumer surplus increases by $125. […]

Consumers, Producers, and the Efficiency of Markets 1733 29. Refer to Table 7-2. If the market price is $3.80, a. David’s consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50. b. Megan’s consumer surplus is […]

Consumers, Producers, and the Efficiency of Markets 1813 Table 7-12 The only four producers in a market have the following costs: Seller Cost Evan $50 Selena $100 Angie $150 Kris $200 34. Refer to Table 7-12. If the sellers bid […]

Consumers, Producers, and the Efficiency of Markets 1873 22. The distinction between efficiency and equality can be described as follows: a. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from […]

Consumers, Producers, and the Efficiency of Markets 1773 107. If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus will not […]

Application: The Costs of Taxation 2011 38. If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as a. […]

Application: The Costs of Taxation 2229 28. Refer to Figure 8-26. How much is producer surplus at the market equilibrium? ANSWER: Producer surplus is 0.5 x 80 x (4–0) = $160 at the market equilibrium. POINTS: 1 DIFFICULTY: Difficulty: Moderate […]

Application: The Costs of Taxation 2151 63. Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the smallest in […]

Application: The Costs of Taxation 2091 199. Refer to Figure 8-9. The per-unit burden of the tax on sellers is a. $20. b. $200. c. $300. d. $500. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.35 – LO: […]

Application: The Costs of Taxation 2171 35. The Laffer curve relates a. the tax rate to tax revenue raised by the tax. b. the tax rate to the deadweight loss of the tax. c. the price elasticity of supply to […]

Application: The Costs of Taxation 2051 115. Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to a. $105. b. $140. c. $170. d. $210. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Challenging LEARNING OBJECTIVES: […]

Application: The Costs of Taxation 2031 77. Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The deadweight loss due to the tax is measured by the area a. J+K+L+M. b. J+K+L+M+N. c. I+Y. d. […]

Application: The Costs of Taxation Multiple Choice – Section 00: Introduction 1. In 1776, the American Revolution was sparked by anger over a. the extravagant lifestyle of British royalty. b. the crimes of British soldiers stationed in the American colonies. […]

Application: The Costs of Taxation 2071 158. Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area a. A. b. B+C. c. A+B+C. d. A+B+C+D+F. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.35 – […]

Application: International Trade Multiple Choice – Section 00: Introduction 1. An important factor in the decline of the U.S. textile industry over the past 100 or so years is a. foreign competitors that can produce quality textile goods at low […]

Application: International Trade 2325 106. Refer to Figure 9-9. Consumer surplus in this market before trade is a. A. b. A + B. c. A + B + D. d. C. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: […]

Application: International Trade 2365 189. The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and […]

Application: International Trade 2285 33. When a country allows international trade and becomes an exporter of a good, a. domestic producers of the good become better off. b. domestic consumers of the good become worse off. c. the gains of […]

Application: International Trade 2405 Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. 24. Refer to Figure 9–22. With free […]

Application: International Trade 2305 72. Refer to Figure 9-5. Without trade, consumer surplus amounts to a. $810. b. $1,620. c. $3,240. d. $6,480. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.41 – LO: 9-2 NATIONAL STANDARDS: United States […]

2464 Application: International Trade 64. What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain. ANSWER: Arguments mentioned in the text include […]

1) A decrease in a consumer’s income a.increases the slope of the consumer’s budget constraint. b.has no effect on the consumer’s budget constraint. c.decreases the slope of the consumer’s budget constraint. d.has no effect on the slope of the consumer’s […]

1) Table 17-6 Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring […]

1) Table 7-19 The following table shows the cost of producing a good for the only four producers in a market. Refer to Table 7-19. If these four producers bid in an auction to supply one unit to a consumer, […]

1) Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier a.25 units of output. b.27 units of output. c.37 units of output. d.184 units of output. 6) The manufacturer of South Face sells jackets to retail stores for $120 each, and it […]

1) Table 20-6 Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position? a.The percentage of people earning less than $25,000 […]

1) Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price of automobiles. This suggests that, in the production of automobiles, a.Japan has a comparative advantage over other countries and Japan will […]

1) Which of the following statements does not apply to a market economy? a.Firms decide whom to hire and what to produce. b.The invisible hand usually maximizes the wellbeing of society as a whole. c.Households decide which firms to work […]

1) Economists refer to the inputs that firms use to produce goods and services as a.derived factors. b.derived resources. c.factors of production. d.instruments of revenue. 2) Table 22-15 Diane, Henry, and Linda are voting for who to promote. They can […]

1) Table 12-10 If Willie has $170,000 in taxable income, his tax liability will be a. $16,781. b. $41,309. c. $41,827. d. $47,600. 2) Studies that compare the wages of more risky and less risky occupations estimate the value of […]

1) Goods that do not have close substitutes have downward-sloping demand curves. a.True b.False 2) When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 62 units. […]

1) Since measurable factors such as years of experience and years of education explain less than half of the variation in wages, ability, effort, and chance must play a significant role in determining wages. a.True b.False 2) The study by […]

1) Along which of the supply curves does quantity supplied move proportionately more than the price? a.along supply curve B only b.along supply curves B and C c.along all three supply curves d.None. Quantity supplied moves proportionately less than the […]

1) Which of the following is a characteristic of a monopoly? a.low fixed costs as a portion of total costs b.free entry and exit c.barriers to entry d.declining marginal cost 2) Table 17-14 This table shows a game played between […]

1) Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers a.both labor and capital to be fixed. […]

1) Capital owners are compensated according to the value of the marginal product of that capital. a.True b.False 2) You know an economist has crossed the line from policy adviser to scientist when he or she a.claims that the problem […]

1) Which of the following does not affect an individual’s demand curve? a.expectations b.income c.prices of related goods d.the number of buyers 2) As an alternative to pairwise majority voting, each voter could be asked to rank the possible outcomes, […]

1) Firms that operate in perfectly competitive markets try to a.maximize revenues. b.maximize profits. c.equate marginal revenue with average total cost. d.All of the above are correct. 2) Scenario 9-1 The before-trade domestic price of peaches in the United States […]

1) Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: Which of the four prices corresponds to a firm earning negative economic profits in the short run but trying to remain open? a.Pa b.Pb […]

1) Figure 8-10 Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the consumer surplus is a.(P0-P2) x Q2. b. 1/2 x (P0-P2) x Q2. c. (P0-P5) […]

1) With no price discrimination, the monopolist sells every unit at the same price. Therefore a.marginal revenue is equal to price. b.marginal revenue is equal to average revenue. c.price is greater than marginal revenue. d.Both a and b are correct. […]

1) One theory of advertising suggests that a.advertising is more effective for industrial products than consumer products. b.the content of advertising may be irrelevant to product success in the market. c.regulations limiting advertising benefit consumers, but not producers. d.television advertising […]

1) Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products. a.True b.False 2) When market conditions in a competitive industry are such that firms cannot cover their total […]

1) Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods. a.True b.False 2) Television advertisements aired during major sporting events are very expensive. A theory asserting that people […]

1) Which of the following is not correct? a.The slope of a line will be a small positive number for a fairly flat upward-sloping line. b.The slope of a line will be a large positive number for a steep upward-sloping […]

1) Scenario 13-14 If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he […]

1) Germany should specialize in the production of a.boats and import cars. b.cars and import boats. c.both goods and import neither good. d.neither good and import both goods. 2) Which of the following would cause price to increase? a.an increase […]

1) Which of the following is a difference between corrective taxes and tradable pollution permits? a.Corrective taxes are a market-based solution while tradable pollution permits are a command-and-control policy. b.With a corrective tax the government sets the price of pollution; […]

1) Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn a.positive […]

1) Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time? a.Point A to Point B b.Point C to Point […]

1) Evidence from a 1988 study of the market for professional basketball players a.found no evidence of consumer-driven wage discrimination. b.found some evidence of consumer-driven wage discrimination. c.found that measurement of marginal productivity was very difficult for basketball players. d.indicated […]

1) As the number of concrete workers in the United States falls, the wage paid to the remaining concrete workers will necessarily fall as well. a.True b.False 2) Figure 21-21 Refer to Figure 21-21. Suppose that a consumer is originally […]

1) Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. […]

1) Which of the following is not possible? a.Demand is elastic, and a decrease in price causes an increase in revenue. b.Demand is unit elastic, and a decrease in price causes an increase in revenue. c.Demand is inelastic, and an […]

1) Table 15-1 Assume this monopolist’s marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge? a. Q = 4, P = $29 b. Q = 4, P = […]

1) Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. In order to maximize profits, the firm should produce a.4 units of output. b.8 units of output. c.12 units of output. […]

1) Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in […]

1) Refer to Scenario 9-2. Suppose the world price of cardboard is $45 and international trade is allowed. Then Boxland’s consumers demand a.110 tons of cardboard and Boxland’s producers supply 75 tons of cardboard. b.110 tons of cardboard and Boxland’s […]

1) Since World War II, GATT has been responsible for reducing the average tariff among member countries from about a.40 percent to about 5 percent. b.40 percent to about 20 percent. c.80 percent to about 20 percent. d.20 percent to […]

1) A statement describing how the world should be a.is a normative statement. b.is a positive statement. c.would only be made by an economist speaking as a scientist. d.would only be made by an economist employed by the government. 2) […]

1) Scenario 15-5 An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will […]

1) What is the difference between a “change in supply” and a “change in quantity supplied?” Graph your answer. a.For each of the following changes, determine whether there will be a change in quantity supplied or a change in supply. […]

1) The Congressional Budget Office, which is staffed by economists, provides Congress with independent evaluations of policy proposals. a.True b.False 2) The theory of efficiency wages suggests that a.above-equilibrium wages increase worker productivity. b.workers with higher levels of education earn […]

1) The less freedom young mothers have to work outside the home, the a.more elastic the supply of labor will be. b.less elastic the supply of labor will be. c.more horizontal the labor supply curve will be. d.larger is the […]

1) The U.S. income tax a.discourages saving. b.encourages saving. c.has no effect on saving. d.will reduce the administrative burden of taxation. 2) In 2009, the lowest quintile of income earners paid about a.1 percent of income as taxes and paid […]

1) Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it. a.True b.False 2) The wage difference between jobs that require education and those that […]

1) The movement from point W to point Y could be caused by a.economic growth. b.unemployment. c.an improvement in efficiency. d.an advance in production technology. 2) Inefficient production is represented by which point(s)? a.Q, S b.Q, S, T c.R, U […]

1) Table 17-4 The table shows the town of Mauston’s demand schedule for gasoline. For simplicity, assume the town’s gasoline seller(s) incur no costs in selling gasoline. Refer to Table 17-4. Suppose there are exactly two sellers of gasoline in […]

1) The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should a.lower the price of the cinnamon […]

1) The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve. a.True b.False 2) In which of the following games is it clearly the case that the cooperative outcome of the game is good for […]

1) An entrepreneur’s motivation to start a business arises from a.an innate love for the type of business that he or she starts. b.a desire to earn a profit. c.an altruistic desire to provide the world with a good product. […]

1) Market failure associated with the free-rider problem is a result of a.a problem associated with pollution. b.benefits that accrue to those who don’t pay. c.losses that accrue to providers of the product. d.market power. 2) Figure 16-4 What price […]

1) In a market, the price of any good adjusts until quantity demanded equals quantity supplied. a.True b.False 2) When leisure is a normal good, the income effect from a decrease in wages is evident in a.a desire to consume […]

1) Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. Varick has a comparative advantage in the production of a.wheat. b.cloth. c.both goods. d.neither good. 2) You purchase a $30, nonrefundable ticket […]

1) Many charities like the Sierra Club are established to deal with externalities. a.True b.False 2) The circular-flow diagram a.is an economic model. b.incorporates two types of decision makers: households and firms. c.represents the flows of inputs, outputs, and dollars. […]

1) Scenario 13-3 Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 […]

1) In a game, a dominant strategy is a.the best strategy for a player to follow only if other players are cooperative. b.the best strategy for a player to follow, regardless of the strategies followed by other players. c.a strategy […]

1) A good that is excludable but not rival is known as a club good. a.True b.False 2) Which of the following theories explains why increased education translates into higher wages? a.human-capital theory b.the theory of compensating differentials c.the theory […]

1) Table 13-6 Wooden Chair Factory Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate […]

1) Figure 15-7 A profit-maximizing monopolist would incur total costs of a. $81. b. $120. c. $144. d. $240. 2) Figure 7-12 If the equilibrium price rises from $200 to $350, what is the producer surplus to new producers a. […]

1) Table 17-13 Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their […]

1) Figure 7-16 Sellers will be unwilling to sell more than a.1 unit of the good if its price is below $200. b.2 units of the good if its price is below $450. c.3 units of the good if its […]

1) In general, less productive workers are paid less than more productive workers. a.True b.False 2) Using the midpoint method, what is the price elasticity of supply between $100 and $220? a. 0.58 b.0.67 c.1.00 d.1.73 Answer: a Price Elasticity […]

1) Figure 10-12 Which of the following is an appropriate label for Line 1? a.social cost minus social value b.social value minus private cost c.demand d.private cost 2) The Surgeon General announces that eating apples promotes healthy teeth. As a […]

1) Figure 9-9 Total surplus in this market after trade is a.A + B. b.A + B + C. c.A + B + C + D. d.B + C + D. 2) Which of the following statements is true for […]

1) The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply. a.True b.False 2) For an economist, the idea of making assumptions is regarded generally as a […]

1) Which of the following is correct? a.A horizontal line has an infinite slope, and a vertical line has a zero slope. b.A horizontal line has a slope of 1, and a vertical line has a slope of -1. c.A […]

1) The invisible hand ensures that economic prosperity is distributed equally. a.True b.False 2) Assume that Bart’s Batteries has entered into a resale price maintenance agreement with Radio Shanty but not with Prime Purchase. In this case, a.the wholesale price […]

1) If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would a.slope downward. b.be horizontal. c.slope upward. d.slope downward for low output levels and upward for high output levels. 2) […]

1) A monopolistically competitive firm’s choice of output level is virtually identical to the choice made by a.a perfectly competitive firm. b.a duopolist. c.a monopolist. d.an oligopolist. 2) Table 2-5 shows one set of production possibilities. Which of the following […]

1) About four out of five millionaires in the United States earned their money rather than inherited it. a.True b.False 2) The Social Security tax, and to a large extent, the federal income tax, are labor taxes. a.True b.False Answer: […]

1) Rational people make decisions at the margin by comparing a.average costs and benefits. b.total costs and benefits. c.additional costs and benefits. d.opportunity costs and benefits. 2) A profit-maximizing firm will shut down in the short run when a.price is […]

1) A company has two locations where it employs workers doing the same job and working the same hours. Other things the same most workers would prefer to live in location A, but location A has a higher cost of […]

1) According to evidence provided by the U.S. government, the median black a.woman is paid roughly the same as the median white woman. b.woman is paid roughly the same as the median black man. c.man is paid 21 percent less […]

1) Peter was recently hired as a salesman for a national consulting firm. His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences. His firm is paying him a wage that […]

1) A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the a.average total cost. b.average variable cost. c.wage. d.price per unit of output. 2) A positive externality occurs […]

1) When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in her income-earning potential), the troubling implication is that a.it is possible for a retired or disabled person […]

1) Which of the following statements is correct? a.The efficient provision of private goods is intrinsically more difficult than the efficient provision of public goods. b.The efficient provision of public goods is intrinsically more difficult than the efficient provision of […]

1) In which of the following tax systems do taxes increase as income increases? a.both proportional and progressive b.proportional but not progressive c.progressive but not proportional d.neither proportional nor progressive 2) Figure 9-2 The figure illustrates the market for calculators […]

1) The typical state spends the most on a.education. b.Medicare and Social Security. c.highways. d.defense. 2) If men, on average, earn 20 percent more than women in a particular occupation, a.this is clear evidence of discrimination. b.some of this differential […]

1) Scenario 17-3. Consider two countries, Kinglandia and Rovinastan, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other […]

1) Scenario 20-2 The government is proposing switching from a progressive tax system, in which families pay 15% of the first $40,000 earned, 30% of the next $40,000 earned, and 45% of any income over $80,000 to a tax system […]

1) For which of the following goods is the income elasticity of demand likely lowest? a.water b.sapphire pendant necklaces c.filet mignon steaks d.fresh fruit 2) Daryn is raking leaves to earn money for his university’s economics club. In the first […]

1) Store clerks are known to have low wages. This is likely to reflect the fact that a.store clerk jobs are perceived to be relatively easy, thus attracting low-skill workers. b.store clerk jobs are perceived to be relatively difficult, thus […]

1) Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. If the government forces this firm to produce at its efficient output level, how much profit will this firm earn? […]

1) A decrease in population can be expected to a.increase the marginal product of land. b.decrease the supply of land. c.decrease the rents on land. d.increase the demand for land. 2) When a firm experiences economies of scale, long-run average […]

1) Table 22-10 The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes), cut the school arts budget (arts), turn off half of the streetlights […]

1) Using the midpoint method, the between point X and point Y is a. 0.4 b.1 c.2 d.2.5 2) Economists think that the best way to determine the value of a human life is to a.evaluate the value of a […]

1) Barb’s aunt gave her $100 for her birthday with the condition that Barb buy herself something. In deciding how to spend the money, Barb narrows her options down to four choices: Option A, Option B, Option C, and Option […]

1) Predatory pricing refers to a.a firm selling certain products together rather than separately. b.a monopoly firm reducing its price in an attempt to maintain its monopoly. c.firms colluding to set prices. d.All of the above are examples of predatory […]

1) Table 22-20 The table below shows the preferred city budget (in millions) for in the city of Springfield. Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. […]

1) When it comes to people’s tastes, economists generally believe that a.tastes are based on forces that are well within the realm of economics. b.tastes are based on historical and psychological forces that are beyond the realm of economics. c.tastes […]

1) Economists try to address their subject with a scientist’s objectivity. a.True b.False 2) If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint. a.True b.False Answer: True […]

1) Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for golf balls in the United States? a.a decrease in the price of golf balls b.an increase in the […]

1) Suppose the between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to a.fall by 8 percent. b.fall by 50 percent. c.rise […]

1) Figure 9-6 The figure illustrates the market for roses in a country. The imposition of a tariff on roses a.increases the number of roses imported by 100. b.increases the number of roses imported by 200. c.decreases the number of […]

1) Figure 7-28 Refer to Figure 7-28. At the quantity Q3, a.the market is in equilibrium. b.consumer surplus is maximized. c.the sum of consumer surplus and producer surplus is maximized. d.the marginal value to buyers is less than the marginal […]

1) Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of […]

1) What is the equilibrium quantity in this market? a.4 units b.8 units c.12 units d.16 units 2) The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in […]

1) Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups […]

1) Alice and Betty’s Production Possibilities in one 8hour day. Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier d.All of the above are correct. 3) Figure 18-2 The figure below shows the production function for a particular firm. Refer to Figure […]

1) If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will a.increase consumer surplus. b.reduce consumer surplus. c.not affect consumer surplus. d.Any of the above are possible. 2) Table 17-9 […]

1) The Coase theorem asserts that the private market will always solve the problem of externalities and allocate resources efficiently a.even if private parties experience substantial costs of bargaining. b.even if the initial distribution of legal rights is skewed in […]

1) Which of the following is a characteristic of a natural monopoly? a.Fixed costs are typically a small portion of total costs. b.Average total cost declines over large regions of output. c.The product sold is a natural resource such as […]

1) Customers who purchase an audio CD from Sally’s Sounds are charged 20% more than customers who purchase the audio CD from the Sally’s Sounds website. This is an example of a.perfect price discrimination. b.price discrimination. c.deadweight loss. d.socially inefficient […]

1) A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost a.only when the market is a monopoly. b.only when the market is a monopoly or monopolistically competitive. c.only when the market […]

1) If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue, and domestic consumers will gain consumer surplus. a.True b.False 2) Monopoly pricing prevents some mutually beneficial […]

1) Which of the following programs is not included in the federal income security spending? a.Social Security b.welfare c.education d.unemployment compensation 2) Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier a.Dave’s job is less dangerous. b.of efficiency wages. c.of education as […]

1) Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities Frontier Sup pose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following combinations of bolts and nails could Uzbekistan […]

1) Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that a.have elastic demand curves. b.are very different from generic products. c.are indistinguishable from […]

1) Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for […]

1) Although economists and accountants treat many costs differently, they both treat the cost of capital the same. a.True b.False 2) Which of the following statements is not correct? a.Medical research can be an example of a public good. b.The […]

1) Figure 13-2 As the number of workers increases, a.total output increases but at a decreasing rate. b.marginal product increases but at a decreasing rate. c.marginal product increases at an increasing rate. d.total output decreases. 2) Along which of these […]

1) Figure 16-14 Which of the following represents the excess capacity of this firm? a.BJ b.GH c.LM d.There is no excess capacity. 2) In a monopolistically competitive market, a.there are only a few sellers. b.each firm takes the price of […]

1) Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could a.benefit both Steve and Tom. b.benefit Steve, but not Tom. c.benefit […]

1) Total surplus is always equal to the sum of consumer surplus and producer surplus. a.True b.False 2) Which of the following is an example of labor-market discrimination? You may assume that worker A and worker B have identical characteristics […]

1) Economists and accountants both include forgone income as a cost to a small business owner. a.True b.False 2) To achieve the optimal provision of public goods, the a.market should be allowed to arrive at an equilibrium without government intervention. […]

1) If the for a good is 6, then a 3 percent decrease in price results in a.a 20 percent increase in the quantity demanded. b.an 18 percent increase in the quantity demanded. c.a 2 percent increase in the quantity […]

1) In the markets for goods and services in the circular-flow diagram, a.households provide firms with savings for investment. b.households provide firms with labor, land, and capital. c.firms provide households with output. d.firms provide households with profit. 2) Negative externalities […]

1) Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits […]

1) Which of the following demonstrates the law of supply? a.When the price of leather belts rose, leather belt sellers increase their quantity supplied of leather belts. b.When car production technology improved, car producers increased their supply of cars. c.When […]

1) For competitive firms, the curve that represents the value of marginal product of labor is the same as the demand for labor curve. a.True b.False 2) If one producer has the absolute advantage in the production of all goods, […]

1) Approximately how much of the income in the United States is earned by workers in the form of wages and fringe benefits? a.25 percent b.50 percent c.67 percent d.90 percent 2) Suppose demand is perfectly elastic, and the supply […]

1) The circular flow model is not used anymore because it fails to perfectly replicate real world situations. a.True b.False 2) Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars is an […]

1) Which of the following would shift a market labor supply curve to the left? a.a decrease in the price of output b.an increase in the price of output c.a labor-augmenting technological change d.better employment opportunities in a closely-related job […]

1) Refer to Figure 9-23. With free trade, the domestic price and domestic quantity demanded are a.$90 and 5. b.$90 and 10. c.$120 and 5. d.$120 and 18. 2) Figure 21-23 Refer to Figure 21-23. When the price of X […]

1) Figure 8-22 Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would a.increase tax revenue and increase the deadweight loss from the tax. b.increase […]

1) If the for a good is 0.3, then a 20 percent decrease in price results in a a.0.015 percent increase in the quantity demanded. b.0.6 percent increase in the quantity demanded. c.6 percent increase in the quantity demanded. d.66 […]

1) According to the Hamermesh and Biddle study, people deemed more attractive than average earn a.30-40 percent more than unattractive people. b.about 5 percent more than average looking people. c.the same as average looking people and 15-20 percent more than […]

1) Figure 16-9 The figure is drawn for a monopolistically-competitive firm. The quantity of output at which the MC and ATC curves cross is the a.efficient scale of the firm. b.short-run equilibrium quantity of output for the firm. c.long-run equilibrium […]

1) Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier […]

1) Figure 8-14 Which of the following combinations will minimize the deadweight loss from a tax? a.supply 1 and demand 1 b.supply 2 and demand 2 c.supply 1 and demand 2 d.supply 2 and demand 1 2) Tax incidence refers […]

1) The purchase price of capital is a.the value of the capital to the firm. b.always less than the rental price. c.the price received from the flow of some capital services. d.the price a person pays to own that factor […]

1) The Condorcet voting paradox demonstrates that democratic outcomes do not always obey the property of a.narrowness of preferences. b.concavity of preferences. c.asymmetry of preferences. d.transitivity of preferences. 2) Figure 21-4 In each case, the budget constraint moves from BC-1 […]

1) Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. Refer to Figure 21-24. Steve a.gains 1.1 pounds of pears and becomes better off by moving from point A to point […]

1) Which of the following is not an explanation for why better educated workers earn more, on average, than less educated workers? a.The higher wages may be a compensating differential for the cost of acquiring the education. b.Workers with a […]

1) John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This […]

1) If a government could successfully achieve the maximin criterion, each member of society would have an equal income. a.True b.False 2) The following diagram shows a budget constraint for a particular consumer. If the price of X is $5, […]

1) When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax a.is considered horizontally equitable. b.burden is minimized. c.satisfies the benefits principle. d.is considered […]

1) A central issue in the Microsoft antitrust lawsuit involved Microsoft’s integration of its Internet browser into its Windows operating system, to be sold as one unit. This practice is known as a.tying. b.predation. c.wholesale maintenance. d.retail maintenance. 2) The […]

1) Table 13-16 Listed in the table are the long-run total costs for three different firms. Which firm is experiencing constant returns to scale? a.Firm A only b.Firm B only c.Firm C only d.Firm A and Firm B only 2) […]

1) Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. The opportunity cost of 1 pound of tomatoes for the farmer is a.1/2 pound of pork. b.2 hours of labor. […]

1) Utility measures the a.income a consumer receives from consuming a bundle of goods. b.satisfaction a consumer receives from consuming a bundle of goods. c.satisfaction a consumer places on her budget constraint. d.All of the above are correct. 2) Efficient […]

1) Assume the market for handkerchiefs is competitive. A decrease in the market price of handkerchiefs a.decreases the demand for workers who make handkerchiefs and decreases their equilibrium wage. b.decreases the demand for workers who make handkerchiefs and increases their […]

1) Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market […]

1) Figure 8-1 Suppose the government imposes a tax of P’ – P”’. The deadweight loss due to the tax is measured by the area a.J+K+L+M. b.J+K+L+M+N. c.I+Y. d.I+Y+B. 2) On holiday weekends thousands of people picnic in state parks. […]

1) Which of the following statements is (are) true of a monopoly? (i)A monopoly has the ability to set the price of its product at whatever level it desires. (ii)A monopoly’s total revenue will always increase when it increases the […]

1) Table 13-20 Listed in the table are the long-run total costs for three different firms. Refer to Table 13-20. Firm C is experiencing diseconomies of scale. a.True b.False 2) Figure 18-7 Refer to Figure 18-7. Assume W1 = $15 […]

1) Figure 20-2 Refer to Figure 20-2. Which of the following is consistent with the data reported in the figure? a.The female poverty rate is higher for all age groups than the male poverty rate. b.The disparity between male and […]

1) Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. Based on the concentration ratio, which industry is the most […]

1) According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time a.is rational behavior. b.likely occurs because saving requires a sacrifice in the present for a reward in […]

1) Scenario 20-6 Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax […]

1) Table 10-3 Taking into account private and external costs, the maximum total surplus that can be achieved in this market is a.$18. b.$38. c.$46. d.$55. 2) A yard sale is an example of a market. a.True b.False Answer: True […]

1) Using the midpoint method, what is the price elasticity of supply between points B and C? a. 1.67 b.1.19 c.0.84 d.0.61 2) Based on the studies of human decision making, which of the following statements is correct? a.Most people […]

1) Neither public goods nor common resources are a.excludable, but only public goods are not rival in consumption. b.excludable, but only common resources are not rival in consumption. c.rival in consumption, but only public goods are not excludable. d.rival in […]

1) Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. Which tax schedules are progressive? a.Tax Schedule A only b.Tax Schedule A and Tax Schedule […]

1) The laws governing patents and copyrights a.promote monopolies. b.are intended to serve private interests, not the public’s interest. c.have costs but not benefits. d.eliminate the need for firms to engage in research and development. 2) The difference between a […]

1) The self-interest of the participants in an economy is guided into promoting general economic self-interest by a.the invisible hand. b.market power. c.government intervention. d.oikonomos. 2) One characteristic of a monopoly market is that the product is virtually identical to […]

1) Brazil’s Production Possibilities Frontier The fact that the line slopes downward reflects the fact that a.for Brazil, it is more costly to produce peanuts than it is to produce cashews. b.Brazil will produce more peanuts and fewer cashews as […]

1) In this market, equilibrium price and quantity, respectively, are a.$10 and 30 units. b.$10 and 50 units. c.$10 and 70 units. d.$4 and 50 units. 2) Buyers and sellers who have no influence on market price are referred to […]

1) In the prisoners’ dilemma game, one prisoner is always better off confessing, no matter what the other prisoner does. a.True b.False 2) Bill is restoring a car and has already spent $4,000 on the restoration. He expects to be […]

1) The outer loop of the circular-flow diagram represents the flows of dollars in the economy. Which of the following does not appear on the outer loop? a.wages b.income c.capital d.rent 2) Discrimination is usually not a profit-maximizing strategy. a.True […]

1) Assume, for Mexico, that the domestic price of beets without international trade is higher than the world price of beets. This suggests that, in the production of beets, a.Mexico has a comparative advantage over other countries and Mexico will […]

1) Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. At […]

1) Which of the following is not a difference between monopolies and perfectly competitive markets? a.Monopolies can earn profits in the long run while perfectly competitive firms break even. b.Monopolies charge a price higher than marginal cost while perfectly competitive […]

1) The income effect of a price change is the change in consumption that results from the movement to a new indifference curve. a.True b.False 2) All else equal, an increase in demand will cause an increase in producer surplus. […]

1) The Arrow impossibility theorem shows that a.democracy should be abandoned as a form of government. b.it is impossible to improve upon democratic voting methods as a mechanism for social choice. c.all voting systems are flawed as a mechanism for […]

1) What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter […]

1) Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. Japan has an absolute advantage in the production of a.cars and a comparative advantage in the production of cars. b.cars and a […]

1) The mainstream view among economists is that a.society faces a tradeoff between unemployment and inflation, but only in the short run. b.society faces a tradeoff between unemployment and inflation, but only in the long run. c.society faces a tradeoff […]

1) If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will a.increase producer surplus. b.reduce producer surplus. c.not affect producer surplus. d.Any of the above are possible. 2) Suppose Abby, […]

1) If the price falls from point A to point B, total revenue a.increases, and demand is price elastic. b.decreases, and demand is price elastic. c.increases, and demand is price inelastic. d.decreases, and demand is price inelastic. 2) Suppose a […]

1) Which of the following events best exemplifies the concept of signaling? a.A college student’s parents, having learned that their child is short of money, send her a check for $1,000. b.A new company making high quality bicycles at a […]

1) Figure 8-4 The vertical distance between points A and B represents a tax in the market. The equilibrium price before the tax is imposed is a.$12, and the equilibrium quantity is 35. b.$8, and the equilibrium quantity is 50. […]

1) Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products. a.True b.False 2) Table 17-15 This table shows a game played between two players, A and B. The […]

1) Which of the following statements is not correct? a.Critics of advertising argue that firms advertise to manipulate consumers’ tastes. b.Defenders of advertising argue that advertising provides valuable product information to consumers. c.An industry with many brand name products will […]

1) Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is […]

1) Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount. a.True b.False 2) Which of the following statements accurately explains the superstar phenomenon in wages? a.Better […]

1) Which of the following statements is correct? a.If the monopolist’s marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. b.If the monopolist’s marginal revenue is […]

1) In this market for sunscreen, there is a decrease in the price of zinc oxide, an input into sunscreen, and more producers enter the market. The equilibrium price a.increases and the equilibrium quantity decreases. b.decreases and the equilibrium quantity […]

1) The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest. a.corporate income taxes, individual income taxes, social insurance taxes b.social insurance taxes, individual income taxes, corporate […]

1) The largest budgetary expense for the federal government in 2011 was a.interest on the national debt. b.health. c.highways. d.income security. 2) Which of the following is true of minimum-wage laws? a.They affect skilled workers’ wages. b.They create above-equilibrium wages […]

1) A tit-for-tat strategy, in a repeated game, is one in which a player starts by cooperating and then does whatever the other player did last time. a.True b.False 2) A production function is a relationship between inputs and a.quantity […]

1) Knowledge that is patented is a a.public good, whereas knowledge that is not patented is a common resource. b.private good, whereas knowledge that is not patented is a club good. c.common resource, whereas knowledge that is not patented is […]

1) The typical firm in the US economy a.has some degree of market power. b.sells its product for a price that is equal to the marginal cost of producing the last unit. c.is perfectly competitive. d.is a monopoly. 2) Panel […]

1) If the government were to impose a tax that assigned everyone the same tax liability, it would be a.a lump-sum tax. b.an equitable tax. c.supported by the poor. d.a progressive tax. 2) What is the most important factor that […]

1) If the price of a good is low, a.firms would increase profit by increasing output. b.the quantity supplied of the good could be zero. c.the supply curve for the good will shift to the left. d.firms can and should […]

1) A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue […]

1) Boxes A and B of this circular-flow diagram represent a.firms and households. b.households and government. c.the markets for goods and services and the markets for financial assets. d.the markets for goods and the markets for services. 2) A reduction […]

1) University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven’t contributed to the research costs. What could the federal government do to equate the equilibrium quantity of […]

1) Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer. Suppose that Family B borrows money to buy elaborate birthday presents for the children and […]

1) The movement from point A to point B on the graph shows a(n) a.decrease in demand. b.increase in demand. c.decrease in quantity demanded. d.increase in quantity demanded. 2) Assume that Nick and Faldo can switch between producing wheat and […]

1) Refer to Figure 7-23. Figure 7-23 The equilibrium price is a.P1. b.P2. c.P3. d.P4. 2) In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called a.spending. b.revenue. […]

1) Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then a.a decrease in price from $18 to $16 will increase total revenue. b.a decrease in price from $24 to […]

1) Effective signals a.convey useful information from informed parties to uninformed parties. b.impose little or no cost on the signaler. c.cannot be conveyed accurately when there is an information asymmetry. d.raise the quantity sold but reduce the price sellers receive. […]

1) Government spending is projected to rise over the next few decades. Three of the most important reasons are spending on Social Security, Medicare, and healthcare. a.True b.False 2) Table 7-17 Both the demand curve and the supply curve are […]

1) A positive externality a.causes the product to be overproduced. b.provides an additional benefit to market participants. c.benefits consumers because it results in a lower equilibrium price. d.is a benefit to a market bystander. 2) A signaling theory of education […]

1) A tax on insulin is likely to cause a very large deadweight loss to society. a.True b.False 2) Trevor’s Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for […]

1) Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i)dog shampoo (ii)rent on the storefront (iii)wages Frank could earn as a substitute elementary-school teacher (iv)interest that Frank’s money was earning before he spent his […]

1) Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours. a.True b.False 2) Table […]

1) Supporters of raising the minimum wage argue that minimum-wage laws are a.a tax-free way to help the working poor. Businesses bear the burden of paying higher wages, not the government. b.better than the Earned Income Tax Credit (EITC) in […]

1) Figure 21-18 Refer to Figure 21-18. Bundle B represents a point where a.MRSxy > Py/Px. b.MRSxy = Px/Py. c.MRSxy < Px/Py. d.MRSxy > Px/Py. 2) Technology spillover is one type of a.negative externality. b.positive externality. c.subsidy. d.producer surplus. Answer: […]

1) The classic example of adverse selection is the a.market for used cars. b.market for new cars. c.relationship between shareholders and managers. d.relationship between a coach and an athlete. 2) Figure 10-1 This graph represents the tobacco industry. The socially […]

1) Susie wins $2 million in her state’s lottery. If Susie keeps working after she wins the money, we can infer that the income effect is larger than the substitution effect for her. a.True b.False 2) A view of a […]

1) If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits a.diminishing profitability. b.increasing returns to scale. c.increasing marginal product. d.decreasing marginal product. 2) If the signaling […]

1) For economists, conducting experiments is often difficult and sometimes impossible. a.True b.False 2) Which of the following events must cause equilibrium quantity to fall? a.demand increases and supply decreases b.demand and supply both decrease c.demand decreases and supply increases […]

1) Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned […]

1) Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. What is the concentration ratio for Industry L? a.about 99% b.about 77% c.about 41% […]

1) Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers […]

1) Which of the following would not be considered a negative externality? a.Smelter, Inc. creates steel and pollution. b.Your friend buys a new puppy that barks every night. c.You have an adverse reaction to a medication your doctor prescribed for […]

1) Table 17-25 There are just two producers of a certain product. Each is considering offering promotional discounts. Refer to Table 17-25. The dominant strategy a.for both firms is to offer the discount. b.for both firms is to not offer […]

1) Which of the following is correct? a.The word economy comes from the Greek word for rational thinker. b.Economists study the management of scarce resources. c.Because economists believe that people pursue their best interests, they are not interested in how […]

1) Which of the following is not an example of a compensating differential? Job A pays more than Job B because Job A requires a.more international travel to dangerous locations. b.two night shifts per month. c.careful handling of toxic chemicals. […]

1) Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: The firm will earn positive economic profit if the market price is a.positive. b.$6. c.above $6. d.There is no price at which the firm […]

1) A tax on an imported good is called a. 2) An externality arises when a person engages in an activity that influences the well-being of a.buyers in the market for that activity and yet neither pays nor receives any […]

1) Which of the following industries is most likely to exhibit the characteristic of free entry? a.electricity b.satellite radio c.mineral mining d.tennis shoes 2) A study conducted by economists Marianne Bertrand and Sendhil Mullainathan found evidence of labor-market discrimination based […]

1) Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus to producers already in the market would be a. $1,600. b. $600. c. $800. d. $1,200. […]

1) Which of the following statements is correct regarding a firm‘s decision-making? a.The decision to shut down and the decision to exit are both short-run decisions. b.The decision to shut down and the decision to exit are both long-run decisions. […]

1) One reason why better-looking workers may have higher earnings is that physical attractiveness may enhance a worker’s productivity for certain jobs, especially for those workers who deal with the public. a.True b.False 2) Refer to Figure 9-17. Relative to […]

1) Implicit costs are costs that do not require an outlay of money by the firm. a.True b.False 2) Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. The firm experiences economies of […]

1) Table 13-3 If the firm can sell its output for $1 per unit, what is the profit-maximizing level of output? a.240 units b.230 units c.190 units d.170 units 2) Consider a small town with only three families, the Greene […]

1) Economists at the U.S. Department of Justice help enforce the nation’s antitrust laws. a.True b.False 2) Figure 14-14 Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to […]

1) The most important tax in the U.S. economy is the tax on corporations’ profits. a.True b.False 2) Which of these instances would constitute labor-market discrimination? Henry receives a higher wage than Ryan. Henry and Ryan are identical in all […]

1) The Condorcet paradox shows that a.allocations of resources based on majority rule are always inefficient. b.problems in counting votes can negate legitimate democratic outcomes. c.the order on which things are voted can affect the result. d.transitive preferences are inconsistent […]

1) Which of the following policies is the government most inclined to use when faced with a positive externality? a.taxation b.permits c.subsidies d.usage fees 2) Which of the following is a plausible explanation for a firm paying above-equilibrium wages to […]

1) Figure 7-24 Refer to Figure 7-24. If 6 units of the good are produced and sold, then a.efficiency is achieved in this market. b.the marginal value to buyers equals the marginal cost to sellers. c.the sum of consumer surplus […]

1) When the market price is below the equilibrium price, suppliers are unable to sell all they want to sell. a.True b.False 2) Patent protection is one way to deal with technology spillovers. a.True b.False Answer: True 3) A firm […]

1) The task of economic regulation is to a.protect monopoly profits. b.approximate the results of the competitive market. c.replace competition with government ownership. d.increase competition within the market. 2) One drawback to industrial policy is that a.technology spillovers are too […]

1) If people can be prevented from using a certain good, then that good is called a.rival in consumption. b.excludable. c.a common resource. d.a public good. 2) An example of an information asymmetry is when a worker knows more than […]

1) The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a.amount of the other good that must be given up. b.market price of the additional amount produced. c.amount of resources that […]

1) Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities Frontier Each has in mind a maximum amount that he will bid. This maximum is called a.a resistance price. b.willingness to pay. c.consumer surplus. d.producer surplus. 4) The statement that “measures of the […]

1) If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75. a.True b.False 2) In […]

1) The consumer’s optimum choice is represented by a.MUx/MUy = Px/Py. b.MUx/Px = MUy/Py. c.MRSxy = Px/Py. d.All of the above are correct. 2) Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized […]

1) Two goods are complements when a decrease in the price of one good a.decreases the quantity demanded of the other good. b.decreases the demand for the other good. c.increases the quantity demanded of the other good. d.increases the demand […]

1) What happens to the price and quantity sold of a drug when its patent runs out? (i)The price will fall. (ii)The quantity sold will fall. (iii)The marginal cost of producing the drug will rise. a.(i) only b.(i) and (ii) […]

1) Table 22-21 The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. Refer to Table 22-21. What is the preferred spending amount of […]

1) Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market? a.to promote efficiency b.to promote equality c.to enforce property rights d.to protect an industry from foreign competition […]

1) When John F. Kennedy said, “A rising tide lifts all boats,” to what was he referring? a.With government intervention, all citizens receive a greater allocation of resources. b.With market forces working independently, everyone receives an equitable share of resources. […]

1) Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm‘s total revenue if it instead produced and sold 4 units of output? a.$4 […]

1) Which of the following types of goods are rival in consumption? a.private goods and club goods b.private goods and common resources c.public goods and club goods d.public goods and common resources 2) A monopolist produces a.more than the socially […]

1) Table 18-9 The following table shows the production function for a particular business. The numbers represent the various labor and output combinations the firm may choose for its output on a daily basis. Refer to Table 18-9. Suppose this […]

1) Scenario 17-2. Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each […]

1) Of the total income earned in the U.S. economy, approximately a.33 percent is earned by workers, and 67 percent is earned by landowners. b.50 percent is earned by workers, 25 percent is earned by landowners, and 25 percent is […]

1) In economics, a difference in access to relevant knowledge is called a(n) a.relevancy frontier. b.knowledge gap. c.information asymmetry. d.information equilibrium. 2) Table 13-2 What is the marginal product of the second worker? a.300 units b.200 units c.100 units d.50 […]

1) Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for mattresses? a.a decrease in the price of mattresses b.a decrease in the price of custom wooden sleigh bed […]

1) The monopolist’s profit-maximizing quantity of output is determined by the intersection of which of the following two curves? a.marginal cost and demand b.marginal cost and marginal revenue c.average total cost and marginal revenue d.average variable cost and average revenue […]

1) Patent and copyright laws a.encourage creative activity. b.promote competition among firms. c.discourage creative activity. d.Both a and b are correct. 2) Price cannot fall so low that some sellers choose to supply a quantity of zero. a.True b.False Answer: […]

1) Home is a country that produces two goods, pears and cellular phones. Last year, Home produced 450 bushels of pears and 1050 cellular phones. This year it produced 450 bushels of pears and 2000 cellular phones. Given no other […]

1) Scenario 20-5 Suppose the government implemented a negative income tax and used the following formula to compute a family’s tax liability: Taxes owed = (1/4 of income) – $10,000 Refer to Scenario 20-5. A family earning $70,000 before taxes […]

1) As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production. a.True b.False 2) The externality associated with technology spillovers a.cannot be internalized by government. b.is a […]

1) Which of the following examples illustrates an oligopoly market? a.a farmers’ market with many individuals selling sweet corn and tomatoes b.a city whose electrical service is provided by one electric co-operative c.a city with two firms who are licensed […]

1) If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then a.a one-unit increase in output will increase the firm‘s profit. b.a one-unit decrease in output will increase the firm‘s profit. […]

1) A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale, it will a.produce 3 units and make $9. b.produce 4 units […]

1) Figure 8-9 The vertical distance between points A and C represents a tax in the market. The per-unit burden of the tax on sellers is a. $20. b. $200. c. $300. d. $500. 2) When a market experiences a […]

1) Willingness to pay a.measures the value that a buyer places on a good. b.is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. c.is the maximum amount a buyer […]

1) A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.90 per unit. The marginal revenue of the 151st unit of output is a. -$5.10. b. -$0.10. […]

1) Table 17-4 The table shows the town of Mauston’s demand schedule for gasoline. For simplicity, assume the town’s gasoline seller(s) incur no costs in selling gasoline. Refer to Table 17-4. If the market for gasoline in Mauston is perfectly […]

1) If four firms comprise the entire golf club industry, the market would be a.competitive. b.characterized by interdependence of firms. c.a duopoly. d.a monopoly. 2) In the signaling theory of education, a.schooling itself does not lead to more productive workers. […]

1) Figure 15-9 The monopolist’s maximum profit a. is $1,600. b. is $2,000. c. is $2,500. d. cannot be determined from the diagram. 2) The characteristics of jobs and workers affect a.labor supply. b.labor demand. c.equilibrium wages. d.All of the […]

1) Using the midpoint method, what is the price elasticity of supply between points C and D? a. 0.21 b.0.29 c.0.73 d.1.36 2) Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 […]

1) Which of the following statements is correct? a.The more similar Firm A’s product is to Firm B’s product, the more likely Firm A is to advertise. b.Monopolistically competitive firms advertise in order to increase the elasticity of the demand […]

1) Consumer surplus is a.a concept that helps us make normative statements about the desirability of market outcomes. b.represented on a graph by the area below the demand curve and above the price. c.a good measure of economic welfare if […]

1) Table 18-9 The following table shows the production function for a particular business. The numbers represent the various labor and output combinations the firm may choose for its output on a daily basis. Refer to Table 18-9. Suppose this […]

1) Chris and Tony’s Production Opportunities Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. If Chris and Tony both decide to […]

1) For a competitive, profit-maximizing firm, the labor demand curve is the same as the a.marginal cost curve. b.value of marginal product curve. c.production function. d.profit function. 2) Barb and Jim run a business that sets up and tests computers. […]

1) In-kind transfers a.are cash payments given to the poor from the government. b.are available to citizens of all income levels, but usually only sought by the poor. c.are non-monetary items given to the poor. d.include food stamps, but not […]

1) Which of the following helped reduce sulfur dioxide emissions, a leading cause of acid rain? (i)corrective taxes (ii)tradable pollution permits (iii)amendments to the Clean Air Act a.(i) only b.both (i) and (ii) c.(iii) only d.both (ii) and (iii) 2) […]

1) Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram? a.Dylan receives a salary for his work as a financial analyst for an investment firm. b.Kristin buys two business suits […]

1) Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require “junk food” producers to include warning labels on all junk food. The other would impose a tax on […]

1) New firms will likely enter a monopolistically competitive market when price exceeds a.marginal revenue. b.average revenue. c.marginal cost. d.average total cost. 2) Figure 8-2 The vertical distance between points A and B represents a tax in the market. The […]

1) Table 13-3 The marginal product of the second worker is a.90 units. b.85 units. c.80 units. d.20 units. 2) Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. – When […]

1) Labor-augmenting technological advances decrease the marginal productivity of labor. a.True b.False 2) In 2011, which category represented the largest source of receipts for the U.S. federal government? a.Medicare b.Social Security c.corporate income taxes d.individual income taxes Answer: d 3) […]

1) Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $120 in income, she could choose to consume a.8 […]

1) A firm’s opportunity costs of production are equal to its a.explicit costs only. b.implicit costs only. c.explicit costs + implicit costs. d.explicit costs + implicit costs + total revenue. 2) Caroline earns more than John. Under a new tax […]

1) As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see a.an increase in the […]

1) Figure 10-10 Taking into account private and external costs, the maximum total surplus that can be achieved in this market is a. $760. b. $1,080. c. $1,440. d. $1,920. 2) Demand is inelastic if the is greater than 1. […]

1) A positive externality a.is a benefit to the producer of the good. b.is a benefit to the consumer of the good. c.is a benefit to someone other than the producer and consumer of the good. d.results in an optimal […]

1) Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany a.may prompt German farmers to invoke the unfair-competition argument. b.increase the […]

1) The debate over the efficiency of markets in which products with brand names are sold a.is framed by the role of regulation in advertising. b.is likely to be resolved by reference to anecdotal evidence. c.hinges on whether consumers are […]

1) State and local governments generate revenue from all of the following sources except a.sales taxes. b.the federal government. c.corporate income taxes. d.customs duties. 2) Suppose a tax of $4 per unit is imposed on a good, and the tax […]

1) George and Brad are waiters at a local restaurant. The female customers prefer to be seated at the tables that George waits on because they think George is better looking than Brad. If George earns more than Brad because […]

1) Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income? a.48.9 percent b.21.3 percent c.8.6 percent d.3.8 percent 2) For a monopolist, marginal revenue is a.equal to price, as […]

1) Granting a pharmaceutical company a patent for a new medicine will lead to (i)a product that is priced higher than it would be without the exclusive rights. (ii)incentives for pharmaceutical companies to invest in research and development. (iii)higher quantities […]

1) Which of the following is not an example of a compensating differential? a.paying workers who do dull, boring work higher wages than workers who do fun, interesting work, all else equal b.paying workers who work on the night shift […]

1) A city street is a.always a public good, whether or not it is congested. b.a public good when it is congested, but it is a common resource when it is not congested. c.a common resource when it is congested, […]

1) If the price of natural gas rises, when is the likely to be the highest? a.immediately after the price increase b.one month after the price increase c.three months after the price increase d.one year after the price increase 2) […]

1) Which of the following require firms to pay to pollute? (i)corrective taxes (ii)tradable pollution permits (iii)pollution regulations a.(i) only b.both (i) and (ii) c.(iii) only d.both (ii) and (iii) 2) In the long run, a firm will exit a […]

1) Food and clothing tend to have a.small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods. b.small income elasticities because consumers buy proportionately more of both goods at higher income levels […]

1) The lack of progress in reducing the poverty rate since the early 1970s is most closely related with which of the following factors? a.increasing income inequality b.a reduction in the poverty line c.rapid economic growth d.a reduction in international […]

1) When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy, a.consumer surplus increases and total surplus increases in the market for that good. b.consumer surplus increases and total surplus decreases in the […]

1) Which of the following statements is not correct? a.The percentage of the population that suffers from long-term poverty is far smaller than the percentage of the population that suffers from short-term poverty because there is a high level of […]

1) Anthony and Addie are playing the ultimatum game, starting with $100. The coin flip results in Anthony being the one to propose a division of the $100. Anthony proposes that he gets $99 and Addie gets $1. Which of […]

1) Majority rule will produce the outcome most preferred by the median voter. a.True b.False 2) Which of the following is not an example of in-kind transfers? a.food stamps b.Medicaid c.the Earned Income Tax Credit d.housing vouchers Answer: c 3) […]

1) An example of a firm with market power is a a.delicatessen in New York. b.cable TV provider in Tulsa. c.clothing store in Chicago. d.family farm in Kansas. 2) Figure 9-9 Total surplus in this market before trade is a.A […]

1) Refer to Figure 9-15. With the tariff, the quantity of saddles imported is a.Q3 – Q1. b.Q3 – Q2. c.Q4 – Q1. d.Q4 – Q2. 2) Table 13-6 Wooden Chair Factory Assume the Wooden Chair Factory currently employs 2 […]

1) A competitive firm‘s short-run supply curve is part of which of the following curves? a.marginal revenue b.average variable cost c.average total cost d.marginal cost 2) Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers […]

1) Which of the following frontier fields of economics identifies that people do not always act rationally? a.asymmetric information b.political economy c.behavioral economics d.existential economics 2) Suppose when a monopolist produces 75 units its average revenue is $10 per unit, […]

1) Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to a.pay your […]

1) Adam Smith used a famous example of what type of firm to illustrate economies of scale? a.Apple b.a pin factory c.a lumber mill d.a British university 2) Table 14-12 Bill’s Birdhouses What is the marginal revenue from selling the […]

1) Alice and Betty’s Production Possibilities in one 8hour day. Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier a.Alice’s opportunity cost of 1 pizza is 1/2 of a pitcher of lemonade and Betty’s opportunity cost of 1 pizza is 2/3 of […]

1) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier Bintu has a comparative advantage in the production of a.bowls and Juba has a comparative advantage in the production of cups. b.cups and Juba has a comparative advantage in the production of […]

1) Figure 10-15 Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects? a.PB must be equivalent to the corrective tax. b.QA must be equivalent to the amount of pollution […]

1) Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a a.shift to a lower indifference curve, and the consumer buys fewer granola bars. b.shift to a higher indifference curve, […]

1) Figure 14-14 Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements […]

1) Which of the following events would bring about a change in the value of the marginal product of labor? a.technological progress that alters the amount a worker can produce b.a change in the marginal product of labor c.a change […]

1) An increase in price causes an increase in total revenue when demand is a.elastic. b.inelastic. c.unit elastic. d.All of the above are possible. 2) The distribution of income for Dismal is as follows: If the poverty rate in Dismal […]

1) Let L represent the number of workers hired by a firm, and let Q represent that firm’s quantity of output. Assume two points on the firm’s production function are (L = 12, Q = 122) and (L = 13, […]

1) Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? a.The greater are the price elasticities of supply and demand, the greater is the deadweight loss. b.The greater is the price […]

1) “The government should punish crimes and enforce voluntary agreements but not redistribute income.” This statement is most closely associated with which political philosophy? a.liberalism b.utilitarianism c.libertarianism d.welfarism 2) Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using […]

1) If a firm notices that its average revenue equals the current market price, that firm must be participating in a competitive market. a.True b.False 2) Karen’s cat causes Danny to sneeze. Karen values her cat’s companionship at $300 per […]

1) Which of the following industries is least likely to exhibit the characteristic of free entry? a.ethnic restaurants b.municipal water and sewer c.corn farming d.grocery stores 2) If the price of walnuts rises, many people would switch from consuming walnuts […]

1) When goods do not have a price, which of the following primarily ensures that the good is produced? a.buyers b.sellers c.government d.the market 2) Which arrow represents the flow of land, labor, and capital? a.A b.B c.C d.D Answer: […]

1) An efficient tax system is one that imposes small deadweight losses and small administrative burdens. a.True b.False 2) Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price […]

1) Graphs such as bar graphs and pie charts are limited in that they a.can only show variables that are positively related. b.can only show variables that have a negative correlation. c.provide information on only one variable. d.provide information on […]

1) Figure 14-9 In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. […]

1) Congress relies on economists at the Congressional Budget Office to a.enforce the nation’s antitrust laws. b.set the nation’s monetary policy. c.provide evidence that incumbent members of Congress are performing well in their jobs. d.provide independent evaluations of policy proposals. […]

1) To be successful, a cartel must a.find a way to encourage members to produce more than they would otherwise produce. b.agree on the total level of production for the cartel, but they need not agree on the amount produced […]

1) In the circular-flow diagram, firms produce a.goods and services using factors of production. b.output using inputs. c.factors of production using goods and services. d.Both (a) and (b) are correct. 2) Table 16-4 This table shows the demand schedule, marginal […]

1) Table 13-17 Consider the following table of long-run total cost for four different firms: Firm 4’s efficient scale occurs at what quantity? a.2 b.3 c.4 d.5 2) A demand curve shows the relationship a.between income and quantity demanded. b.between […]

1) Which of the following is not an example of signaling? a.screening b.advertising c.getting an education d.gift giving 2) Table 7-3 The only four consumers in a market have the following willingness to pay for a good: If the price […]

1) Which of the following problems can not be alleviated by a gasoline tax? a.traffic congestion b.traffic accidents c.the undersupply of goods that produce positive externalities d.air pollution 2) The argument that consumers will not be willing to pay any […]

1) Of the following countries, which country’s government collects the largest amount of tax revenue as a percentage of that country’s total income? a.Denmark b.United States c.Canada d.Greece 2) Table 12-7 The following table shows the marginal tax rates for […]

1) Table 17-27 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation). Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The […]

1) Inflation measures the increase in the quantity of goods and services produced from each hour of a worker’s time. a.True b.False 2) Figure 7-22 At the equilibrium price, consumer surplus is a. $1,000. b. $2,000. c. $3,500. d. $500. […]

1) Some economists suggest that increased international trade with countries that have a greater proportion of unskilled workers has led to an expanding wage gap between high-skill and low-skill workers in the United States. a.True b.False 2) Figure 10-2. The […]

1) A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits. a.True b.False 2) In the simple circular-flow […]

1) Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit? a.only the one with a low level […]

1) The notion that similar taxpayers should pay similar amounts of taxes is known as a.vertical equity. b.the benefits principle. c.horizontal equity. d.taxpayer efficiency. 2) Table 12-8 The following table presents the total tax liability for an unmarried taxpayer under […]

1) Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. Refer to Table 18-12. Let Q represent the number of boxes of envelopes produced per week. […]

1) In the circular-flow diagram, one loop represents the flow of goods, services, and factors of production, and the other loop represents the corresponding flow of dollars. a.True b.False 2) Scenario 14-1 Assume a certain firm in a competitive market […]

1) At which point is this economy producing its maximum possible quantity of doors? a.R b.S c.T d.U 2) Figure 21-2 The downwardsloping line on the figure represents a consumer’s budget constraint. Refer to Figure 21-2. Which of the following […]

1) Suppose the government used the following formula to compute a family’s tax liability: Taxes owed = 28% of income – $8,000. How much would a family that earned $20,000 owe? a.-$8,000 b.-$2,400 c.$0 d.$2,400 2) Monopolies use their market […]

1) Which of the following is an important cause of inflation in an economy? a.increases in productivity in the economy b.the influence of positive externalities on the economy c.lack of property rights in the economy d.growth in the quantity of […]

1) When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular good, a.producer surplus increases and total surplus increases in the market for that good. b.producer surplus increases and total surplus decreases […]

1) When buyers in a competitive market take the selling price as given, they are said to be a.market entrants. b.monopolists. c.free riders. d.price takers. 2) Figure 16-2. The figure is drawn for a monopolistically competitive firm. If the average […]

1) For a snow-removal business, the capital stock would include inputs such as snow blowers and shovels. a.True b.False 2) Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. The […]

1) A society consists of three individuals: Sam, Tristan, and Ulyana. In terms of income and utility, Sam is currently best-off, Tristan ranks in the middle, and Ulyana is worst-off. Which of the following statements is correct? a.Utilitarianism suggests that […]

1) Figure 7-16 Suppose the price of the good is $450. Then, on the first unit of the good that is sold, producer surplus is a.$250, and on the second unit of the good that is sold, producer surplus is […]

1) Becky is a single mother of two young children who spend their days at a daycare center while Becky goes to work. The daycare center closes at 5:30. If parents do not pick up their children at or before […]

1) Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. […]

1) The national defense of the United States is not excludable because a.my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States. b.my enjoyment of the national defense does diminish your […]

1) In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm‘s average total cost. a.True b.False 2) What must be given up to obtain an item is […]

1) To fully understand how taxes affect economic well-being, we must a.assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. b.compare the taxes raised in […]

1) Economists argue that we can calculate the value of a human life by observing voluntary risks that people take every day. a.True b.False 2) Assume Leo buys coffee beans in a competitive market. It follows that a.Leo has a […]

1) The supply of labor in any one market depends on the opportunities available in other markets. a.True b.False 2) Figure 10-19 Note that the lines labeled €Demand€ and €Social Value€are parallel. Also, the slopes of the lines on the […]

1) Scenario 12-1 Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. Suppose the government levies a tax of $1 on each cigar, […]

1) About what percent of total world trade is accounted for by countries that belong to the World Trade Organization? a.54 percent b.72 percent c.89 percent d.97 percent 2) The United States has more income inequality than Japan, Germany, and […]

1) In the long run the primary effect of increasing the quantity of money is higher prices. a.True b.False 2) Studies indicate that the for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price […]

1) In 2011, the poverty line for a family of four in the U.S. was a.$60,974. b.$23,021. c.$20,988. d.$17,642. 2) Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 […]

1) A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying. a.True b.False 2) Table 17-26 Two prescription drug […]

1) Labor unions will raise the quantity of labor demanded. a.True b.False 2) Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. What is […]

1) If a country allows free trade and its domestic price for a given good is lower than the world price, then it will import that good. a.True b.False 2) The idea that people in equal conditions should pay equal […]

1) Economists normally assume that the goal of a firm is to (i)earn profits as large as possible, even if it means reducing output. (ii)earn revenues as large as possible, even if it means reducing profits. (iii)minimize costs, regardless of […]

1) Which of the following events must result in a higher price in the market for cigars? a.Demand for cigars increases, and supply of cigars decreases. b.Demand for cigars and supply of cigars both decrease. c.Demand for cigars decreases, and […]

1) Table 7-1 If price of the product is $135, then the total consumer surplus is a. $-50. b. $-35. c. $15. d. $150. 2) Refer to Figure 9-16. The tariff a.decreases producer surplus by the area C and decreases […]

1) President Gerald Ford referred to inflation as a.a blight on our nation’s economy. b.a necessary evil to combat high unemployment. c.public enemy number one. d.a fly in the ointment. 2) The price elasticity of supply measures how responsive a.equilibrium […]

1) The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases, deadweight loss continues to increase. a.True b.False 2) Scenario 17-3. Consider two countries, Kinglandia and Rovinastan, that are engaged […]

1) Table 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, […]

1) Table 17-6 Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring […]

1) Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier revenue will be equal to zero at a. Q = 10. b. Q = 15. c. Q = 20. d. Q = 30. 7) Assume that Falda and Varick can switch between […]

1) The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased. a.True b.False 2) […]

1) When a single person (or small group) has the ability to influence market prices, there is a.competition. b.market power. c.an externality. d.a lack of property rights. 2) Scenario 8-1 Erin would be willing to pay as much as $100 […]

1) Some countries win in international trade, while other countries lose. a.True b.False 2) For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade indicates whether that country’s demand for aluminum exceeds […]

1) Suppose that an industrial accident at a factory destroys a significant number of high-speed blenders that bartenders use to mix frozen drinks. What will happen in the labor market for bartenders? a.Both wages and employment will increase. b.Both wages […]

1) An increase in quantity demanded a.results in a movement downward and to the right along a demand curve. b.results in a movement upward and to the left along a demand curve. c.shifts the demand curve to the left. d.shifts […]

1) A normative economic statement such as The minimum wage should be abolished a.would likely be made by an economist acting as a scientist. b.would require values and data to be evaluated. c.would require data but not values to be […]

1) When two variables have a negative correlation, a.when the x-variable decreases, the y-variable decreases. b.when the x-variable decreases, the y-variable increases. c.when the x-variable increases, the y-variable increases. d.More than one of the above is correct. 2) A monopolist […]

1) Which of the following is an example of an implicit cost? (i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm (ii) interest paid on the firm’s debt […]

1) Scenario 18-3 Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives […]

1) Sellers’ total revenue would increase if the price a.increased from $12 to $15. b.decreased from $39 to $36. c.decreased from $27 to $24. d.All of the above are correct. 2) Human capital is a.an important determinant of wages, but […]

1) Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. If trade in peaches […]

1) Research into new technologies conveys neither negative externalities nor positive externalities. a.True b.False 2) A congested side street in your neighborhood is a.excludable and rival in consumption. b.excludable and not rival in consumption. c.not excludable and rival in consumption. […]

1) The supply curve for stand up paddle boards a.shifts when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. b.shifts when the price […]

1) Which of the following events must cause equilibrium price to fall? a.demand increases and supply decreases b.demand and supply both decrease c.demand decreases and supply increases d.demand and supply both increase 2) Table 14-2 The table represents a demand […]

1) The broken window fallacy a.explains why inflation is so high. b.is a justification for the government to print more money. c.is illustrated when a government program is justified not on its merits but on the number of jobs it […]

1) The government enforces property rights by a.requiring property owners to pay property taxes. b.providing police and courts. c.forcing people to own property. d.providing public parks and recreation facilities. 2) Using the midpoint method, between prices of $50 and $60, […]

1) Above-equilibrium wages caused by efficiency wages will most likely result in a.a shortage of labor. b.increased unemployment. c.compensating wage differentials. d.an decrease in the quantity of labor supplied. 2) Most studies have found that tobacco and marijuana are substitutes […]

1) According to the Coase theorem, in the presence of externalities a.private parties can bargain to reach an efficient outcome. b.government assistance is necessary to reach an efficient outcome. c.the assignment of legal rights can prevent externalities. d.the initial distribution […]

1) Which of the following is an example of an implicit cost? a.salaries paid to owners who work for the firm b.interest on money borrowed to finance equipment purchases c.cash payments for raw materials d.foregone rent on office space owned […]

1) Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: When price falls from P3 to P1, the firm finds that it a.decreases its fixed costs. b.should produce Q1 units of output. c.should produce […]

1) Production Possibilities for Picnicland What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900? a.150 burgers b.225 burgers c.300 burgers d.450 burgers 2) Table 22-10 The town of Franklin is facing a […]

1) In which of the following market structures is(are) there a large number of sellers? (i)monopolistic competition (ii)perfect competition (iii)oligopoly a.(i) and (ii) only b.(ii) and (iii) only c.(ii) only d.(i), (ii), and (iii) 2) An increase in demand will […]

1) At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price […]

1) Figure 20-3 Refer to Figure 20-3. Which of the following best describes the poverty rates by age from 1965 to 2011? a.The poverty rates by age have declined for all age groups. b.The percentage of people living in poverty […]

1) A lump-sum tax would take different amounts from the poor and the rich. a.True b.False 2) The poverty line is based on the percentage of people who cannot afford an adequate diet. a.True b.False Answer: False 3) Figure 14-7 […]

1) The median-voter theorem explains why a.politicians take extreme stands on issues. b.voters are attracted to political outsiders. c.two opposing politicians tend to take opposite sides of each issues. d.politicians tend to take middle-of-the-road positions. 2) Between point A and […]

1) In a perfectly competitive market, the market supply curve is a.the marginal cost curve above average total cost for a representative firm. b.the horizontal sum of all the individual firms‘ supply curves. c.the vertical sum of all the individual […]

1) Productivity is defined as the quantity of goods and services produced from each unit of labor input. a.True b.False 2) The following table shows the number of cases of water each seller is willing to sell at the prices […]

1) Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource problem. a.True b.False 2) Table 15-17 A monopolist faces the following demand curve: Which of the following statements best describes […]

1) Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur? a.a movement along D2 from point A to point B b.a movement […]

1) Figure 18-9 Refer to Figure 18-9. If the apple pickers start working fewer hours because they are taking more vacation time, the equilibrium wage will a.fall below w1 due to a shift in demand. b.fall below w1 due to […]

1) In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services? a.goods and services b.dollars paid to land, labor, and capital c.dollars spent on goods and services d.wages, rent, […]

1) When a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer. a.True b.False 2) When the marginal product of an input declines as the quantity of that input increases, the production function exhibits a.increasing […]

1) Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because a.those who stand to gain have an incentive to tell the truth. b.those who stand to lose have […]

1) Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium rental price of capital equipment will a.increase. b.decrease. c.not change. d.It is not possible to determine […]

1) When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a.elastic, and the demand curve will be horizontal. b.inelastic, and the demand curve will be horizontal. c.elastic, and the demand curve will be vertical. […]

1) Consider a good for which the number of people who benefit from the good is large and the exclusion of any one those people is impossible. In this case, the market for this good will likely a.be provided by […]

1) Panel (a) Panel (b) The graphs show the demand for cigarettes. In Panel (a), the arrows are consistent with which of the following events? a.The price of marijuana, a complement to cigarettes, increased. b.Mandatory health warnings were placed on […]

1) The signaling theory of education is most similar to the a.human capital theory of education. b.discrimination theory of advertising. c.signaling theory of advertising. d.efficiency wage theory of labor economics. 2) One reason why better-looking workers may have higher earnings […]

1) Which of the following is a determinant of the market supply curve but not a determinant of an individual seller’s supply? a.production technology b.expectations c.input prices d.the number of sellers 2) Suppose the cost of operating a 100 room […]

1) If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers’ incomes rise? a.Both the equilibrium price and quantity would increase. b.Both the equilibrium price and quantity […]

1) Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in 30 minutes? a.1 toothbrush and 4 hairbrushes b.4 toothbrushes […]

1) Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P= $15) and (Q = 2,400, P = $12). Then which of the following scenarios is possible? a.Both of these points lie […]

1) “Trade raises the economic wellbeing of a nation in the sense that the gains of the winners exceed the losses of the losers.” This statement is correct for a nation that exports manufactured goods, but it is not correct […]

1) Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. Which industry has the lowest concentration ratio? a.Industry J b.Industry K c.Industry L d.Industry […]

1) Which of the following is an example of screening? a.a man buys an expensive birthday present for his girlfriend b.an insurance company offers a policy with a high deductible c.the seller of a used motorcycle knows more about its […]

1) Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. A result of this country allowing international trade in crude oil is as follows: a.The well-being of domestic […]

1) Carolyn’s Pottery Shop produces vases that sell for $15 each. Assume that labor is the only input that varies for the firm. If Carolyn hires 10 workers, she can produce and sell 500 vases per week. If she hires […]

1) Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. Refer to Table 18-11. What is the marginal profit of the sixth […]

1) When a production possibilities frontier is bowed outward, the opportunity cost of the second good in terms of the first good increases as more of the second good is produced. a.True b.False 2) A profit-maximizing firm in a competitive […]

1) One advantage market economies have over centrally-planned economies is that market economies a.provide an equal distribution of goods and services to households. b.establish a significant role for government in the allocation of resources. c.solve the problem of scarcity. d.are […]

1) Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. Maya has an absolute advantage in the production of a.both goods and a comparative advantage in the production of mixers. b.both goods […]

1) To maximize its profit, a monopolistically competitive firm a.takes the price as given and chooses its quantity, just as a competitive firm does. b.takes the price as given and chooses its quantity, just as a colluding oligopolist does. c.chooses […]

1) The essence of an oligopolistic market is that there are only a few sellers. a.True b.False 2) Inefficiency exists in an economy when a good is a.not being consumed by buyers who value it most highly. b.not distributed fairly […]

1) Which of the following statements is true of the tax on gasoline? a.The cost of collecting a gasoline tax outweighs the revenues raised by the tax. b.It is preferred to tolls as the best solution to road congestion. c.It […]

1) A tax on a good causes the size of the market to increase. a.True b.False 2) Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP? a.increasing […]

1) Figure 8-2 The vertical distance between points A and B represents a tax in the market. The loss of consumer surplus as a result of the tax is a. $1.50. b. $3. c. $4.50. d. $6. 2) Table 15-18 […]

1) Figure 15-14 If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 would a.raise the price and raise total surplus. b.lower the price and raise total surplus. c.raise […]

1) The “unfaircompetition” argument might be cited by an American who believes that a.almost every country has a comparative advantage, relative to the United States, in producing almost all goods. b.young industries should be protected against foreign competition until they […]

1) Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. Suppose the […]

1) Table 17-9 The table shows the demand schedule for a particular product. Refer to Table 17-9. Suppose the market for this product is served by two firms that have formed a cartel. If the marginal cost of production is […]

1) Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Which of the following combinations of coolers and radios could Aruba produce in one 40- hour week? a.3 coolers and 7 radios […]

1) When the nation of Duxembourg allows trade and becomes an importer of software, a.residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises. b.residents […]

1) Most firms have a.no monopoly pricing power. b.some monopoly pricing power. c.absolute monopoly pricing power. d.the ability to earn monopoly profits. 2) Table 20-3 The Distribution of Income in Edgerton Refer to Table 20-3. According to the table, what […]

1) The value of the for a good will be relatively large when a.there are no good substitutes available for the good. b.the time period in question is relatively short. c.the good is a luxury rather than a necessity. d.All […]

1) If the demand for movies increases at the same time as the movie industry adopts labor-saving technology for producing movies, the equilibrium price for movies will increase, but the effect on the equilibrium quantity of movies is ambiguous. a.True […]

1) Which of the following events would cause the price of oranges to fall? a.There is a shortage of oranges. b.The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. c.The price of land throughout Florida decreases, […]

1) A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it. a.True b.False 2) Figure 10-4 This market a.has no need for government intervention. b.would benefit from […]

1) Which of the following is an example of government intervention to solve a Tragedy of the Commons problem? a.subsidizing basic research b.building lighthouses c.toll charges on congested roads d.cost-benefit analysis 2) Table 17-20 Nadia and Maddie are two college […]

1) Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the for tortilla chips […]

1) Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting […]

1) Positive statements are not a.descriptive. b.prescriptive. c.claims about how the world is. d.made by economists speaking as scientists. 2) If a government simplified its tax system the likeliest result would be a decrease in a.consumer surplus. b.producer surplus. c.in […]

1) Table 13-1 What is total output when 3 workers are hired? a.15 b.60 c.105 d.135 2) Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. […]

1) Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market. a.True b.False 2) Duties of the Council of Economic […]

1) Figure 21-23 Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer’s income is $160, the consumer’s optimal choice is D. Then the price of X decreases to $20. […]

1) In the transition from the short run to the long run, the number of firms in a competitive industry is a.fixed. b.increasing at a constant rate. c.decreasing. d.able to adjust to market conditions. 2) If employers are profit-maximizers, then […]

1) In 2011, the federal government spent 9 percent of the budget on net interest. Which of the following statements regarding net interest is correct? a.If the government pays down its debt, the amount of the budget needed for net […]

1) DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make […]

1) Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not […]

1) A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied. a.True b.False 2) Answer the following questions based on the table. A consumer […]

1) A likely example of substitute goods for most people would be a.tables and chairs. b.bicycles and helmets. c.apple juice and orange juice. d.coffee and sugar. 2) Table 12-10 If Jace has $33,000 in taxable income, his marginal tax rate […]

1) Table 17-27 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation). Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The […]

1) Suppose that the market for labor is initially in equilibrium. Suppose that workers’ tastes change so that they choose to retire at age 55 rather than age 67. Then the equilibrium wage a.and the equilibrium quantity of labor will […]

1) Table 18-7 Refer to Table 18-7. What is the value of the cell labeled II? a.-$100 b.$100 c.$200 d.$300 2) College-age athletes who drop out of college to play professional sports a.are not rational decision makers. b.are well aware […]

1) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier If Hosne and Merve both spend all of their time making wallets, then total production is a.7 wallets. b.8 wallets. c.14 wallets. d.28 wallets. 2) The president of the United States receives […]

1) The theory of efficiency wages suggests that firms may pay above-equilibrium wages a.to reduce employee turnover. b.to prevent unions from recruiting members. c.to reduce the need for minimum wage laws. d.to increase the demand for better-skilled workers. 2) The […]

1) Rational people make decisions at the margin by a.following marginal traditions. b.behaving in a random fashion. c.thinking in black-and-white terms. d.comparing marginal costs and marginal benefits. 2) When a supply curve or a demand curve shifts, the equilibrium price […]

1) Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then a.less than the socially […]

1) You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn’t known about, but would really like to see. In computing the opportunity cost of visiting this […]

1) Which of the following allows you to provide information about the relationship between two variables? a.coordinate system. b.pie chart c.bar graph d.time-series graph 2) Figure 21-9 Refer to Figure 21-9. If the consumer has $600 in income, what is […]

1) In deciding whether a good is a public good, one must determine the a.incomes of those who benefit from the good. b.value of the external benefits that accrue to resource owners. c.excludability of the good. d.All of the above […]

1) Some companies merge in order to lower costs through efficient joint production. a.True b.False 2) Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, […]

1) Which of these activities will most likely impose an external cost? a.An athlete works out at a gym. b.A secretary smokes a cigarette in a crowded break room. c.A young mother pushes her baby in a stroller. d.A construction […]

1) The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos […]

1) Table 22-17 Voter Type Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based […]

1) If duopoly firms that are not colluding were able to successfully collude, then a.price and quantity would rise. b.price and quantity would fall. c.price would rise and quantity would fall. d.price would fall and quantity would rise. 2) The […]

1) If the demand for light bulbs increases, producer surplus in the market for light bulbs a.increases. b.decreases. c.remains the same. d.may increase, decrease, or remain the same. 2) Which of the following conditions is characteristic of a monopolistically competitive […]

1) Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Karen has a budget of $80, Tara has a budget […]

1) Figure 10-11 Which of the following statements is correct? a.The private value of the 420th unit of output is $15. b.The social value of the 420th unit of output is $42. c.The external benefit of the 420th unit of […]

1) Figure 10-9 c.buyers are to a change in production costs. d.equilibrium price is to a change in supply. 8) The theory of consumer choice most closely examines which of the following Ten Principles of Economics? a.People face trade-offs. b.Governments […]

1) What is the equilibrium price in this market? a.$8 b.$12 c.$16 d.$20 2) What percent of families are poor for eight or more years? a.more than 20 percent b.between 15 and 20 percent c.approximately 10 percent d.less than 3 […]

1) Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping, she will work fewer hours after receiving the pay raise. a.True b.False 2) Consider the production […]

1) Figure 8-9 The vertical distance between points A and C represents a tax in the market. The total surplus without the tax is a. $8,000. b. $12,000. c. $20,000. d. $40,000. 2) When one firm sells its pollution permit […]

1) Which combination would produce a decrease in equilibrium quantity and an indeterminate change in equilibrium price? a.A b.B c.C d.D 2) Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant […]

1) A competitive firm sells its output for $50 per unit. Assume that labor is the only input that varies for the firm. The marginal product of the 10th worker is 10 units of output per day; the marginal product […]

1) If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that a.the poor family should pay more in taxes to pay for public education […]

1) Goods with close substitutes tend to have more elastic demands than do goods without close substitutes. a.True b.False 2) Economists say that a market where goods are not consumed by those valuing the goods most highly is a.laissez-faire.. b.unequal. […]

1) According to utilitarians, the ultimate objective of public actions should be to a.ensure the poor can afford an adequate diet. b.distribute income uniformly. c.maximize the sum of individual utility. d.prevent all people from experiencing diminishing marginal utility. 2) Who […]

1) Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm […]

1) Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping […]

1) Boxes C and D of this circular-flow diagram represent a.households and government. b.firms and government. c.the markets for goods and services and the markets for financial assets. d.the markets for goods and services and the markets for factors of […]

1) Scenario 18-6 Rocchetta Industries manufactures and supplies bottled water in Mexico. As a result of a contamination of water supplies at many of Mexico’s resort communities, the demand for bottled water has increased. Refer to Scenario 18-6. When the […]

1) Table 7-6 For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only […]

1) The Laffer curve illustrates that a.deadweight loss rises by the square of the increase in a tax. b.deadweight loss rises exponentially as a tax increases. c.tax revenue first rises, then falls as a tax increases. d.Both a) and b) […]

1) Chile’s Production Possibilities Frontier Colombia’s Production Possibilities Frontier Chi le and Colombia would not be able to gain from trade if Colombia’s opportunity cost of one pound of soybeans changed to a.1/2 pound of coffee. b.3/4 pound of coffee. […]

1) Figure 21-5 Refer to Figure 21-5. In graph (b), what is the price of good X relative to the price of good Y (i.e., Px/Py)? a. 1/3 b.1 c.3 d.10 2) If rectangle D is larger than rectangle A, […]

1) A good is excludable if a.one person’s use of the good diminishes another person’s enjoyment of it. b.the government can regulate its availability. c.it is not a normal good. d.people can be prevented from using it. 2) When negative […]

1) The opportunity cost of moving from point B to point D is 15 doghouses. a.True b.False 2) A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level. a.True b.False Answer: True […]

1) Table 13-16 Listed in the table are the long-run total costs for three different firms. Which firm is experiencing diseconomies of scale? a.Firm A only b.Firm B only c.Firm C only d.Firm A and Firm B only 2) At […]

1) Figure 18-7 Refer to Figure 18-7. Which of the following would shift the labor supply curve from S1 to S2? a.a change in workers’ attitudes toward the work-leisure tradeoff b.decreases in wages in other labor markets c.immigration of workers […]

1) The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. The cost of imposing a regulation that would ban […]

1) For a typical worker, her income will be lower when she is younger, peak around age 50, and decrease drastically when she retires. This pattern of changes in income for a typical worker is called a.the life cycle. b.permanent […]

1) If the supply of a product decreases, then we would expect equilibrium price a.to increase and equilibrium quantity to decrease. b.to decrease and equilibrium quantity to increase. c.and equilibrium quantity to both increase. d.and equilibrium quantity to both decrease. […]

1) A family’s income tax liability is a.a standard percentage of all income earned. b.determined by wage income rather than dividend and interest income. c.based on total income. d.constant from year to year. 2) When total revenue is less than […]

1) Economics is the study of a.production methods. b.how society manages its scarce resources. c.how households decide who performs which tasks. d.the interaction of business and government. 2) Normative conclusions a.come from positive analysis alone. b.are based on ignorance of […]

1) Soup is an inferior good if the demand a.for soup falls when the price of a substitute for soup rises. b.for soup rises when the price of soup falls. c.curve for soup slopes upward. d.for soup falls when income […]

1) If government officials break up a natural monopoly into four smaller firms, then a.each firm will be unable to maximize profits due to increased competition. b.competition will force firms to produce surplus output, which drives up price. c.the average […]

1) Economic studies of lottery winners and people who have inherited large amounts of money show that a.the income effect of winning the lottery or inheriting large amounts of money likely outweighs the substitution effect for most people. b.the substitution […]

1) Scenario 13-4 Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on […]

1) Corporate profits are a.included in payroll taxes. b.exempt from taxes. c.taxed twice, once as profit and once as dividends. d.taxed to pay for Medicare. 2) The two taxes that together provide the U.S. federal government with almost 80 percent […]

1) Which of the following countries has the largest tax burden? a.Mexico b.Canada c.United States d.Denmark 2) Lisa’s Production Possibilities FrontierBryce’s Production Possibilities Frontier s opportunity costs of operating his new business? a. $25,000 b. $75,000 c. $100,000 d. $175,000 […]

1) Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline? a.The demand for gasoline becomes more inelastic. b.The slope of the supply curve for gasoline becomes steeper. c.The […]

1) Table 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, […]

1) Suppose that a large lake in the middle of Minnesota evaporates, leaving more fertile farm land for growing corn available. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned […]

1) Figure 16-13 What is the first step in this industry’s adjustment to long run equilibrium? 2) Table 18-10 Refer to Table 18-10. This table describes the number of baseballs a manufacturer can produce per day with different quantities of […]

1) When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country a.cannot experience significant gains or losses by trading with other countries. b.cannot […]

1) Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by a.making it illegal to “disturb the […]

1) A paper plant produces water pollution during the production process. If the government forces the plant to internalize the negative externality, then the a.supply curve for paper would shift to the right. b.supply curve for paper would shift to […]

1) Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for […]

1) A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should a.increase the price of the good that it produces and sells. b.increase its […]

1) When a country has a comparative advantage in producing a certain good, a.the country should import that good. b.the country should produce just enough of that good for its own consumption. c.the country’s opportunity cost of that good is […]

1) When a country allows trade and becomes an importer of a good, a.domestic producers become better off, and domestic consumers become worse off. b.domestic producers become worse off, and domestic consumers become better off. c.domestic consumers become better off, […]

1) We must be knowledgeable of how people behave in strategic situations if we are to understand a.perfectly competitive markets. b.monopolistically competitive markets. c.oligopolistic markets. d.All of the above are correct. 2) Trade can make everybody better off because it […]

1) If one person’s use of a good diminishes another person’s enjoyment of it, the good is a.rival in consumption. b.excludable. c.normal. d.exhaustible. 2) Which of the following is not a result of the shift of the economy’s production possibilities […]

1) Figure 21-2 The downwardsloping line on the figure represents a consumer’s budget constraint. Refer to Figure 21-2. If the consumer’s income is $100, then what is the price of an apple? a. $0.50 b. $0.75 c. $1.00 d. $1.25 […]

1) An example of asymmetric information is when a seller of a house knows more than the buyer about the house’s condition. a.True b.False 2) An increase in a consumer’s income a.increases the slope of the consumer’s budget constraint. b.has […]

1) Figure 18-9 Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will a.increase, and more apple pickers will be hired. b.decrease, and more apple pickers will be hired. c.increase, and fewer apple pickers will be […]

1) Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only […]

1) People can be prevented from using a good if the good is a.a private good or a club good. b.a private good or a common resource. c.a public good or a common resource. d.a private good or a public […]

1) Which of the following is true of markets characterized by positive externalities? a.Social value exceeds private value, and market quantity exceeds the socially optimal quantity. b.Social value is less than private value, and market quantity exceeds the socially optimal […]

1) Table 12-11 If Bud has taxable income of $78,000, his marginal tax rate is a. 19.3%. b. 24.0%. c. 26.8%. d. 34.0%. 2) Scenario 22-3 At issue in a particular city vote is how much to spend, per person, […]

1) Education and on-the-job training are sources of human capital. a.True b.False 2) If Ernie’s individual labor supply curve is upward sloping, then Ernie responds to an increase in the a.wage by working more hours per week. b.opportunity cost of […]

1) In the field of study called political economy, economists make use of insights from the field of psychology. a.True b.False 2) An increase in price from $15 to $20 would a.increase total revenue by $500 b.decrease total revenue by […]

1) This economy cannot produce at which point(s)? a.L, M b.N, O, P, Q c.N, O, P d.Q 2) The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs […]

1) If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that a.the price effect would become a more significant consideration for each firm that makes automobiles. b.the excess of […]

1) The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the a.supply of wheat is elastic. b.supply of wheat is inelastic. c.demand for […]

1) For a profit-maximizing monopolistically competitive firm, marginal revenue equals marginal cost in a.the short run but not in the long run. b.the long run but not in the short run. c.both the short run and the long run. d.neither […]

1) Capital income does not include income paid to households for the use of their capital. a.True b.False 2) Table 17-7 The information in the table below shows the total demand for internet radio subscriptions in a small urban market. […]

1) The nation of Cranolia used to prohibit international trade, but now trade is allowed, and Cranolia is exporting furniture. Relative to the previous no-trade situation, buyers of furniture in Cranolia are now better off. a.True b.False 2) A new […]

1) Suppose that Elmer’s hourly wage increases, and he decides to work fewer hours. For Elmer, the substitution effect of the wage change is a.only partially offset by the income effect. b.more than offset by the income effect. c.exactly offset […]

1) If a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good. a.True b.False 2) Which of the following events must cause equilibrium quantity […]

1) An excise tax is a tax on a specific good, like gasoline. a.True b.False 2) Figure 21-2 The downwardsloping line on the figure represents a consumer’s budget constraint. Refer to Figure 21-2. Which points are affordable? a.W, X, and […]

1) A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues. a.True b.False 2) Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a […]

1) Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. Refer to Table 22-14. Which of the following […]

1) Individual demand curves are summed vertically to obtain the market demand curve. a.True b.False 2) A change in the supply of one factor of production a.will not change either the marginal productivities or the prices of other factors. b.will […]

1) Refer to Figure 9-17. Without trade, total surplus is a. $600. b. $1,200. c. $1,800. d. $2,250. 2) Suppose that in 2020 the average citizen’s federal tax bill is $11,888 per person, and total federal spending is $13,997 per […]

1) The idea that rational employers think at the margin is central to understanding how many units of labor they choose to employ. a.True b.False 2) Supply-side economics is a term associated with the views of a.Ronald Reagan and Arthur […]

1) If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should a.use more fertilizers and weed killers to increase their yields. b.plant additional acres to increase their output. c.reduce the […]

1) Externalities are a.side effects passed on to a party other than the buyers and sellers in the market. b.side effects of government intervention in markets. c.external forces that cause the price of a good to be higher than it […]

1) If preferences exhibit the property of transitivity, then a.the preferences are irrational. b.individuals prefer more government involvement in private markets than do people whose preferences are not transitive. c.preferences change over time more quickly than when preferences are not […]

1) Table 17-5 The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to […]

1) Which of the following statements is (are) correct? a.Relative to some other scientists, economists find it more difficult to conduct experiments. b.Theory and observation are important in economics as well as in other sciences. c.To obtain data, economists often […]

1) Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. Refer […]

1) While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms’ owners, workers, and customers. This statement illustrates […]

1) Table 18-5 Refer to Table 18-5. The price of output is a.$1 b.$2. c.$3. d.$4. 2) Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. How much profit will […]

1) If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a.the country will be an exporter of the good. b.the country will be an importer of the good. […]

1) Figure 10-11 The graph represents a market in which a.there is no externality. b.there is a positive externality. c.there is a negative externality. d.The answer cannot be determined from inspection of the graph. 2) Assume that Zimbabwe and Portugal […]

1) When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent a.a transfer of benefits from the consumer to the producer. b.a loss in total welfare. c.the higher marginal costs […]

1) The average tax rate measures the a.fraction of spending paid in taxes. b.fraction of income paid in taxes. c.incremental rate of tax on income. d.average deadweight loss from all taxes. 2) Table 22-5 The citizens of Anytown will decide […]

1) A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits. a.True b.False 2) The following table contains some production possibilities for […]

1) It is argued that competitive markets provide a “natural remedy” to discriminatory wage practices. Which of the following is widely recognized as a potential limit to the potency of that natural remedy? a.Governments sometimes mandate discriminatory practices. b.Some employees […]

1) The diagram below pertains to the demand for turkey in the United States. All else equal, sellers expecting the price of turkey to rise in the future would cause a current move from a.DA to DB. b.DB to DA. […]

1) Discrimination by a manager in the hiring process a.decreases the firm’s costs. b.increases the firm’s costs. c.is evident if a white manager refuses to hire a certain black applicant. d.is evident if a male manager fails to hire a […]

1) If the government regulates the price that a natural monopolist can charge to be equal to the firm’s average total cost, the firm will a.earn zero profits. b.earn positive profits, causing other firms to enter the industry. c.earn negative […]

1) Which of the following statements is correct? a.A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers. b.A disadvantage of a negative income tax program is that a poor person who […]

1) A disadvantage associated with in-kind transfers to reduce poverty is that they a.alter peoples’ incentives, whereas a negative income tax does not alter peoples’ incentives. b.do not allow poor families to make purchases based on their preferences. c.can only […]

1) Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers. a.True b.False 2) Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: If the market price […]

1) The slope of a horizontal line is infinite, and the slope of a vertical line is zero. a.True b.False 2) Aristotle writes, “What is common to many is taken least care of, for all men have greater regard for […]

1) A pair of jeans is rival but non-excludable. a.True b.False 2) Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie […]

1) Other things equal, a particular job will likely pay a higher wage if it involves a.danger to the worker. b.personal enjoyment for the worker. c.intellectual stimulation for the worker. d.All of the above are correct. 2) Increases in productivity […]

1) Accounting profit is equal to a.marginal revenue minus marginal cost. b.total revenue minus the explicit cost of producing goods and services. c.total revenue minus the opportunity cost of producing goods and services. d.average revenue minus the average cost of […]

1) Scenario 13-6 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer […]

1) If the number of buyers in a market decreases, then a.demand will increase. b.demand will decrease. c.supply will increase. d.supply will decrease. 2) If the income elasticity of demand for a good is negative, then the good must be […]

1) The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product of labor. a.True b.False 2) The market for ice cream is a a.monopolistic market. b.highly competitive market. […]

1) Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Henry of making a bird house is 1/3 bird feeder. a.True b.False 2) If the demand […]

1) For a monopolist, when the output effect is greater than the price effect, marginal revenue is a.positive. b.negative. c.zero. d.maximized. 2) The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. […]

1) If Shawn can produce donuts at a lower opportunity cost than Sue, then a.Shawn has a comparative advantage in the production of donuts. b.Sue has a comparative advantage in the production of donuts. c.Shawn should not produce donuts. d.Shawn […]

1) Scenario 8-2 Roland mows Karla’s lawn for $25. Roland’s opportunity cost of mowing Karla’s lawn is $20, and Karla’s willingness to pay Roland to mow her lawn is $28. Assume Roland is required to pay a tax of $10 […]

1) Which of the following is not an example of the principle that trade can make everyone better off? a.Americans buy tube socks from China. b.Residents of Maine drink orange juice from Florida. c.A homeowner hires the kid next door […]