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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 cost. b. lower prices of goods that are substitutes […]

1. A decrease in supply will cause the largest increase in price when a. both supply and demand are inelastic. b. both supply and demand are elastic. c. demand is elastic and supply is inelastic. d. demand is inelastic and […]

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. c. British taxes imposed on the American colonies. d. the failure […]

1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive. c. how firms’ profits respond to changes in market prices. d. […]

1. By definition, imports are a. people who work in foreign countries. b. goods in which a country has an absolute advantage. c. limits placed on the quantity of goods leaving a country. d. goods produced abroad and sold domestically. […]

1. We can use the theory of consumer choice to analyze a. why most demand curves slope downward. b. the tradeoff between work and leisure c. how interest rates affect household saving. d. All of the above are correct. ANSWER: […]

Labor supply KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 039.21.4 – MC – MANK08 40. A consumer has preferences over consumption and leisure, both of which are normal goods. When the wage decreases, the consumer chooses to consume less leisure. For this […]

Subjective Short Answer 1. Economics is the study of ______ . ANSWER: how society manages its scarce resources. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. TOPICS: […]

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 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision […]

a. the 1970’s and the 1990’s b. the 1970’s but not the 1990’s c. the 1990’s but not the 1970’s d. neither the 1970’s nor the 1990’s ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.010 – Analyze the relationship between money […]

1. In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely? a. The average American purchases more televisions than the average Nigerian. b. The average American has better […]

1 WHAT’S NEW IN THE EIGHTH EDITION: There is a new case study “Adam Smith Would Have Loved Uber.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: ➢ that economics is about the allocation of scarce resources. […]

ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.218 – Given a scenario, identify the distribution system being used. TOPICS: Invisible hand principle Economic systems KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 056.01.2 – MC – MANK08 57. For markets to work well, there […]

1. The adage, “There is no such thing as a free lunch,” means a. even people on welfare have to pay for food. b. the cost of living is always increasing. c. people face tradeoffs. d. all costs are included […]

True / False 1. Scarcity means that there is less of a good or resource available than people wish to have. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision […]

LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. TOPICS: Economic thinking Opportunity cost KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 064.01.1 – MC – MANK08 65. When calculating the cost of […]

1. Which of the following is a principle concerning how people interact? a. Markets are usually a good way to organize economic activity. b. Rational people think at the margin. c. People respond to incentives. d. All of the above […]

LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. TOPICS: Economic thinking Marginal thinking KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 105.01.1 – MC – MANK08 106. A bagel shop sells fresh […]

Positive externalities KEYWORDS: BLOOM’S: Application CUSTOM ID: 164.10.1 – MC – MANK08 165. Refer to Figure 10-11. Taking only private value and private cost into account, total surplus at the market equilibrium amounts to a. $3,850. b. $4,320. c. $4,980. […]

Public economics KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 092.10.2 – MC – MANK08 93. Taxes that are enacted to mitigate the effects of negative externalities are sometimes called a. control taxes. b. command levies. c. Pigovian taxes. d. Marshallian taxes. ANSWER: […]

1. Externalities can be corrected by each of the following except a. self-interest. b. moral codes and social sanctions. c. charity. d. normal market adjustments. ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.097 – Examine the effects of an externality on […]

decrease the price of the good produced. d. Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.097 […]

1. In markets, the invisible hand allocates resources efficiently a. in all cases. b. when the buyers and sellers are the only interested parties. c. when there are positive externalities, but not when there are negative externalities. d. when there […]

True / False 1. Markets sometimes fail to allocate resources efficiently. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.097 – Examine the effects of an externality on a market. TOPICS: Externalities Public economics KEYWORDS: BLOOM’S: Knowledge CUSTOM […]

In Chapter 10, different sources of externalities and a variety of potential cures for externalities are addressed. Markets maximize total surplus to buyers and sellers in a market. However, if a market generates an externality (a cost or benefit to […]

because a. it is hard to estimate the market demand curve and thus charge the “right” corrective tax. b. selling pollution permits create a net increase in pollution. c. Corrective taxes distort incentives. d. Corrective taxes provide greater flexibility to […]

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 necessary to control individual greed. ANSWER: c […]

a. reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year. b. reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the […]

Subjective Short Answer 1. Does research into new technologies create a positive externality or does it create a negative externality? ANSWER: Research into new technologies creates a positive externality. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.022 – Classify an externality as either […]

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. 1. Refer to Figure 10–13. Each unit of plastics that is produced results in an external a. cost of $6. b. cost […]

and Jane bears a cost of Dick’s ownership of the dog. Assuming Jane has the legal right to peace and quiet, which of the following statements is correct? a. If Dick‘s benefit exceeds Jane’s cost, government intervention is necessary. b. […]

1. If an externality is present in a market, economic efficiency may be enhanced by a. increased competition. b. weakening property rights. c. better informed market participants. d. government intervention. ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.097 – Examine the […]

Public goods KEYWORDS: BLOOM’S: Application CUSTOM ID: 047.11.1 – MC – MANK08 48. 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 […]

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. c. not excludable, people have an incentive to be free riders. d. not […]

1. Markets do not ensure that the air we breathe is clean because a. clean air has no value. b. the government prevents markets from doing so. c. property rights are not well established for clean air. d. clean air […]

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 […]

d. improved valuation of a common resource ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.191 – Given a scenario describing an externality, identify the appropriate public policy to internalize that externality. TOPICS: Public economics Pigouvian taxes KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: […]

The purpose of Chapter 11 is to address a group of goods that are free to the consumer. When goods are free, market forces that normally allocate resources are absent. Therefore, free goods, such as playgrounds and public parks, may […]

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 the decisions of buyers and sellers and these decisions lead to […]

Subjective Short Answer 1. When a good does not have a __________ attached to it, private markets fail to ensure that the good is produced and consumed in the proper amounts. ANSWER: price DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.100 – Examine […]

CUSTOM ID: 102.11.2 – MC – MANK08 103. Suppose that the Town of Mapledale is considering hiring an additional firefighter. The expected benefit is estimated to be worth $5 for each of Mapledale’s 15,000 residents. What should the city do? […]

cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park […]

1. It would always be a mistake to view a. many species of animals as common resources. b. a road as a public good. c. national defense as a common resource. d. a fireworks display as a public good. ANSWER: […]

True / False 1. When goods are available free of charge, the market forces that normally allocate resources in our economy are absent. a. True b. False ANSWER: True DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.100 – Examine the implications of excludability […]

1. Goals of efficiency and equity in tax policy are a. complementary in most countries. b. necessary for application of the ability–to-pay principle. c. often in conflict with each other. d. easier to achieve when tax codes are complex. ANSWER: […]

ANSWER: b DIFFICULTY: Difficult LEARNING OBJECTIVES: ECON.MANK.095 – Examine the design of the U.S. tax system. TOPICS: Taxes KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 176.12.2 – MC – MANK08 177. Refer to Table 12–10. If Miss Kay has $80,000 in taxable […]

1. The concept that people should pay taxes based on the benefits they receive from government services is called a. the ability-to-pay principle. b. the benefits principle. c. horizontal equity. d. vertical equity. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.095 […]

perform these functions. The purpose of Chapter 12 is to build on the lessons learned about taxes in previous chapters. We have seen that a tax reduces the quantity sold in a market, that the distribution of the burden of […]

True / False 1. The average American pays a higher percent of his income in taxes today than he would have in the late 18th century. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.095 – Examine the […]

b. His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent. c. His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent. d. His […]

1. In designing a tax system, policymakers have two objectives that are often conflicting. They are a. maximizing revenue and minimizing costs to taxpayers. b. efficiency and minimizing costs to taxpayers. c. efficiency and equity. d. maximizing revenue and reducing […]

LEARNING OBJECTIVES: ECON.MANK.193 – Given a scenario describing buyers’ willingness to pay, compute consumer surplus in a market. TOPICS: Consumer surplus Welfare economics Taxes KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 065.12.2 – MC – MANK08 66. The deadweight loss associated with […]

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 ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.095 – Examine the design of the U.S. […]

TOPICS: Taxes KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 055.12.3 – MC – MANK08 56. You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, […]

Subjective Short Answer 1. What has been the relationship over the past century between the U.S. economy’s income and the percentage of that income that the government collects in revenues? ANSWER: Both have increased over time, but the percentage of […]

TOPICS: Producer theory Production costs KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 170.13.3 – MC – MANK08 171. Refer to Figure 13-5. Curve D is increasing because a. of diminishing marginal product. b. of increasing marginal product. c. marginal product first increases, […]

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. c. how financial institutions set interest rates. d. whether resources […]

average total-cost curve at its minimum. TOPICS: Producer theory Production costs KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 044.13 – TF – MANK08 45. Average total cost and marginal cost express information that is already contained in a firm’s total cost. a. […]

1. Economists assume that the typical person who starts her own business does so with the intention of a. donating the profits from her business to charity. b. capturing the highest number of sales in her industry. c. maximizing profits. […]

47. Refer to Figure 13–2. The graph illustrates a typical a. total-cost curve. b. production function. c. production possibilities frontier. d. marginal product of labor curve. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.174 – Given a graph of the production […]

Subjective Short Answer 1. Define profit. ANSWER: Profit = Total revenue – Total cost. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.275 – Given data on total revenue, implicit costs, and explicit costs, compare economic profit and accounting profit. TOPICS: Producer theory KEYWORDS: […]

DIFFICULTY: Difficult LEARNING OBJECTIVES: ECON.MANK.170 – Given a graph of the average-total-cost curve in the long run, identify the regions that represent economies of scale, constant returns to scale, and diseconomies of scale. TOPICS: Producer theory Production costs Long run […]

ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.275 – Given data on total revenue, implicit costs, and explicit costs, compare economic profit and accounting profit. TOPICS: Producer theory Production costs KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 065.13.1 – MC – MANK08 66. […]

market structures—competitive, monopolistic, monopolistically competitive, and oligopolistic. The purpose of Chapter 13 is to address the costs of production and develop the firm’s cost curves. These cost curves underlie the firm’s supply curve. In previous chapters, we summarized the firm’s […]

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 ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply […]

a. upward sloping b. downward sloping c. U-shaped d. constant ANSWER: a DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.252 – Given data on a firm’s cost structure, calculate the firm’s marginal cost at different quantities. TOPICS: Marginal product Production costs KEYWORDS: BLOOM’S: […]

1. One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run, a. output is not variable. b. the number of workers used to produce the firm’s product is fixed. […]

True / False 1. The economic field of industrial organization examines how firms’ decisions about prices and quantities depend on the market conditions they face. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic […]

d. $360 ANSWER: c DIFFICULTY: Difficult LEARNING OBJECTIVES: ECON.MANK.253 – Given data on a firm’s cost structure, calculate the firm’s various average costs at different quantities. TOPICS: Producer theory Production costs KEYWORDS: BLOOM’S: Application CUSTOM ID: 066.13.3 – MC – […]

1. Which of these assumptions is often realistic for a firm in the short run? a. The firm can vary both the size of its factory and the number of workers it employs. b. The firm can vary the size […]

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 as it needs at the prevailing wage rate. ANSWER: c […]

Subjective Short Answer 1. If a firm can influence the market price of the good it sells, then it is said to have __________. ANSWER: market power DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.092 – Examine firms in competitive markets. TOPICS: Perfect […]

conditions. Chapters 15 through 17 will employ these cost curves to see how firms with market power (monopolistic, monopolistically competitive, and oligopolistic firms) respond to changes in market conditions. The purpose of Chapter 14 is to examine the behavior of […]

True / False 1. For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal. a. True b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.092 – Examine firms in competitive markets. […]

1. A key characteristic of a competitive market is that a. government antitrust laws regulate competition. b. producers sell nearly identical products. c. firms minimize total costs. d. firms have price setting power. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.092 […]

c. $250 d. $450 ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.284 – Given the market price and the firm’s production costs, determine the profit-maximizing outcome of a perfectly competitive firm. TOPICS: Perfect competition Short run KEYWORDS: BLOOM’S: Analysis CUSTOM ID: […]

a. $12. b. $4. c. $3. d. $1. ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.285 – Given the market price of a good, compute a competitive firm’s average revenue at various quantities. TOPICS: Perfect competition KEYWORDS: BLOOM’S: Application CUSTOM ID: […]

ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.284 – Given the market price and the firm’s production costs, determine the profit-maximizing outcome of a perfectly competitive firm. TOPICS: Perfect competition KEYWORDS: BLOOM’S: Application CUSTOM ID: 062.14.2 – MC – MANK08 63. […]

ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.171 – Given a graph of the firm’s production costs and the market price of a good, indicate the area that represents the firm’s profit. TOPICS: Perfect competition Short run KEYWORDS: BLOOM’S: Analysis CUSTOM […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.172 – Given a graph of the firm’s production costs, determine the shutdown price in the short run for a perfectly competitive firm. TOPICS: Perfect competition Short run KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 217.14.2 – MC […]

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 […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.034 – Compare the welfare effects of allowing a monopolist to engage in price discrimination against standard monopoly pricing. TOPICS: Monopolies KEYWORDS: BLOOM’S: Application CUSTOM ID: 054.15.4 – MC – MANK08 Scenario 15–10 Vincent operates a […]

1. Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies? a. preventing mergers through antitrust laws b. regulating the prices that monopolies can charge c. doing […]

Subjective Short Answer 1. What are the three main sources of barriers to entry for monopolies? ANSWER: monopoly resources government regulation the production process DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.003 – Analyze the behavior and market effects of monopolies. TOPICS: Monopolies […]

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 price maker, whereas a monopolist is a […]

1. Which of the following is not a characteristic of a monopoly? a. barriers to entry b. one seller c. one buyer d. a product without close substitutes ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.003 – Analyze the behavior and […]

1. Monopolists can achieve any level of profit they desire because they have unlimited market power. a. True b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.003 – Analyze the behavior and market effects of monopolies. TOPICS: Monopolies KEYWORDS: BLOOM’S: […]

1. Which of the following strategies is not an effective strategy to reduce monopoly inefficiency? a. antitrust laws b. price discrimination c. doing nothing d. breaking up a natural monopoly into more than one firm ANSWER: d DIFFICULTY: Moderate LEARNING […]

244 WHAT’S NEW IN THE EIGHTH EDITION: A new Ask the Experts feature on “Airline Mergers” has been added and there are two new questions in the Problems and Applications section. LEARNING OBJECTIVES: By the end of this chapter, students […]

Chapter 15/Monopoly ❖ 257 5. Policymakers can respond to the inefficiencies caused by monopolies in one of four ways: (1) by trying to make monopolized industries more competitive; (2) by regulating the behavior of the monopolies; (3) by turning some […]

ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.003 – Analyze the behavior and market effects of monopolies. TOPICS: Monopolies KEYWORDS: BLOOM’S: Application CUSTOM ID: 132.15.2 – MC – MANK08 133. Refer to Table 15-7. Sally will maximize her profits by selling […]

1. Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production. a. (i) and (ii) only b. […]

KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 051.15.1 – MC – MANK08 52. Drug companies are allowed to be monopolists in the drugs they discover in order to a. allow drug companies to charge a price that is equal to their marginal […]

71. Refer to Figure 15–3. Which panel could represent the demand curve facing a soybean farmer? a. Panel A b. Panel B c. Panel C d. Panel D ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.003 – Analyze the behavior and […]

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 […]

1. Price discrimination a. is illegal in the United States and Europe. b. can occur in both perfectly competitive and monopoly markets. c. is illogical because it does not maximize profits. d. can maximize profits if the seller can prevent […]

187. Suppose for some firm that average total cost is minimized at Q1 units of output. For a monopolistically competitive firm in long-run equilibrium, Q1 a. is also the level of output at which marginal cost equals average total cost. […]

KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 227.16.2 – MC – MANK08 228. Monopolistic competition is an a. inefficient market structure because there is deadweight loss. b. inefficient market structure because price exceeds marginal cost. c. efficient market structure because free entry […]

1. Which market structure(s) is(are) imperfectly competitive? ANSWER: oligopoly monopolistic competition DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.023 – Classify an imperfectly competitive firm as an oligopoly or a monopolistically competitive firm. TOPICS: Monopolistic competition KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 001.16.4 – […]

1. Some firms have an incentive to advertise because they sell a a. homogeneous product and charge a price equal to marginal cost. b. homogeneous product and charge a price above marginal cost. c. differentiated product and charge a price […]

ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.094 – Examine the behavior of oligopolists. TOPICS: Oligopolies KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 052.16.1 – MC – MANK08 53. One way in which monopolistic competition differs from oligopoly is that a. there are […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.161 – Given a graph of a monopolistically competitive market, derive the profit-maximizing price and quantity. TOPICS: Monopolistic competition KEYWORDS: BLOOM’S: Application CUSTOM ID: 067.16.2 – MC – MANK08 68. Refer to Figure 16–4. What price […]

1. A downward-sloping demand curve a. is a feature of all monopolistically competitive firms. b. means that the firm in question will never experience a zero profit. c. causes marginal revenue to exceed price. d. prohibits firms from earning positive […]

Subjective Short Answer 1. Which market structure(s) is(are) imperfectly competitive? ANSWER: oligopoly monopolistic competition DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.023 – Classify an imperfectly competitive firm as an oligopoly or a monopolistically competitive firm. TOPICS: Monopolistic competition KEYWORDS: BLOOM’S: Comprehension CUSTOM […]

Chapter 13. The purpose of Chapter 16 is to address monopolistic competition —a market structure in which many firms sell products that are similar but not identical. Monopolistic competition differs from perfect competition because each of the many sellers offers […]

1. The market for novels is a. perfectly competitive. b. a monopoly. c. monopolistically competitive. d. an oligopoly. ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.058 – Determine if a market attribute is a characteristic of a competitive market or a […]

True / False 1. There are four basic types of market structure. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. TOPICS: […]

1. A typical firm in the US economy would be classified as a. perfectly competitive. b. imperfectly competitive. c. a duopolist. d. an oligopolist. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making […]

41. Television advertisements aired during major sporting events are very expensive. A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising a. enhances the effectiveness of the […]

8 $77 8 $12 124. Refer to Table 16–6. What is the profit-maximizing output for Beatrice’s Birthday Cakes? a. 3 cakes b. 4 cakes c. 5 cakes d. 6 cakes ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.161 – Given a […]

True / False 1. The essence of an oligopolistic market is that there are only a few sellers. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.094 – Examine the behavior of oligopolists. TOPICS: Oligopolies KEYWORDS: BLOOM’S: Knowledge […]

KEYWORDS: BLOOM’S: Application CUSTOM ID: 062.17.2 – MC – MANK08 63. Lori and Maya are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If […]

Subjective Short Answer 1. Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market? ANSWER: Because there are only a few firms in an oligopoly market, their actions are interdependent. There are […]

1. From society’s standpoint, cooperation among oligopolists is a. desirable, because it leads to less conflict among firms and a wider variety of products for consumers. b. desirable, because it leads to an outcome closer to the competitive outcome than […]

➢ the prisoners’ dilemma and how it applies to oligopoly and other issues. ➢ how the antitrust laws try to foster competition in oligopolistic markets. 286 Chapter 16 Oligopoly WHAT’S NEW IN THE EIGHTH EDITION: Two new features have been […]

c. increases, the market approaches the competitive market outcome. d. increases, the market approaches the monopoly outcome. ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.299 – Identify if an attribute is a characteristic of oligopolies. TOPICS: Oligopolies KEYWORDS: BLOOM’S: Analysis CUSTOM […]

ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.183 – Given a payoff matrix, identify the dominant strategy, if present, for each player. TOPICS: Game theory Nash equilibrium KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 117.17.2 – MC – MANK08 118. The players in […]

1. When firms are faced with making strategic choices to maximize profit, economists typically use a. the theory of monopoly to model their behavior. b. the theory of aggressive competition to model their behavior. c. game theory to model their […]

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 profits of all other sellers. c. […]

1. A distinguishing feature of an oligopolistic industry is the tension between a. profit maximization and cost minimization. b. cooperation and self interest. c. producing a small amount of output and charging a price above marginal cost. d. short-run decisions […]

DIFFICULTY: Challenging LEARNING OBJECTIVES: ECON.MANK.299 – Identify if an attribute is a characteristic of oligopolies. TOPICS: Collusion Oligopolies KEYWORDS: BLOOM’S: Application CUSTOM ID: 061.17.1 – MC – MANK08 62. Refer to Table 17-7. Assume there are two profit-maximizing internet radio […]

1. The story of the prisoners’ dilemma shows why a. predatory pricing is clearly not in society’s best interest. b. economists are unanimous in condemning resale price maintenance, since it inevitably reduces competition. c. oligopolies can fail to act independently, […]

1. According to the neoclassical theory of distribution, the wages paid to workers a. reflect the market prices of the goods those workers produce. b. reflect the degree of market power held by the firms that pay those wages. c. […]

1. In 2015, the total income of all U.S. residents was about a. $10 billion. b. $16 billion. c. $10 trillion. d. $16 trillion. ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for the factors of production. […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for the factors of production. TOPICS: Factors of production Marginal product KEYWORDS: BLOOM’S: Application CUSTOM ID: 036.18.4 – MC – MANK08 37. Consider the market for land. Suppose the value of […]

1. To say that a firm is competitive in the labor market is to say that the firm a. has little or no control over the number of workers it hires. b. has little or no control over the wage […]

1. In a representative labor market, a. the wage adjusts to balance the supply and demand for labor. b. the wage equals the value of the marginal product of labor. c. an increase in the supply of labor increases the […]

➢ why equilibrium wages equal the value of the marginal product of labor. ➢ the effects of immigration on the labor market. ➢ how the other factors of production—land and capital—are compensated. ➢ how a change in the supply of […]

DIFFICULTY: Difficult LEARNING OBJECTIVES: ECON.MANK.262 – Given data on production technology, calculate a firm’s value of the marginal product for an input. TOPICS: Marginal product Value of the marginal product KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 129.18.1 – MC – MANK08 […]

True / False 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 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for the factors of […]

1. In economics, the term capital refers to a. money. b. stocks and bonds. c. equipment and structures used in production. d. All of the above are correct. ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for […]

Subjective Short Answer 1. What are the three most important factors of production? ANSWER: The three most important factors of production are labor, land, and capital. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for the factors of production. […]

of labor equals 35 units per week, then the marginal cost of producing an additional unit of output is a. $20. b. $35. c. $700. d. We do not have enough information to answer this question. ANSWER: a DIFFICULTY: Difficult […]

d. Supply decreases from S2 to S1. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.073 – Determine if a change in the marginal product of labor or the output price causes a movement along or shift of the firm’s labor-demand curve. […]

42. 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 […]

1. Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by a. race. b. level of education. c. attitudes toward risk. d. All of the above are forms of discrimination. ANSWER: a DIFFICULTY: Easy LEARNING […]

TOPICS: Wage differentials Discrimination KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 063.19.2 – MC – MANK08 64. A natural correction to employer discrimination in market economies is the a. threat of judicial review. b. profit motive. c. political process. d. union movement. […]

c. the superstar CPA will not earn as much as the superstar golfer because a superstar accountant can only work with a limited number of clients per day, whereas millions of fans can enjoy the services provided by a superstar […]

➢ why a few superstars earn tremendous incomes in some occupations. ➢ why wages rise above the level that balances supply and demand. ➢ why it is difficult to measure the impact of discrimination on wages. ➢ when market forces […]

True / False 1. The economic theory of labor markets suggests that wages are determined by labor supply and labor demand. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.008 – Analyze the markets for the factors of […]

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 by factors that affect demand. c. low, other things equal. d. high, other […]

d. a tournament. ANSWER: a DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.121 – Explain the interaction of unionized and nonunionized states by determining the change in the labor market of a nonunionized state. TOPICS: Labor economics Unions KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: […]

Subjective Short Answer 1. The difference in wages that results from nonmonetary characteristics of different jobs is called the ANSWER: compensating differential. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.196 – Given a scenario describing workers’ wages, identify the economic justification for this […]

CUSTOM ID: 134.19.1 – MC – MANK08 135. Studies of wages by labor economists indicate that measurable variables such as age, job characteristics, years of education, and years of experience account for a. virtually none of the variation in wages […]

1. John Maynard Keynes referred to economics as an easy subject, a. at which very few excel. b. but not as easy as philosophy or the pure sciences. c. which very few can enjoy. d. which deals primarily with common […]

True / False 1. Economists try to address their subject with a scientist’s objectivity. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.024 – Classify the different functions an economist may serve. TOPICS: Economic thinking KEYWORDS: BLOOM’S: Knowledge […]

13 way. They will see how economists employ the scientific method, the role of assumptions in model building, and the application of two specific economic models. Students will also learn the important distinction between two roles economists can play: as […]

1. Economists, like mathematicians, physicists, and biologists, a. make use of the scientific method. b. try to address their subject with a scientist’s objectivity. c. devise theories, collect data, and then analyze these data in an attempt to verify or […]

b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.162 – Given a graph of a production possibilities frontier, determine the opportunity cost for producing each commodity. TOPICS: Production possibilities model Opportunity cost KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 071.02 – TF […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. TOPICS: Circular flow model Economic thinking KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 075.02.1 – MC – MANK08 76. In the […]

1. The ancient Greek philosopher, Plato, concluded that in an ideal society the income of the richest person a. would be equal to the income of the poorest person. b. would be no more than four times the income of […]

True / False 1. The invisible hand of the marketplace acts to allocate resources efficiently, but it does not necessarily ensure that resources are allocated fairly. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.006 – Analyze the […]

1. Whether or not policymakers should try to make our society more egalitarian is largely a matter of a. economic efficiency. b. political philosophy. c. egalitarian principles. d. enhanced opportunity. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.039 – Contrast the […]

DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.039 – Contrast the prescription for the government’s role in redistribution income implied by the political philosophies of utilitarianism, liberalism, and libertarianism. TOPICS: Political economy Economic thinking KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 038.20.2 – MC – […]

Subjective Short Answer 1. Who said “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries”? ANSWER: Winston Churchill DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.006 – Analyze the factors […]

c. in-kind transfers only. d. income only. ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.178 – Given a household’s size and income, determine if that household is living in poverty according to the U.S. poverty line. TOPICS: Economic thinking KEYWORDS: BLOOM’S: […]

➢ how political philosophers view the government’s role in redistributing income. ➢ the various policies aimed at helping poor families escape poverty. 334 WHAT’S NEW IN THE EIGHTH EDITION: There is a new In the News feature on “A Worldwide […]

1. Governments enact policies to a. make the distribution of income more efficient. b. make the distribution of income more equal. c. maximize the use of the welfare system. d. minimize the use of in-kind transfers. ANSWER: b DIFFICULTY: Easy […]

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 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.006 – Analyze the factors contributing to income […]

1. Which of the following statements is not correct? a. Libertarians are opposed to redistributing income. b. Critics of the welfare system argue that it breaks up families. c. One of the problems with measuring income inequality is valuing in-kind […]

U.S. economy KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 116.20.1 – MC – MANK08 117. Based on U.S. data for 2011, the poverty rate is the highest for which group of people? a. children b. married couples c. female-headed households, no spouse […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.067 – Determine the effect of an event on the loanable funds market. TOPICS: Permanent income hypothesis KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 152.20.1 – MC – MANK08 153. A typical worker’s normal or average income is […]

TOPICS: Fiscal policy KEYWORDS: BLOOM’S: Application CUSTOM ID: 041.20.3 – MC – MANK08 42. A disadvantage associated with an Earned Income Tax Credit (EITC) program to reduce poverty is that it a. encourages illegitimate births because single women with children […]

True / False 1. The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy TOPICS: Consumer theory KEYWORDS: BLOOM’S: Knowledge CUSTOM […]

Which of the following could explain the change in the budget line from A to B? a. a decrease in income and a decrease in the price of X b. a decrease in income and an increase in the price […]

DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.088 – Evaluate how a consumer can maximize utility subject to budget limitations. TOPICS: Budget constraints Consumer theory KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 039.21 – SAE – MANK08 40. Refer to Figure 21–32. How much income […]

358 ❖ Chapter 21/The Theory of Consumer Choice a. The increase in the interest rate raises the price of “consumption when young.” The substitution effect suggests that Saul would lower the amount of consumption when young and save more for […]

345 WHAT’S NEW IN THE EIGHTH EDITION: The discussion of Giffen goods has been clarified. LEARNING OBJECTIVES: By the end of this chapter, students should understand: ➢ how a budget constraint represents the choices a consumer can afford. ➢ how […]

53. As long as a consumer remains on the same indifference curve, a. she is indifferent to all points that lie on any other indifference curve. b. her preferences will not affect the marginal rate of substitution. c. she is […]

Subjective Short Answer Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. 1. Refer to Scenario 21-4. If […]

LEARNING OBJECTIVES: ECON.MANK.189 – Given a scenario describing a consumer’s income level and the prices of two goods, derive this consumer’s budget constraint. TOPICS: Budget constraints Consumer theory KEYWORDS: BLOOM’S: Application CUSTOM ID: 077.21.1 – MC – MANK08 78. Suppose […]

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 and less time on work c. choosing to spend more now […]

105. Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a. the consumer to feel richer, so the consumer buys more granola bars. b. the consumer to feel richer, so […]

85. Consider the indifference curve map for nickels and quarters. Assume nickels are on the horizontal axis and quarters are on the vertical axis. The indifference curves for nickels and quarters are a. straight lines with slope of -1/5. b. […]

Figure 21–16 1. Refer to Figure 21–16. The price of X is $20, the price of Y is $5, and the consumer’s income is $40. Which point represents the consumer’s optimal choice? a. A b. B c. C d. D […]

1. Indifference curves illustrate a. a firm’s profits. b. a consumer’s budget. c. a consumer’s preferences. d. the prices of two goods. ANSWER: c DIFFICULTY: Easy REFERENCES: Preferences – What the Consumer Wants LEARNING OBJECTIVES: ECON.MANK.088 – Evaluate how a […]

d. 6 ANSWER: b DIFFICULTY: Challenging REFERENCES: The Theory of Consumer Choice LEARNING OBJECTIVES: ECON.MANK.088 – Evaluate how a consumer can maximize utility subject to budget limitations. TOPICS: Consumer choice equilibrium Consumer theory KEYWORDS: BLOOM’S: Application CUSTOM ID: 053.21.3 – […]

Multiple Choice Figure 21-1 The downward-sloping line on the figure represents a consumer’s budget constraint. 1. Refer to Figure 21-1. If the consumer’s income is $140, then what is the price of a CD? a. $3 b. $5 c. $7 […]

Subjective Short Answer 1. When some people are better informed than others and the imbalance affects the choices they make, economists say there is ANSWER: asymmetric information. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.002 – Analyze how asymmetric information distorts […]

True / False 1. The science of economics is a finished jewel, perfect and unchanging. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.024 – Classify the different functions an economist may serve. KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: […]

1. The field of political economy a. casts aside most of the standard methods of economic analysis. b. is also referred to as the field of public choice. c. is also referred to as the field of macroeconomics. d. produces […]

The purpose of Chapter 22 is to give students a taste of three topics on the frontier of microeconomic research. The first topic addressed is asymmetric information , a situation when one person in an economic relationship has more relevant […]

ANSWER: b DIFFICULTY: Moderate REFERENCES: Political Economy LEARNING OBJECTIVES: ECON.MANK.134 – Explain why majority rule voting will always pick the choice most preferred by the median voter. KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 112.22.2 – MC – MANK08 113. Which voter […]

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 it has already studied, economists have found perfect and […]

c. moral hazard. d. screening. ANSWER: a DIFFICULTY: Easy REFERENCES: Asymmetric Information LEARNING OBJECTIVES: ECON.MANK.219 – Given a scenario, identify the presence of moral hazard or adverse selection. KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 063.22.1 – MC – MANK08 64. When […]

Percent of electorate 32 20 15 33 First choice D C A B Second choice C A D D Third choice B D B A Fourth choice A B C C 61. Refer to Table 22–9. The table shows the […]

1. Economists use basic psychological insights in the field of study called a. psychological economics. b. transitional economics. c. behavioral economics. d. social economics. ANSWER: c DIFFICULTY: Easy REFERENCES: Behavioral Economics LEARNING OBJECTIVES: ECON.MANK.316 – Recognize the role psychology plays […]

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. ANSWER: c DIFFICULTY: Easy REFERENCES: Asymmetric Information LEARNING OBJECTIVES: ECON.MANK.002 – Analyze how asymmetric information […]

ten principles discussed in Chapter 1). The purpose of Chapter 3 is to demonstrate how everyone can gain from trade. Trade allows people to specialize in the production of goods for which they have a comparative advantage and then trade […]

48 WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Price Gouging.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: ➢ what a competitive market is. ➢ what determines the demand […]

64 ❖ Chapter 4/The Market Forces of Supply and Demand 2. Here is an example of a monthly demand schedule for pizza: Price of Pizza Slice Number of Pizza Slices Demanded $ 0.00 10 0.25 9 0.50 8 0.75 7 […]

The purpose of Chapter 5 is to add precision to the supply-and-demand model. We introduce the concept of elasticity, which measures the responsiveness of buyers and sellers to changes in economic variables such as prices and income. The concept of […]

Rent control KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 177.06.1 – MC – MANK08 178. One economist has argued that rent control is “the best way to destroy a city, other than bombing.” Why would an economist say this? a. He fears […]

supplied and quantity demanded to changes in economic conditions. Chapter 6 addresses the impact of government policies on competitive markets using the tools of supply and demand that you learned in Chapters 4 and 5. The purpose of Chapter 6 […]

Subjective Short Answer 1. What do economists call the highest amount a consumer will pay to purchase a good? ANSWER: The (maximum) willingness to pay. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.014 – Assess a market’s efficiency. TOPICS: Consumer surplus Welfare economics […]

framework, which focused on the question, “What is the equilibrium price and quantity in a market?” This chapter now addresses the normative question, “Is the equilibrium price and quantity in a market the best possible solution to the resource allocation […]

TOPICS: Welfare economics Efficiency KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 098.07.3 – MC – MANK08 99. The “invisible hand” refers to a. the marketplace guiding the self-interests of market participants into promoting general economic well-being. b. the fact that social planners […]

1. Which of the following statements is not correct? a. An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. b. Market power can cause markets to be inefficient. c. Externalities can cause markets to be […]

1. Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount? a. The response of buyers to a change in the price […]

True / False 1. Total surplus is always equal to the sum of consumer surplus and producer surplus. a. True b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.014 – Assess a market’s efficiency. TOPICS: Welfare economics KEYWORDS: BLOOM’S: Comprehension […]

1. When the government imposes taxes on buyers or sellers of a good, society a. loses some of the benefits of market efficiency. b. gains efficiency but loses equality. c. is better off because the government’s tax revenues exceed the […]

39. Refer to Figure 8-27. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will […]

combines the lessons learned in Chapters 6 and 7 and addresses the effects of taxation on welfare. Chapter 9 will address the effects of trade restrictions on welfare. The purpose of Chapter 8 is to apply the lessons learned about […]

a. $20. b. $200. c. $300. d. $500. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.231 – Given a supply and demand graph, determine the impact of a tax on the price and quantity in a market. TOPICS: Taxes KEYWORDS: BLOOM’S: […]

1. A decrease in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and elastic supply. b. elastic demand and inelastic supply. c. inelastic demand and elastic supply. d. inelastic […]

ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.099 – Examine the effects of taxes on market outcomes. TOPICS: Taxes Laffer curve KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 036.08.3 – MC – MANK08 37. The view held by Arthur Laffer and Ronald Reagan […]

b. L+M+N+Y+B. c. L+M+Y. d. J. ANSWER: a DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.238 – Given a supply and demand graph, indicate the change in consumer and producer surplus caused by a tax. TOPICS: Welfare economics Producer surplus KEYWORDS: BLOOM’S: Analysis […]

1. When a tax is levied on a good, the buyers and sellers of the good share the burden, a. provided the tax is levied on the sellers. b. provided the tax is levied on the buyers. c. provided a […]

Taxes KEYWORDS: BLOOM’S: Application CUSTOM ID: 037.08.2 – MC – MANK08 38. Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from […]

c. $10. d. $16. ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.231 – Given a supply and demand graph, determine the impact of a tax on the price and quantity in a market. TOPICS: Taxes KEYWORDS: BLOOM’S: Application CUSTOM ID: 134.08.1 […]

LEARNING OBJECTIVES: ECON.MANK.152 – Given a domestic supply and demand graph, indicate the change in consumer and producer surplus caused by international trade. TOPICS: International trade KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 117.09.2 – MC – MANK08 118. Refer to Figure […]

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

The purpose of Chapter 9 is to use welfare economics to address the gains from trade more precisely than in Chapter 3, which discussed comparative advantage and the gains from trade. This chapter develops the conditions that determine whether a […]

True / False 1. The history of the textile industry raises important questions for economic policy. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.089 – Evaluate the potential gains from trade using comparative and absolute advantage. TOPICS: […]

177. Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area a. E. b. B + E. c. D + E + F. d. B + D + E + F. ANSWER: a DIFFICULTY: Moderate […]

Subjective Short Answer 1. Suppose in the country of Jumanji that the price of coffee with no trade allowed is below the world price of coffee. If Jumanji allows free trade, will Jumanji be an importer or an exporter of […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.276 – Given data on world and domestic prices, determine whether a country will be an importer or exporter of a good if it opens up to international trade. TOPICS: International trade Imports KEYWORDS: BLOOM’S: Application […]

b. domestic producers of bicycles are worse off, domestic consumers of bicycles are better off, and the economic well-being of the country falls. c. domestic producers of bicycles are better off, domestic consumers of bicycles are worse off, and the […]

1. What is the fundamental basis for trade among nations? a. shortages or surpluses in nations that do not trade b. misguided economic policies c. absolute advantage d. comparative advantage ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.089 – Evaluate the […]

1. Congressman Smith cites the “jobs argument” when he argues in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith’s reasoning is that he ignores […]

1. In 2008, the Los Angeles Times asked members of the American public whether free international trade has helped or hurt the economy. Of those surveyed, a. 57 percent said free international trade helped the economy. b. 26 percent said […]

trade. TOPICS: International trade Exports KEYWORDS: BLOOM’S: Application CUSTOM ID: 237.09.2 – MC – MANK08 238. If Freedonia changes its laws to allow international trade in software and the world price is higher than its domestic price, then it must […]

1. The labor supply curve is fundamentally a representation of the trade-off people face between which of the following? a. work and wages b. work and leisure c. wages and productivity d. technology and wages ANSWER: b DIFFICULTY: Moderate LEARNING […]

$2 3 4 2 1 $4 6 8 4 2 $6 9 12 6 3 $8 12 16 8 4 $10 15 20 10 5 61. Refer to Table 4-7. If these are the only four sellers in the market […]

1. The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people a. consider sunk costs. b. equate prices to the average costs of production. c. prefer to purchase products from […]

1. The quantity supplied of a good is the amount that a. buyers are willing and able to purchase. b. sellers are able to produce. c. buyers and sellers agree will be brought to market. d. sellers are willing and […]

CUSTOM ID: 062.04.4 – MC – MANK08 63. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches and that the market demand violates the law of demand. Then, in the table, the value of […]

1. The unique point at which the supply and demand curves intersect is called a. market harmony. b. coincidence. c. equivalence. d. equilibrium. ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.279 – Given information on supply and demand in a market, […]

LEARNING OBJECTIVES: ECON.MANK.279 – Given information on supply and demand in a market, determine the equilibrium price and quantity of a good. TOPICS: Supply and demand Equilibrium KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 120.04.4 – MC – MANK08 121. If consumers […]

1. The two words most often used by economists are a. prices and quantities. b. resources and allocation. c. supply and demand. d. efficiency and equity. ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.071 – Determine the effects of an event […]

1. The price elasticity of supply measures how much a. the quantity supplied responds to changes in input prices. b. the quantity supplied responds to changes in the price of the good. c. the price of the good responds to […]

c. 0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. d. 1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. […]

c. operating costs. d. fixed costs. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.275 – Given data on total revenue, implicit costs, and explicit costs, compare economic profit and accounting profit. TOPICS: Economic thinking Opportunity cost KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: […]

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. […]

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 around them. c. Economic policies rarely have effects that their architects […]

155. Refer to Figure 4-24. 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. c. x to y. d. y to […]