1) A production function is a relationship between inputs and
a. quantity of output.
b. revenue.
c. costs.
d. profit.
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2)
Refer to Figure 8-19. If the economy is at point B on the curve, then an increase in the tax rate will
a. increase the deadweight loss of the tax and increase tax revenue.
b. increase the deadweight loss of the tax and decrease tax revenue.
c. decrease the deadweight loss of the tax and increase tax revenue.
d. decrease the deadweight loss of the tax and decrease tax revenue.
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3) Table 12-1
On Taxable Income … The Tax Rate is …
Up to $8,375 10%
From $8,375 to $34,000 15
From $34,000 to $82,400 25
From $82,400 to $171,850 28
From $171,850 to $373,650 33
Over $373,650 35
Refer to Table 12-1. If Betina has $170,000 in taxable income, her marginal tax rate is
a. 25%.
b. 28%.
c. 33%.
d. 35%.
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4) Table 12-10
The following table shows the marginal tax rates for unmarried individuals for two years.
2009 2010
On Taxable Income… The Tax Rate is… On Taxable Income… The Tax Rate is…
$0 to $15,000 10% Over $0 20%
$15,000 to $40,000 15%
$40,000 to $75,000 20%
$75,000 to $120,000 25%
Over $120,000 30%
Refer to Table 12-10. Which of the following best describes the tax schedule in 2009?
a. proportional tax
b. progressive tax
c. regressive tax
d. vertical tax
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5) Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
COSTS REVENUES
Quantity Produced Total Cost Marginal Cost Quantity Demanded Price Total Revenue Marginal Revenue
0 $100 — 0 $120 —
1 $150 1 $120
2 $202 2 $120
3 $257 3 $120
4 $317 4 $120
5 $385 5 $120
6 $465 6 $120
7 $562 7 $120
8 $682 8 $120
Refer to Table 14-6. What is the total revenue from selling 7 units?
a. $120
b. $490
c. $562
d. $840
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6) Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?
a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke.
b. Mary pays Cathy $16 so that Mary can smoke.
c. Mary pays Cathy $14 so that Mary can smoke.
d. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.
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7) Which of the following firms is the closest to being a perfectly competitive firm?
a. the New York Yankees
b. Apple, Inc.
c. DeBeers diamond wholesalers
d. a wheat farmer in Kansas
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8) As government debt increases,
a. Congress will reduce spending by an equal proportion.
b. the government must spend more revenue on interest payments.
c. a trade-off with government deficits is inevitable.
d. tax rates must rise to cover the deficit.
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9) If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should
a. shut down.
b. reduce its output but continue operating.
c. continue to produce at the current levels.
d. increase its output.
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10) If the government were to limit the release of air-pollution produced by a steel mill to 75 parts per million, the policy would be considered a
a. regulation.
b. corrective tax.
c. subsidy.
d. market-based policy.
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11)
Refer to Figure 8-6. Total surplus with the tax in place is
a. $1,500.
b. $3,600.
c. $4,500.
d. $6,000.
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12) European countries tend to rely on which type of tax more so than the United States does?
a. an income tax
b. a lump-sum tax
c. a value-added tax
d. a corrective tax
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13)
Refer to Figure 9-10. With trade, the equilibrium price of rifles and the equilibrium quantity of rifles demanded in Mexico are
a. P1 and Q1.
b. P1 and Q2.
c. P2 and Q2.
d. P0 and Q0.
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14)
Refer to Figure 10-9, Panel (b) and Panel (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the socially optimal quantity of smokestack scrubbers is represented by point
a. Q2.
b. Q3.
c. Q4.
d. Q5.
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15)
Refer to Figure 7-1. If the price of the good is $200, then
a. consumer surplus is $150.
b. consumer surplus is $650.
c. producer surplus is $650.
d. producer surplus is $750.
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16)
Refer to Figure 8-6. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?
a. $0
b. $4
c. $6
d. $10
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17)
Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to
a. $45.
b. $90.
c. $210.
d. $255.
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18)
Refer to Figure 7-21. Buyers who value this good more than the equilibrium price are represented by which line segment?
a. AC.
b. CK.
c. BC.
d. CH.
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19) Table 13-4
Charless Math Tutoring
Number of Workers Output (number of students tutored per week)
0 0
1 20
2 45
3 60
4 70
Refer to Table 13-4. What is the marginal product of the third worker?
a. 15 students
b. 20 students
c. 35 students
d. 60 students
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20) The French expression used by free-market advocates, which literally translates as “allow them to do,” is
a. laissez-faire.
b. je ne sais pas.
c. si’l vous plait.
d. tte–tte.
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21) Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur?
(i) New firms will enter the market.
(ii) In the short run, price will rise; in the long run, price will rise further.
(iii) In the long run, all firms will be producing at their efficient scale.
a. (i) and (ii) only
b. (i) and (iii) only
c. (ii) and (iii) only
d. (i), (ii) and (iii)
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22)
Refer to Figure 10-19. Which of the following quantities decreases as the quantity of the good is increased?
a. the private cost of the good
b. the social cost of the good
c. the private value of the good
d. the external benefit of the good
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23) Which of the following represents a potential solution to the problem of environmental pollution?
a. corrective taxes
b. well established property rights
c. government regulation
d. All of the above are correct.
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24) Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and
2009 Tax Rates Income Ranges 2010 Tax Rates Income Ranges
15% $0 $28,000 10% $0 $10,000
28% $28,000 $70,000 15% $10,000 $30,000
31% $70,000 $140,000 27% $30,000 $60,000
36% $140,000 $300,000 30% $60,000 $150,000
40% over $300,000 35% $150,000 $320,000
38% over $320,000
Refer to Table 12-12. What type of tax structure did the United States have in 2009 for single individuals?
a. A proportional tax structure
b. A regressive tax structure
c. A progressive tax structure
d. A lump-sum tax structure
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25) 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.
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26) Which of the following are taxed?
a. both corporate profits and dividends shareholders receive
b. corporate profits but not dividends shareholders receive
c. dividends shareholders receive but not corporate profits
d. neither corporate profits nor dividends shareholders receive
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27) Table 13-15
Consider the following table of long-run total cost for four different firms:
Quantity 1 2 3 4 5 6 7
Firm 1 $210 $340 $490 $660 $850 $1,060 $1,290
Firm 2 $180 $350 $510 $660 $800 $930 $1,050
Firm 3 $120 $250 $390 $540 $700 $870 $1,050
Firm 4 $150 $300 $450 $600 $750 $900 $1,050
Refer to Table 13-13. Which firm has constant returns to scale over the entire range of output?
a. Firm 1
b. Firm 2
c. Firm 3
d. Firm 4
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28)
Refer to Figure 7-9. If the supply curve is S and the demand curve shifts from D to D, what is the increase in producer surplus to existing producers?
a. $625
b. $2,500
c. $3,125
d. $5,625
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29) Scenario 13-9
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. She can sell a photo frame for $30 each.
Refer to Scenario 13-9. An economist would calculate the total cost for one photo frame to be
a. $5.
b. $10.
c. $15.
d. $25.
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30) Some costs do not vary with the quantity of output produced. Those costs are called
a. marginal costs.
b. average costs.
c. fixed costs.
d. explicit costs.
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31) Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.
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32) Tolls are not effective in altering people’s incentives to drive during rush hour.
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33) Because the benefits of basic research are obvious and easy to measure, it is likely that the public sector pays for the right amount and the right kinds of basic research.
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34) Corporate income taxes are based on the amount of revenue a corporation earns.
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35) The shape of the total-cost curve is inversely related to the shape of the production function.
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36) Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.
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37) Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition.
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38) The production function depicts a relationship between which two variables? Also, draw a production function that exhibits diminishing marginal product.
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39) All competitive firms earn zero economic profit in both the short run and the long run.
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40) A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.
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