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 producing the good at the same low cost per unit.
d.no buyer is willing to pay more than the equilibrium price for any unit of the good.
2) In the U.S. government’s 1998 suit against the Microsoft Corporation, a central issue
was whether Microsoft should be allowed to integrate its Internet browser into its
Windows operating system. Microsoft responded that
a.this integration of products is an example of tying, and the U.S. Supreme Court has
consistently ruled that tying is a perfectly acceptable and legal business practice.
b.this integration of products is an example of resale price maintenance, and the U.S.
Supreme Court has consistently ruled that fair trade is a perfectly acceptable and legal
business practice.
c.putting new features into old products is a natural part of technological practice.
d.it would discontinue this integration of products, provided a speedy resolution of the
government’s case could
be reached.
3) Labor supply curves are always upward sloping.
a.True
b.False
4) Which of the following is not a reason for the existence of a monopoly?
a.patents
b.marginal-cost pricing
c.economies of scale
d.trademarks
5) Suppose a profit-maximizing monopolist faces a constant marginal cost of $10,
produces an output level of 100 units, and charges a price of $50. The socially efficient
level of output is 200 units. Assume that the demand curve and marginal revenue curve
are the typical downward-sloping straight lines. The monopoly deadweight loss equals
$4,000.
a.True
b.False
6) Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each
and average total cost per unit is $11 at the profit-maximizing output level, then in the
long run
a.more firms will enter the market.
b.some firms will exit from the market.
c.the equilibrium price per duck call will fall.
d.average total costs will fall.
7) Which of the following does not describe the hypothesis that changes in technology
have altered the relative demand for skilled and unskilled labor?
a.Firms rely more on computer databases than on paper filing systems so there is an
increased demand for high-skilled computer programmers.
b.Consumers can accomplish many simple banking tasks on an automated teller
machine (ATM) rather than speaking to a bank teller so there is a decreased demand for
low- skilled bank tellers.
c.Transponders in peoples’ vehicles can be used to automatically deduct tolls from debit
accounts, reducing the
need for low-skilled toll collectors.
d.Improvements in technology have made tax preparation software easy for an average
citizen to use, reducing the need for high-skilled accountants.
8) Total cost is the
a.amount a firm receives for the sale of its output.
b.fixed cost less variable cost.
c.market value of the inputs a firm uses in production.
d.quantity of output minus the quantity of inputs used to make a good.
9) A certain state legislature is considering an increase in the state gasoline tax.
Representative Campbell argues that an increase in the gasoline tax would harm
low-income drivers disproportionately. Representative Richards responds by saying that
low-income drivers own smaller cars that use less gasoline, and that low-income drivers
therefore would not be harmed disproportionately.
a.Representative Campbell’s argument is based primarily on efficiency, while
Representative Richards’ argument is based primarily on equality.
b.Representative Campbell’s argument is based primarily on equality, while
Representative Richards’ argument is based primarily on efficiency.
c.Both representatives’ arguments are based primarily on efficiency.
d.Both representatives’ arguments are based primarily on equality.
10) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities
Frontier
If Hosne must work 0.5 hour to make each purse, then her production possibilities
frontier is based on how many hours of work?
a.2 hours
b.5 hours
c.20 hours
d.50 hours
11) Specialization and trade can make everyone better off if a person can obtain goods
at prices that are less than that person’s opportunity cost.
a.True
b.False
12) 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.
What is the concentration ratio for Industry B?
a.approximately 46%
b.approximately 54%
c.approximately 57%
d.approximately 61%
13) Which of the following statements is characteristic of utilitarianism?
a.An extra dollar of income provides higher marginal utility to a poor person than to a
rich person.
b.Social policies should be created behind a “veil of ignorance.”
c.Society should strive to maximize the utility of its wealthiest member.
d.Equality of opportunity is more important than equality of incomes.
14) Figure 16-10
The figure is drawn for a monopolistically-competitive firm.
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 more than $2,000.
d.All of the above are correct.
15) Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer
named Hannah. When young, Hannah works and earns income. When old, she is retired
and earns no income.
Refer to Figure 21-32. At two of the four labeled points, Hannah is equally happy.
Identify those two points.
16) Before the __________, agreements between oligopolists were unenforceable
contracts; afterwards, such agreements were criminal conspiracies.
17) Explain how a firm in a competitive market identifies the profit-maximizing level
of production. When should the firm raise production, and when should the firm lower
production?
18) Greg’s Production Possibilities
Catherine’s Production Possibilities
What is Catherine’s opportunity cost of producing ice cream? Explain how you derived
your answer.
19)
20) Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-14. In 2010, what percentage of total income in the US did the
bottom 20% of families have?
21) Suppose the for a product is 1.3. If a supplier wants to increase revenue, what
change should it make to price, if any?
22) If the supply of pencils, a substitute for pens, increases, what will happen to the
equilibrium price of pencils and to the equilibrium price of pens?
23) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities
Frontier