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 – P3.
2) The graph below pertains to the supply of paper to colleges and universities.
All else equal, the return of college students to
campus in the fall would cause a move from
a.x to y.
b.y to x.
c.SA to SB.
d.SB to SA.
3) According to the circular flow diagram, if Denny is the owner of a landscaping
business and he just received $50 for mowing Mrs. Pendleton’s lawn,
a.the $50 represents a cost of production for Denny’s firm.
b.the $50 represents wages, rent, and profit to Denny’s firm.
c.Denny acts as a firm who interacted in the markets for factors of production with Mrs.
Pendleton.
d.Denny acts as a firm who interacted in the markets for goods and services with Mrs.
Pendleton.
4) Which of the following formulas would correctly calculate a monopolist’s profit?
a.profit = price – marginal cost
b.profit = price – average total cost
c.profit = (price – marginal cost) x quantity
d.profit = (price – average total cost) x quantity
5) John has financial assets totaling $1.5 million, and he plans to use these assets to
start his own business. Since John owns these funds and will not need to borrow to start
his business, these assets are considered human capital.
a.True
b.False
6) At any given quantity, the willingness to pay in the market for gasoline is reflected in
the
a.height of the demand curve at that quantity.
b.height of the supply curve at that quantity.
c.value to the producer of the last unit of gasoline sold.
d.total quantity of gasoline exchanged in the market.
7) In the short run, a firm should exit the industry if its marginal cost exceeds its
marginal revenue.
a.True
b.False
8) Which of the following explains the rise in income inequality in the United States
from 1970 to 2011?
a.An increase in minimum wages.
b.An increase in the demand for skilled labor.
c.An increase in the demand for unskilled labor.
d.Reduced international trade with low-wage countries.
9) In 2011 the largest percentage of federal government spending was on
a.national defense. The largest source of federal revenues was from corporate income
taxes.
b.health. The largest source of federal revenues was from individual income taxes.
c.income security. The largest source of federal revenues was from corporate income
taxes.
d.income security. The largest source of federal revenues was from individual income
taxes.
10) The idea that only the government can organize economic activity in a way that
promotes economic well-being for a country as a whole
a.is a basic principle regarding individual decisionmaking.
b.amounts to a denial of one of the basic principles regarding interactions among
people.
c.supports the idea that the invisible hand should guide economic activity.
d.was promoted by the economist Adam Smith in a well-known 1776 book.
11) One economically efficient way to eliminate the Tragedy of the Commons is to
a.tax the owners of the resource.
b.prevent anyone from using the resource.
c.reduce the marginal social benefit of the resource.
d.establish private ownership of the resource.
12) One advantage of a lump-sum tax over other taxes is that it
a.is both equitable and efficient.
b.doesn’t cause deadweight loss.
c.would place a larger tax burden on the rich.
d.would raise more revenues.
13)
Production at point Y is
a.impossible and inefficient.
b.impossible but efficient.
c.possible but inefficient.
d.possible and efficient.
14) Figure 7-21
Which area represents consumer surplus when the price is P1?
a.A
b.B
c.C
d.D
15) Figure 10-11
Which of the following magnitudes is constant over all units of output?
a.the private value of the last unit of output that was produced and sold
b.the social value of the last unit of output that was produced and sold
c.the external benefit of the last unit of output that was produced and sold
d.the private cost of the last unit of output that was produced and sold
16) Figure 18-6
Refer to Figure 18-6. The graph above illustrates the market for bakers who make
homemade breads and breakfast pastries. If the bakery profession becomes more
attractive to young women and men because of a new reality television show, what
happens in the market for bakers?
a.Demand increases from D1 to D2.
b.Demand decreases from D2 to D1.
c.Supply increases from S1 to S2.
d.Supply decreases from S2 to S1.
17) Explain what information is contained in the poverty rate statistic. Are there
problems in using an absolute scale to measure poverty? If so, explain them.
18) Table 16-7
A monopolistically competitive firm faces the following demand schedule for its
product. In addition, the firm has total fixed costs equal to 20.
If this firm has a constant marginal cost of $7, what is the profit-maximizing level of
output?
19) Over the last 60 or so years, the percentage of women with paid jobs has increased
significantly. Is this increase in female employment associated with an increase in the
demand for labor, or is it associated with an increase in the supply of labor?
20)
If the price increases from $5 to $6, how does the quantity demanded change?
21) Scenario 15-11
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50
people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed
at $450. Vincent’s cost is not reduced if he runs a tour with a partially full bus. While
his cost is the same for all tours, Vincent charges each passenger his/her willingness to
pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those
rates, on a typical day Vincent’s demand is:
Assume that Vincent’s customers are always available for the tour¾ therefore, he can
fill his bus for each tour as long as there is sufficient total demand for the day.
Vincent uses a pricing practice called
22) What does the invisible hand refers to?
23) If a particular labor market were to convert from a competitive market to a
monopsony, what effect would we expect on the number of workers hired? What effect
would we expect on the wage paid to workers?
24) Suppose the government issues a limited number of pollution permits in order to
limit the quantity of pollution. Under this policy, does the demand curve for pollution
rights determine the quantity of pollution, or does it determine the price of pollution?
25) It costs a company $35,000 to produce 700 graphing calculators. The company’s
cost will be $35,070 if it produces an additional graphing calculator. The company is
currently producing 700 graphing calculators.
What is the minimum price the company will charge for the 701th calculator?
26) Suppose the Environmental Protection Agency issues pollution permits in order to
limit the quantity of pollution.
Under this policy, is the supply of pollution rights perfectly elastic or is it perfectly
inelastic?