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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
advertising.
c.zero; there is no relationship between product differentiation and advertising.
d.irrelevant; firms with differentiated products do not need to advertise.
2) A movement downward and to the right along a demand curve is called a(n)
a.increase in demand.
b.decrease in demand.
c.decrease in quantity demanded.
d.increase in quantity demanded.
3) Figure 9-2
The figure illustrates the market for calculators in a country.
With free trade, producer surplus is
a. $845.
b. $1,620.
c. $1,690.
d. $3,240.
4) Dioxin emission that results from the production of paper is a good example of a
negative externality because
a.self-interested paper firms are generally unaware of environmental regulations.
b.there are fines for producing too much dioxin.
c.self-interested paper producers will not consider the full cost of the dioxin pollution
they create.
d.toxic emissions are the best example of an externality.
5) Equilibrium price must decrease when demand
a.increases and supply does not change, when demand does not change and supply
decreases, and when demand decreases and supply increases simultaneously.
b.increases and supply does not change, when demand does not change and supply
decreases, and when demand increases and supply decreases simultaneously.
c.decreases and supply does not change, when demand does not change and supply
increases, and when demand decreases and supply increases simultaneously.
d.decreases and supply does not change, when demand does not change and supply
increases, and when demand increases and supply decreases simultaneously.
6) One benefit of the patent system is that it encourages the production of technical
knowledge.
a.True
b.False
7) If a road is congested, then use of that road by an additional person would lead to a
a.negative externality.
b.positive externality.
c.Pigovian externality.
d.free-rider problem with rush hour drivers stuck in traffic.
8) When the government levies a tax on a corporation,
a.all the burden of the tax ultimately falls on the corporation's owners.
b.the corporation is more like a tax collector than a taxpayer.
c.output must increase to compensate for reduced profits.
d.less deadweight loss will occur since corporations are entities and not people who
respond to incentives.
9) Figure 8-11
Neither a shift of the demand curve nor a shift of the supply curve is shown on the
figure. However, we know that, when the tax is imposed,
a.the demand curve will shift.
b.the supply curve will shift.
c.either the demand curve or the supply curve will shift.
d.None of the above are correct; the tax causes neither the demand curve nor the supply
curve to shift.
10) Table 22-17
Voter Type
Refer to Table 22-17. The table shows the preferences for three types of voters over
three possible outcomes: A, B, and C. The table also shows the percentage of voters of
each type. Based on this information, which of the following statements is true?
a.In a vote between B and C, C loses since only the Type 1 voters prefer C to B.
b.In a vote between A and B, B wins getting 85% of the total vote.
c.In a vote between A and C, C loses getting only 45% of the total vote.
d.Both a and b.
11)
A shift of the economy's production possibilities frontier from Panel (a) to Panel (b)
could be caused by
a.unemployment.
b.an improvement in sofa production technology.
c.an improvement in tractor production technology.
d.an improvement in both sofa and tractor production technology.
12) Suppose that a family saves and borrows to buffer itself against changes in income.
These actions relate to which problem in measuring inequality?
a.in-kind transfers
b.negative income tax
c.transitory versus permanent income
d.economic mobility
13) Recent developments in political economy
a.render much of the traditional field of political science obsolete.
b.render much of the traditional field of economics obsolete.
c.illustrate the resolute nature of democracy.
d.point to the fact that government is a less-than-perfect institution.
14) Concerts in arenas are not excludable because it is virtually impossible to prevent
someone from seeing the show.
a.True
b.False
15) Which of the following is an example of a monopolistically competitive industry?
a.electric lamp bulbs
b.aircraft manufacturing
c.corn
d.sweaters
16) A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can
sell 151 units of output for $9.98 per unit. The marginal revenue of the 151st unit of
output is
a. -$6.98.
b. -$0.02.
c. $2.45.
d. $6.98.
