1) Figure 21-8
Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC,
what is the price of good Y?
a. $3.33
b. $5
c. $15
d. $30
2) Table 12-20
The following table presents the total tax liability for an unmarried taxpayer under four
different tax schedules for the income levels shown.
Which tax schedules are proportional?
a.Tax Schedule B only
b.Tax Schedule B and Tax Schedule C
c.Tax Schedule D only
d.Tax Schedule A and Tax Schedule B
3) Supply and demand both tend to be more elastic in the long run and more inelastic in
the short run.
a.True
b.False
4)
Suppose the point labeled B is the “halfway point” on the demand curve and it
corresponds
to a price of $5.00. Then, between prices of $4.99 and $5.01, the is
a.less than 1 but greater than zero.
b.equal to 1
c.greater than 1
d.equal to zero.
5) Suppose the tax on automobile tires is increased so that the tax goes from being a
“medium” tax to being a “large” tax. As a result, it is likely that
a.tax revenue increases, and the deadweight loss increases.
b.tax revenue increases, and the deadweight loss decreases.
c.tax revenue decreases, and the deadweight loss increases.
d.tax revenue decreases, and the deadweight loss decreases.
6) Suppose Ukraine subsidizes Ukrainian wheat farmers, while Russia offers no subsidy
to Russian wheat farmers. As a result of the Ukrainian subsidy, sales of Ukrainian wheat
to Russia
a.may prompt Russian farmers to invoke the infant-industry argument.
b.increase the consumer surplus of Russian buyers of wheat.
c.decrease the total surplus of the Russian people.
d.All of the above are correct.
7) The product-variety externality and the business-stealing externality are both
spillover costs of new firms entering a monopolistically competitive market.
a.True
b.False
8) Table 16-2
The following table shows the total output produced by the top six firms as well as the
total industry output for each industry.
What is the concentration ratio for Industry K?
a.about 8%
b.about 36%
c.about 48%
d.about 84%
9) Unless two people who are producing two goods have exactly the same opportunity
costs, then one person will have a comparative advantage in one good, and the other
person will have a comparative advantage in the other good.
a.True
b.False
10) Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific
salmon off the coast of Alaska. As part of her business she hires a captain and several
crew members for each boat. In the market for fresh Pacific salmon, there are thousands
of firms like Gertrude’s. While Gertrude usually catches a significant number of fish
each year, her contribution to the entire harvest of salmon is negligible relative to the
size of the market.
Refer to Scenario 18-2. Based on the given information, it is likely that Gertrude’s firm
has
a.some influence over the wages paid to crew members but no influence over the price
of salmon.
b.some influence over the price of salmon but no influence over the wages paid to crew
members.
c.some influence over both the price of salmon and the wages paid to crew members.
d.no influence over either the price of salmon or the wages paid to crew members.
11) The graph below pertains to the supply of paper to colleges and universities.
All else equal, a major paper manufacturer filing
for bankruptcy and shutting down as a result of an IRS tax evasion investigation would
cause a move from
a.x to y.
b.y to x.
c.SA to SB.
d.SB to SA.
12) A tax system with little deadweight loss and a small administrative burden would be
described as
a.equitable.
b.communistic.
c.capitalistic.
d.efficient.
13) On the Fourth of July, there is no fireworks display in the small town of
Yankeeville, even though it would be efficient for such a display to be produced. Which
of the following statements is correct?
a.The lack of a fireworks display in Yankeeville arises because of an externality.
b.The lack of a fireworks display in Yankeeville is a case of market failure.
c.In deciding not to produce a fireworks display in Yankeeville, private individuals and
private firms made decisions that were privately rational but socially inefficient.
d.All of the above are correct.
14) The Coase theorem asserts that private economic actors can solve the problem of
externalities among themselves, without government intervention, regardless of
whether those actors incur significant costs in reaching and enforcing an agreement.
a.True
b.False
15) Game theory is necessary for understanding
a.all market structures.
b.competition and oligopoly, but it is not necessary for understanding monopoly.
c.monopoly and oligopoly, but it is not necessary for understanding competition.
d.oligopoly, but it is not necessary for understanding monopoly or competition.
16) Figure 10-13. On the graph, Q represents the quantity of plastics and P represents
the price of plastics.
If the government imposed a corrective tax that successfully moved the market from the
market equilibrium to the social optimum, then tax revenue for the government would
amount to
a. $1,250.
b. $1,600.
c. $2,000.
d. $2,500.
17) Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:
If the market price is $10, what is the firm‘s shortrun economic profit?
a.$9 b. $15 c. $30 d. $50
18) Table 15-18
A monopolist faces the following demand curve:
Suppose marginal cost is constant at $8 per unit.
The monopolist’s profitmaximizing level of output is
a.3 units.
b.4 units.
c.5 units.
d.6 units.
19) Table 22-23
The town of Franklin is facing a severe budget shortage. The town administrator has
proposed four options to balance the budget: increase property taxes (taxes), cut the
school arts budget (arts), turn off half of the streetlights in the town (streetlights),
reduce police patrols (police). Exactly one of the four choices will prevail, and the
choice will be made by way of pairwise voting, with the majority determining the
outcome on each vote. The preferences of the voters are summarized in the table below.
Voter Type
Refer to Table 22-23. If the town administrator asks the people to first choose between
cutting the arts program and turning off half of the streetlights, and then choose
between the winner of the first election and reducing police patrols, and then choose
between the winner of the second election and increasing taxes, which option will win
each vote?
20) Consider the markets for mobile and landline telephone service. Suppose that when
the average income of residents of Plainville is $55,000 per year, the quantity demanded
of landline telephone service is 12,500 and the quantity demanded of mobile service is
28,000. Suppose that when the price of mobile service rises from $100 to $120 per
month, the quantity demanded of landline service decreases to 11,000. Suppose also
that when the average income increases to $60,000, the quantity demanded of mobile
service increases to 33,000.
Using the midpoint method, what is the income elasticity of demand for mobile
service?
21) When a group of firms acts in unison to maximize profits as if they were a
monopoly, they form a ________.
22) Figure 8-26
Suppose the government places a $3 tax per unit on this good. How many units of this
good will be bought and sold after the tax is imposed?
23) Figure 8-25
Suppose the government places a $4 tax per unit on this good. How much is total
surplus after the tax is imposed?
24) Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand
name products even though generic versions are available at lower prices. His friend
John says he was irrational to spend more for a nearly identical product. His friend
Martina agreed with Dean’s decision to spend more for the brand name products.
Which friend is a critic of brand names?
25) Are whales excludable? Are they rival in consumption? How do we classify whales
in terms of the four types of goods?