1) The pollution market failure is an example of the free rider problem.
a.True
b.False
2) A profit-maximizing firm in a competitive market is currently producing 200 units of
output. It has average revenue of $9 and average total cost of $7. It follows that the
firm‘s
a.average total cost curve intersects the marginal cost curve at an output level of less
than 200 units.
b.average variable cost curve intersects the marginal cost curve at an output level of less
than 200 units.
c.profit is $400.
d.All of the above are correct.
3) The Council of Economic Advisers’ Economic Report of the President discusses
recent developments in the economy and presents the council’s analysis of current
policy issues.
a.True
b.False
4) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The consumer surplus without the tax is
a. $2,000.
b. $5,000.
c. $8,000.
d. $16,000.
5) One problem with regulating a monopolist on the basis of cost is that
a.by focusing on costs, the regulators ignore profits.
b.it does not provide an incentive for the monopolist to reduce its cost.
c.a monopolist’s costs, by definition, are higher than costs of perfectly competitive
firms.
d.a monopolist is still able to generate excessive economic profits.
6) Suppose John and Wayne are the only two demanders of cowboy movies. Each
month, John buys six cowboy movies when the price is $10 each, and he buys four
cowboy movies when the price is $15 each. Each month, Wayne buys four cowboy
movies when the price is $10 each, and he buys two cowboy movies when the price is
$15 each. Which of the following points is on the market demand curve?
a.quantity demanded = 2; price = $15
b.quantity demanded = 4; price = $25
c.quantity demanded = 10; price = $10
d.quantity demanded = 16; price = $25
7) Which of the following movements
would illustrate the effect in the market for Ramen noodles of a decrease in the incomes
of young adults, assuming that Ramen noodles are an inferior good?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
8) Diseconomies of scale often arise because higher production levels allow
specialization among workers.
a.True
b.False
9) When the price of a good or service changes,
a.the supply curve shifts in the opposite direction.
b.the demand curve shifts in the opposite direction.
c.the demand curve shifts in the same direction.
d.there is a movement along a given demand curve.
10) Adam Smith was the author of the 1776 book An Inquiry into the Nature and
Causes of the Wealth of Nations.
a.True
b.False
11) Figure 18-7
Refer to Figure 18-7. If the relevant labor supply curve is S2 and the current wage is
W1,
a.there is a surplus of labor.
b.the quantity of labor demanded exceeds the quantity of labor supplied.
c.an increase in the minimum wage could restore equilibrium in the market.
d.firms will need to raise the wage to restore equilibrium.
12) Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output
per week.
Refer to Figure 18-1. Suppose the firm hires each unit of labor for $700 per week, and
each unit of output sells for $9. How many workers will the firm hire to maximize its
profit?
a.2
b.3
c.4
d.5
13) The scientific method is applicable to studying
a.natural sciences, but not social sciences.
b.social sciences, but not natural sciences.
c.both natural sciences and social sciences.
d.None of the above is correct.