1) Suppose an influenza pandemic were to significantly decrease the population of a
country. We would predict a decrease in the marginal product of land in that country.
a.True
b.False
2) Which of the following illustrates the concept of a negative externality?
a.A college professor plays a vigorous game of racquet ball with the racquet he recently
purchased.
b.A flood wipes out a farmer’s corn crop.
c.A college student plays loud music on his new stereo system at 2:00 a.m.
d.A janitor eats a hamburger during his lunch break.
3) In the prisoners’ dilemma game, confessing is a dominant strategy for each of the two
prisoners.
a.True
b.False
4) Monopoly firms have
a.downward-sloping demand curves, so they can sell as much output as they desire at
the market price.
b.downward-sloping demand curves, so they can sell only the specific price-quantity
combinations that lie on the demand curve.
c.horizontal demand curves, so they can sell as much output as they desire at the market
price.
d.horizontal demand curves, so they can sell only a limited quantity of output at each
price.
5) Table 22-11
Five voters must choose from among four options: A, B, C, or D. Each voter’s
preferences are summarized in the table below. Options higher in the table are more
preferred by the voter.
Refer to Table 22-11. Which pairwise voting scheme would result in outcome D?
a.First, choose between A and B. Second, voters choose between the winner of the first
vote and C. Third, voters choose between the winner of the second vote and D.
b.First, choose between B and D. Second, voters choose between the winner of the first
vote and C. Third, voters choose between the winner of the second vote and A.
c.First, choose between C and D. Second, voters choose between the winner of the first
vote and A. Third, voters choose between the winner of the second vote and B.
d.First, choose between C and D. Second, voters choose between the winner of the first
vote and B. Third, voters choose between the winner of the second vote and A.
6) Table 15-8
The following table provides information on the price, quantity, and average total cost
for a monopoly.
At what price will the monopolist maximize his profit?
a.$6
b.$12
c.$18
d.$24
7) For a firm operating in a competitive market, both marginal revenue and average
revenue exceed the market price.
a.True
b.False
8) Figure 19-4
Refer to Figure 19-4. If a union is successful in reducing supply from S1 to S2, the
wage will
a.rise from $15 per hour to $18 per hour and 100 fewer people will be employed.
b.rise from $15 per hour to $18 per hour and 200 more people will be employed.
c.fall from $15 per hour to $12 per hour and 100 more people will be employed.
d.fall from $18 per hour to $15 per hour and 200 fewer people will be employed.
9) The degradation of the environment from litter is a
a.a negative externality.
b.free rider problem.
c.Tragedy of the Commons.
d.Both a and c are correct.
10) Which of the following statements comparing monopoly with competition is
correct?
a.A monopolist produces a higher level of output and charges a lower price than a
competitive firm would.
b.With perfect price discrimination, the total surplus under monopoly can be the same
as under competition.
c.With or without price discrimination, the consumer surplus under monopoly is at least
as large as it would be under competition.
d.The deadweight loss associated with monopoly is caused by the positive economic
profits of the monopolist; competitive firms do not earn a positive economic profit so
there is no deadweight loss under competition.
11) Jerry consumes two goods, hamburgers and ice cream sandwiches. He has
maximized his utility given his income. Ice cream sandwiches costs $2, and he
consumes them to the point where the marginal utility he receives is 6. Hamburgers cost
$4, and the relationship between the marginal utility that Jerry gets from eating
hamburgers and the number he eats per month is as follows:
How many hamburgers does Jerry buy each month?
a.1
b.2
c.3
d.4
12) In order to explain the changing gap in earnings between skilled and unskilled
workers in recent years, economists have proposed two hypotheses. One hypothesis
emphasizes
a.compensating differentials.
b.the increased recognition that a larger stock of human capital usually leads to higher
earnings.
c.the decreasing importance of labor unions.
d.the increasing importance of international trade.
13) Answer the following questions based on the graph that represents J.R.’s demand for
ribs per week at Judy’s Rib Shack.
a.At the equilibrium price, how many ribs would J.R. be willing to purchase?
b.How much is J.R. willing to pay for 20 ribs?
c.What is the magnitude of J.R.’s consumer surplus at the equilibrium price?
d.At the equilibrium price, how many ribs would Judy be willing to sell?
e.How high must the price of ribs be for Judy to supply 20 ribs to the market?
f.At the equilibrium price, what is the magnitude of total surplus in the market?
g.If the price of ribs rose to $10, what would happen to J.R.’s consumer surplus?
h.If the price of ribs fell to $5, what would happen to Judy’s producer surplus?
i.Explain why the graph that is shown verifies the fact that the market equilibrium
(quantity) maximizes the sum of producer and consumer surplus.
14) Suppose that a firm’s longrun average total costs of producing an individual income
tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200
returns. For this range of output, the firm is experiencing
a.economies of scale.
b.constant returns to scale.
c.diseconomies of scale.
d.specialization.
15) One way that employers respond to the moral-hazard problem is by monitoring
their employees.
a.True
b.False