1) The opportunity cost of moving from point B to point D
is 15 doghouses.
a.True
b.False
2) A monopoly creates a deadweight loss to society because it produces less output than
the socially efficient level.
a.True
b.False
3) If point A represents Alice’s current production and point B represents Betty’s current
production, under what circumstances can both Alice and Betty benefit from
specialization and trade?
a.Alice produces more pizzas and Betty produces more lemonade.
b.Alice produces more lemonade and Betty produces more pizzas.
c.Both Alice and Betty produce only pizzas.
d.There are no circumstances under which both Alice and Betty can benefit from
specialization and trade.
4) Critics of advertising argue that advertising leads to less elastic demand for products
and a larger markup of price over marginal cost.
a.True
b.False
5) Suppose a competitive market is comprised of firms that face identical cost curves.
The firms experience an increase in demand that results in positive profits for the firms.
Which of the following events are then most likely to occur?
(i)New firms will enter the market.
(ii)In the short run, price will rise; in the long run, price will rise further.
(iii)In the long run, all firms will be producing at their efficient scale.
a.(i) and (ii) only
b.(i) and (iii) only
c.(ii) and (iii) only
d.(i), (ii) and (iii)
6) Economic welfare is generally measured by
(i)profit.
(ii)total surplus.
(iii)the price consumers pay for the product.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(ii) only
d.(i), (ii), and (iii)
7) 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 $600 per week, and
each unit of output sells for $9. What is the value of the marginal product of the third
worker?
a.$540
b.$600
c.$675
d.$810
8)
Unemployment could cause this economy to produce at which point(s)?
a.Q, S
b.Q, S, T
c.R, U
d.T
9) The market for soybeans in Canada consists solely of domestic buyers of soybeans
and domestic sellers of soybeans if
a.consumer surplus equals producer surplus in the Canadian soybean market.
b.total surplus exceeds consumer surplus in the Canadian soybean market.
c.Canada permits international trade in soybeans.
d.Canada forbids international trade in soybeans.
10) Calvin is planning ahead for retirement and must decide how much to spend and
how much to save while he’s working in order to have money to spend when he retires.
When the substitution effect dominates the income effect, an increase in the interest rate
on savings will cause him to
a.increase his savings rate.
b.decrease his savings rate.
c.continue saving at the same rate.
d.Any of the above are possible.