1) Consumer surplus is equal to the
a.Value to buyers – Amount paid by buyers.
b.Amount paid by buyers – Costs of sellers.
c.Value to buyers – Costs of sellers.
d.Value to buyers – Willingness to pay of buyers.
2) Scenario 17-2.
Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the
fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs
$5 million per well. If each company drills one well, each will get half of the oil and
earn a $67 million profit ($72 million in revenue – $5 million in costs). Assume that
having X percent of the total wells means that a company will collect X percent of the
total revenue.
Refer to Scenario 17-2. If BQ and Exxoff are able to successfully collude to maximize
their joint profits, BQ will earn
a.$43 million and Exxoff will earn $86 million.
b.$62 million and Exxoff will earn $62 million.
c.$67 million and Exxoff will earn $67 million.
d.$86 million and Exxoff will earn $43 million.
3) Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain
consumer named Steve.
Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of
the budget constraint?
a.price of apples = $6/pound; price of pears = $4/pound
b.price of apples = $4/pound; price of pears = $6/pound
c.price of apples = $6/pound; price of pears = $5/pound
d.price of apples = $5/pound; price of pears = $6/pound
4) Which of the following theories would suggest that attending school does not
improve productivity but that high- ability people are more likely to stay in school?
a.physical-capital theory
b.human-capital theory
c.signaling theory
d.neoclassical theory
5) In a 2007 New York Times article Paul Krugman wrote that
a.the infant-industry argument works well as an argument in favor of protection for the
U.S. steel industry.
b.the negative effects of third world exports on U.S. wages may be increasing.
c.there are social gains to the U.S. from free trade.
d.high wage countries account for a growing share of U.S. imports of manufactured
goods.
6) For a typical consumer, most indifference curves are downward sloping.
a.True
b.False
7) The difference between accounting profit and economic profit relates to
a.the manner in which revenues are defined.
b.how marginal revenue is calculated.
c.the manner in which costs are defined.
d.the price of the good in the market.
8) Suppose a firm in a competitive market earned $1,000 in total revenue and had a
marginal revenue of $10 for the last unit produced and sold. What is the average
revenue per unit, and how many units were sold?
a.$5 and 50 units
b.$5 and 100 units
c.$10 and 50 units
d.$10 and 100 units
9) How did the influential economist John Maynard Keynes explain his remark that
though economics is an easy subject compared with the higher branches of philosophy
or pure science, it is a subject at which few excel?
a.Most people who study economics are not very bright.
b.Good economists must possess a rare combination of gifts.
c.Economics is quite boring; hence, people tend to lose interest in it before mastering it.
d.Good thinkers become frustrated with economics because it does not make use of the
scientific method.
10) Tariffs cause deadweight loss because they move the price of an imported product
closer to the equilibrium without trade, thus reducing the gains from trade.
a.True
b.False
11) For a monopolist, when does marginal revenue exceed average revenue?
a.never
b.when output is less than the profit-maximizing level of output
c.when output is greater than the profit-maximizing level of output
d.for all levels of output greater than zero
12) Willie‘s Wading Adventures sells hip waders for fishing and duck hunting in a
perfectly competitive market. If hip waders sell for $100 each and average total cost per
unit is $95 at the profit-maximizing output level, then in the long run
a.more firms will enter the market.
b.some firms will exit from the market.
c.the equilibrium price per unit will rise.
d.average total costs will fall.
13) Which of the following is a principle concerning how people interact?
a.Markets are usually a good way to organize economic activity.
b.Rational people think at the margin.
c.People respond to incentives.
d.All of the above are correct.
14) When managers of firms in a competitive market observe falling profits, they may
infer that the market is experiencing
a.a violation of conventional market forces.
b.over-investment.
c.the entry of new firms.
d.too few firms in the market.
15) Refer to Figure 9-24. With free trade, consumer surplus is
a.$400 and producer surplus is $100.
b.$400 and producer surplus is $400.
c.$900 and producer surplus is $100.
d.$900 and producer surplus is $400.
16) Figure 7-23
Refer to Figure 7-23. At equilibrium, consumer surplus is represented by the area
a.A.
b.A+B+C.
c.D+H+F.
d.A+B+C+D+H+F.
17) Which of the following is not a common resource?
a.clean air
b.clean water
c.open grazing land
d.national defense
18) Ralph Nader’s book Unsafe at Any Speed caused Congress to require
a.safety glass in all new cars.
b.seat belts in all new cars.
c.air bags in all new cars.
d.stricter drunk driving laws in all states.
19) In almost all cases of common resources, the same problem arises as in the Tragedy
of the.
20) If A is preferred to B and B is preferred to C, then we would expect A to be
preferred to C. This property is called
21) Among female workers over age 25, about what percent has a college degree? What
is this percentage for black female workers over age 25?
22) Scenario 7-1
Suppose market demand is given by the equation
Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the
change in total consumer surplus in the market?
23) Figure 18-12. The figure shows the relationship between the number of mechanics
hired and the number of car repairs performed per day at a car-repair shop.
Refer to Figure 18-12. If the
shop charges $120 per repair, then what is the value of the marginal product of the third
mechanic?
24) Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-14. If the distribution of income were completely equal, what
percentage of income would the bottom fifth of the population earn?
25) Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a
market.
With no trade allowed, how much are
consumer surplus, producer surplus, and total surplus in this market?
26) Figure 8-26
How much is producer surplus at the market equilibrium?