1) If the government imposes a binding price floor in a market, then the consumer
surplus in that market will increase.
a.True
b.False
2) Under which of the following scenarios would a park be considered a club good?
a.Visitors to the park must pay an admittance fee, but there are always plenty of empty
picnic tables.
b.Visitors to the park must pay an admittance fee and frequently all of the picnic tables
are in use.
c.Visitors can enter the park free of charge and there are always plenty of empty picnic
tables.
d.Visitors can enter the park free of charge, but frequently all of the picnic tables are in
use.
3) The changing gap in wages between unskilled and skilled workers is most likely
related to a larger increase in demand for unskilled occupations relative to skilled
occupations.
a.True
b.False
4) If we observe that when consumers’ incomes rise by 10%, the quantity demanded of
ice cream increases by 5%,
then ice cream is an inferior good.
a.True
b.False
5) Table 15-6
A monopolist faces the following demand curve:
Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4
per unit for all units produced. What would the total profit be if she charged $6 per unit
for her product?
a.$1
b.$3
c.$8
d.$15
6) Suppose that the market for labor is initially in equilibrium. An increase in the price
of output will cause the equilibrium wage
a.and the equilibrium quantity of labor to rise.
b.and the equilibrium quantity of labor to fall.
c.to rise and the equilibrium quantity of labor to fall.
d.to fall and the equilibrium quantity of labor to rise.
7) The government’s health plan for the elderly is called
a.Medicaid.
b.Medicare.
c.Social Security.
d.food stamps.
8) In the long run, a firm will enter a competitive industry if
a.total revenue exceeds total cost.
b.the price exceeds average total cost.
c.the firm can earn economic profits.
d.All of the above are correct.
9) The income elasticity of demand for caviar tends to be
a.high because caviar is relatively expensive.
b.low because caviar is packaged in small containers.
c.high because buyers generally feel that they can do without it.
d.low because it is almost always in short supply.
10) Table 15-8
The following table provides information on the price, quantity, and average total cost
for a monopoly.
How much extra revenue does the monopolist earn when he lowers the price from $18
to $12?
a. $10
b. $12
c. $30
d. $41
11) Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
Who experiences the largest gain in consumer surplus when the price of an orange
decreases from $1.05 to $0.75?
a.Allison
b.Bob
c.Charisse
d.Allison and Bob experience the same gain in consumer surplus, and Charisse’s gain is
zero.
12) The practice of tying is illegal on the grounds that
a.it allows firms to expand their market power.
b.it allows firms to form collusive arrangements.
c.it prevents firms from forming collusive agreements.
d.the Sherman Act explicitly prohibited such agreements.
13) Suppose a country imposes a lump-sum income tax of $6,000 on each individual in
the country. What is the average income tax rate for an individual who earns $60,000
during the year?
a.0%
b.10%
c.More than 10%
d.The average tax rate cannot be determined without knowing the entire tax schedule.
14) The three main sources of barriers to entry are monopoly resources, government
regulation, and the firm’s production process.
a.True
b.False
15) Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
The opportunity cost of 1 parasol for Huang is
a.1/3 plate.
b.1/2 plate.
c.3 plates.
d.6 plates.
16) Which of the following pairs of goods includes a good that is excludable and rival
in consumption as well as a good that is not excludable and not rival in consumption?
a.tablet computer, gym membership at a gym that always has plenty of open equipment
and classes
b.tablet computer, national defense
c.congested nontoll road, national defense
d.online music subscription, streetlight
17) Consider the labor market for computer programmers. Because of the dot.com
boom in the late 1990s, a lot of workers went to school to learn how to write computer
code for one of thousands of new dot.com companies. However, when these computer
programming students graduated the dot.com bust took place. The dot.com bust
decreased the value of the marginal product of computer programmers. Holding all else
equal what effect did these two circumstances have on the equilibrium quantity in the
labor market for computer programmers?
a.The equilibrium quantity of labor increased.
b.The equilibrium quantity of labor decreased.
c.The equilibrium quantity of labor did not change.
d.It is not possible to determine what happens to the equilibrium quantity of labor.
18) If the government allowed a free market for transplant organs such as kidneys to
exist, critics argue that such a market would
a.not reduce the shortage of organs.
b.benefit rich people but not poor people.
c.be inefficient because markets are not good at allocating scarce resources.
d.be inferior to a plan imposed by a benevolent dictator.