1) In the short run, a firm operating in a competitive industry will shut down if price is
a.less than average total cost.
b.less than average variable cost.
c.greater than average variable cost but less than average total cost.
d.greater than marginal cost.
2) The measures
a.buyers’ responsiveness to a change in the price of a good.
b.the extent to which demand increases as additional buyers enter the market.
c.how much more of a good consumers will demand when incomes rise.
d.the movement along a supply curve when there is a change in demand.
3) Figure 8-14
Which of the following statements is correct?
a.Supply 1 is more elastic than supply 2
b.Demand 2 is more elastic than demand 1
c.Demand 1 is more elastic than supply 1
d.All of the above are correct.
4) Copyrights and patents are examples of barriers to entry that give firms monopoly
pricing powers.
a.True
b.False
5) Governments can improve market outcomes for
a.public goods but not common resources.
b.common resources but not public goods.
c.both public goods and common resources.
d.neither public goods nor common resources.
6) According to the signaling theory of education,
a.schooling sends signals to employers in much the same way that advertising sends
signals to consumers.
b.a person becomes more productive by earning a college degree.
c.education is less important than natural ability.
d.All of the above are correct.
7) When new firms enter a perfectly competitive market,
a.demand increases.
b.the short-run market supply curve shifts right.
c.the short-run market supply curve shifts left.
d.existing firms will increase prices to keep the new firms from entering.
8) If an allocation of resources is efficient, then
a.consumer surplus is maximized.
b.producer surplus is maximized.
c.all potential gains from trade among buyers are sellers are being realized.
d.the allocation achieves equality as well.
9) An upward-sloping labor-supply curve implies that an increase in the wage induces
a.firms to increase the quantity of labor they hire.
b.firms to increase the quantity of output they produce.
c.workers to decrease the quantity of leisure they enjoy.
d.All of the above are correct.
10) An estate tax is an example of a(n)
a.individual income tax.
b.social insurance tax.
c.corporate income tax.
d.None of the above is correct.
11) In a prisoners’ dilemma game,
a.the solution when playing the game once will be the same as the solution when the
players play the game repeatedly, since agreements cannot be maintained in a prisoners’
dilemma.
b.if the players play the game repeatedly, the players can achieve a higher payoff, on
average, than when they play the game only once.
c.repeated play will always result in a better outcome for both players than when the
game is played only once.
d.the tit-for-tat strategy in repeated play requires players to always select the opposite
strategy as their opponent.
12) Table 15-4
A monopolist faces the following demand curve:
In order to maximize total revenues, the monopolist should produce
a.5 units.
b.7.5 units.
c.10 units.
d.12.5 units.
13) Table 15-11
The following table shows quantity, price, and marginal cost information for a
monopoly:
What price should the firm charge to maximize its profit?
a.$4
b.$5
c.$6
d.$7
14) Suppose that demand for a good increases and, at the same time, supply of the good
decreases. What would happen in the market for the good?
a.Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b.Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c.Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d.Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.