1) The goal of requiring licenses for hunting and fishing is
a.to reduce the use of a common resource.
b.to ensure that the people hunting and fishing are qualified.
c.to generate revenue for the government.
d.to monitor compliance with federal gun laws.
2) When a policy succeeds in giving buyers and sellers in a market an incentive to take
into account the external effects of their actions, the policy is said to
a.equalize private value and private cost.
b.equalize private cost and external cost.
c.externalize the actions of the buyers and sellers.
d.internalize the externality.
3) The Sherman Act made cooperative agreements
a.unenforceable outside of established judicial review processes.
b.enforceable with proper judicial review.
c.a criminal conspiracy.
d.a crime, but did not give direction on possible penalties.
4) Tying is always profitable for a monopoly.
a.True
b.False
5) A Giffen good is a good for which
a.an increase in the price raises the quantity demanded.
b.the income effect outweighs the substitution effect.
c.an increase in the price decreases the quantity demanded.
d.Both a) and b) are correct.
6) Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Chi
le’s opportunity cost of one pound of soybeans is
a.3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 1/2
pound of coffee.
b.3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
c.4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is 1/2
pound of coffee.
d.4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
7) If firms are competitive and profit maximizing, the price of a good equals the
a.marginal cost of production.
b.fixed cost of production.
c.total cost of production.
d.average total cost of production.
8) A tax raises the price received by sellers and lowers the price paid by buyers.
a.True
b.False
9) In the long run a company that produces and sells organic tofu incurs total costs of
$1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu
company exhibits
a.diseconomies of scale because total cost is rising as output rises.
b.diseconomies of scale because average total cost is rising as output rises.
c.economies of scale because total cost is rising as output rises.
d.economies of scale because average total cost is falling as output rises.
10) Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game
each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit
for each firm is given in the table as (Profit for Firm A, Profit for Firm B).
Refer to Table 17-18. If these two firms agree to cooperate to maximize their joint
profit, the outcome of the game will be
a.10 units of output for Firm A and 10 units of output for Firm B.
b.10 units of output for Firm A and 12 units of output for Firm B.
c.12 units of output for Firm A and 10 units of output for Firm B.
d.12 units of output for Firm A and 12 units of output for Firm B.
11) Which of the following is an example of using the scientific method with a natural
experiment?
a.measuring how long it takes a marble to fall from a ten story building
b.comparing plant growth with and without a soil additive
c.tracking the price of oil when a war in the Middle East interrupts the flow of crude oil
d.observing the reaction when two chemicals are mixed together
12)
The opportunity cost of one sofa is highest when the economy produces
a.0 sofas.
b.12 sofas.
c.20 sofas.
d.24 sofas.
13) Assume that England and Spain can switch between producing cheese and
producing bread at a constant rate.
Assume that England and Spain each has 24 labor hours available. If each country
divides its time equally between the production of cheese and bread, then total
production is
a.10 units of cheese and 6 units of bread.
b.25 units of cheese and 7.5 units of bread.
c.20 units of cheese and 12 units of bread.
d.12 units of cheese and 8 units of bread.
14) Which type of public policy toward monopolies is much more common in Europe
than in the United States?
a.antitrust laws
b.regulation
c.public ownership
d.”do nothing”
15) Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal
cost of the 500th unit is $17, and the average total cost of producing 500 units is $12.
The firm sells its output for $20.
If the marginal cost of producing the 501st unit would be $19, producing and selling the
501st unit would
a.decrease the firm‘s profit by $19.
b.decrease the firm‘s profit by $2.
c.increase the firm‘s profit by $1.
d.increase the firm‘s profit by $3.
16) Suppose a certain good conveys either an external cost or an external benefit. If the
private cost of the last unit of the good that was produced is equal to the private value
of that unit, then the sum of producer and consumer surplus is maximized.
a.True
b.False
17) Scenario 13-14
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of
seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3
bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
Farmer Brown’s production function exhibits
a.increasing marginal product.
b.constant marginal product.
c.diminishing marginal product.
d.The production function is unrelated to the marginal product.
18) The amount of money that a firm receives from the sale of its output is called
a.total gross profit.
b.total net profit.
c.total revenue.
d.net revenue.
19) A monopoly is a market with one
a.seller, and that seller is a price taker.
b.seller, and that seller sets the price.
c.buyer, and that buyer is a price taker.
d.buyer, and that buyer sets the price.
20) Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
The total surplus with the tax is
represented by area
a.C+H.
b.A+B+C.
c.D+H+F.
d.A+B+D+F.