1) If the current allocation of resources in the market for hammers is inefficient, then it
must be the case that
a.producer surplus exceeds consumer surplus in the market for hammers.
b.consumer surplus exceeds producer surplus in the market for hammers.
c.the sum of consumer surplus and producer surplus could be increased by moving to a
different allocation of resources.
d.the costs that sellers of hammers are incurring could be reduced by moving to a
different allocation of resources.
2) Table 16-7
A monopolistically competitive firm faces the following demand schedule for its
product. In addition, the firm has total fixed costs equal to 20.
If the firm has a constant marginal cost of $7 per unit, what price should the firm charge
to maximize profit?
a.$10
b.$14
c.$18
d.$22
3) Ten friends who love to ski decide to pool their financial resources and equally share
the cost of a one-week time- share condominium in Alta, Utah. Suppose that the lift
lines at the ski resort become more congested when the ten additional people start to
ski. Which of the following statements is not correct?
a.Use of the ski resort by the ten new skiers will yield a negative externality.
b.The ski resort can reduce the congestion externality by raising lift ticket prices.
c.An increase in lift ticket prices could be viewed as a corrective tax on the externality
of congestion.
d.Each of the ten friends would have been better off staying at home.
4) Public policies
a.may be able to improve either economic efficiency or equality.
b.may be able to improve economic efficiency but cannot improve equality.
c.may be able to improve equality but cannot improve economic efficiency.
d.cannot improve either equality or economic efficiency.
5) In a certain city, the local government regulates the destruction of historic buildings
and provides tax breaks to owners of historic buildings who restore them. These
government policies
a.reflect the fact that restored historic buildings convey a positive externality.
b.reflect the fact that the destruction of historic buildings conveys a positive externality.
c.are likely to worsen the market failure that is associated with historic buildings and
the restoration of such buildings.
d.are likely to decrease the well-being of society as a whole.
6) Policies such as rent control and trade barriers persist in spite of the fact that
economists are virtually united in their opposition to such policies, probably because
a.economists have not yet convinced the general public that the policies are undesirable.
b.economists engage in positive analysis, not normative analysis.
c.economists have values that are different from the values of most non-economists.
d.economists’ theories are not easily confirmed or refuted in laboratory analysis.
7) In one month, Moira can knit 2 sweaters or 4 scarves. In one month, Tori can knit 1
sweater or 3 scarves. Moira’s opportunity cost of knitting scarves is lower than Tori’s
opportunity cost of knitting scarves.
a.True
b.False
8)
Which of the following items is not a clear-cut example of the type of good represented
by Box D?
a.a fireworks display in a town with many residents
b.national defense
c.general knowledge
d.a lighthouse
9) Suppose Iceland goes from being an isolated country to being an exporter of coats.
As a result,
a.consumer surplus increases for consumers of coats in Iceland.
b.producer surplus increases for producers of coats in Iceland.
c.total surplus remains unchanged in the coat market in Iceland.
d.it is reasonable to infer that other countries have a comparative advantage over
Iceland in coat production.
10) Which of the following is the most likely outcome of raising the minimum wage?
a.an increase in both the quantity of labor supplied by workers and the quantity of labor
demanded by firms
b.an increase in the quantity of labor supplied by workers and a decrease in the quantity
of labor demanded by firms
c.a decrease in the quantity of labor supplied by workers and an increase in the quantity
of labor demanded by firms
d.a decrease in both the quantity of labor supplied by workers and the quantity of labor
demanded by firms
11) An optimizing consumer will select the consumption bundle in which the marginal
rate of substitution
a.is equal to the relative price ratio of the goods.
b.exceeds the marginal utility of each good by the greatest amount.
c.is less than the slope of the budget constraint.
d.All of the above are correct.