1) Figure 7-24
Refer to Figure 7-24. At equilibrium, consumer surplus is
a. $18.
b.$36.
c.$54.
d.$72.
2) A monopolist produces an output level where marginal revenue equals marginal cost
and charges a price where marginal cost equals average total cost.
a.True
b.False
3) When a perfectly competitive firm decides to shut down, it is most likely that
a.marginal cost is above average variable cost.
b.marginal cost is above average total cost.
c.price is below the firm‘s average variable cost.
d.fixed costs exceed variable costs.
4) Assume that Falda and Varick can switch between producing wheat and producing
cloth at a constant rate.
Falda has a comparative advantage in the production of
a.wheat.
b.cloth.
c.both goods.
d.neither good.
5) What would happen to the equilibrium price and quantity of latt©s if coffee shops
began using a machine that reduced the amount of labor necessary to produce steamed
milk, which is used to make latt©s, and scientists discovered that coffee prevents heart
attacks?
a.Both the equilibrium price and quantity would increase.
b.Both the equilibrium price and quantity would decrease.
c.The equilibrium price would increase, and the effect on equilibrium quantity would be
ambiguous.
d.The equilibrium quantity would increase, and the effect on equilibrium price would be
ambiguous.
6) Figure 18-8
This figure below shows the labor market for automobile workers. The curve labeled S
is the labor supply curve, and the curves labeled D1 and D2 are the labor demand
curves. On the horizontal axis, L represents the quantity of labor in the market.
Refer to Figure 18-8. Which of the following events would most likely explain a shift
of the labor-demand curve from D2 back to D1?
a.The price of automobiles decreased.
b.A large number of immigrants entered the automobile-worker market.
c.A technological advance increased the marginal product of automobile workers.
d.The demand for automobiles increased.
7) Assume that your roommate is very messy. According to campus policy, you have a
right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being
messy but imposes a $60 cost on you. The Coase theorem would suggest that an
efficient solution would be for your roommate to
a.stop her messy habits or else move out.
b.pay you at least $60 but less than $80 to live with the clutter.
c.continue to be messy and force you to move out.
d.demand payment of at least $60 but no more than $80 to clean up after herself.
8) A small island off the coast of Cape Cod contains two restaurants and two retail
stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown
in the economy, tourists are less willing to pay for the boat ride to visit the island. The
owners of the restaurants and stores on the island – Restaurants 1 and 2, and Stores A
and B – think that if tourists could ride the ferry for free, they would be happy to visit
the island, eat and shop. The business owners are considering contributing to a pool of
money that will be used to pay for roundtrip ferry service each day. The table represents
their willingness to pay, that is, the maximum amount that each business owner is
willing to contribute, per day, to pay for each ferry trip.
Suppose the cost to run the ferry for each roundtrip is $750. How many ferry trips
should
there be to maximize the total surplus of the four business owners?
a.1
b.2
c.3
d.4
9) Refer to Figure 9-19. With free trade, the country for which the figure is drawn will
a.export 30 units of textiles.
b.export 50 units of textiles.
c.import 30 units of textiles.
d.import 50 units of textiles.
10) Table 12-22
A lump-sum tax is illustrated by tax
a.A.
b.B.
c.C.
d.D.
11) When regulators use a marginal-cost pricing strategy to regulate a natural
monopoly, the regulated monopoly
a.will experience a loss.
b.will experience a price below average total cost.
c.may rely on a government subsidy to remain in business.
d.All of the above are correct.
12) The competitive firm‘s short-run supply curve is that portion of the
a.average variable cost curve that lies above marginal cost.
b.average total cost curve that lies above marginal cost.
c.marginal cost curve that lies above average variable cost.
d.marginal cost curve that lies above average total cost.
13) You own an ice cream store and are concerned that an employee may be giving
generous scoops to friends and relatives and smaller scoops to some other customers.
This is an example of
a.a moral hazard problem.
b.adverse selection.
c.behavioral economics.
d.signaling.
14) Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants
to increase his total revenue, he should
a.increase the price of his lawn-mowing service.
b.decrease the price of his lawn-mowing service.
c.reduce the costs of operating his lawn-mowing service.
d.More than one of the above is correct.
15)
Inefficient production is represented by which point(s)?
a.L, M
b.N, O, P, Q
c.N, O, P
d.Q
16) The term excess capacity refers to the fact that a firm produces a lower quantity
than it would if it operated at the efficient scale.
a.True
b.False
17) Figure 9-8. On the diagram below, Q represents the quantity of cars and P
represents the price of cars.
When the country for which the
figure is drawn allows international trade in cars,
a.consumer surplus increases by the area B.
b.producer surplus decreases by the area B + D.
c.total surplus increases by the area D.
d.All of the above are correct.
18) If a increase in income decreases the demand for a good, then the good is a(n)
a.substitute good.
b.complementary good.
c.normal good.
d.inferior good.
19) Figure 15-4
The marginal revenue curve for a monopoly firm is depicted by curve
a.A.
b.B.
c.C.
d.D.
20) Suppose most people regard emeralds, rubies, and sapphires as close substitutes for
diamonds. Then DeBeers, a large diamond company, has
a.less incentive to advertise than it would otherwise have.
b.less market power than it would otherwise have.
c.more control over the price of diamonds than it would otherwise have.
d.higher profits than it would otherwise have.