Figure 16-5
Refer to Figure 16-5. Suppose the firm represented in the diagram decides to practice
perfect price discrimination. What is the total revenue collected by the firm?
A) $6,720
B) $7,680
C) $10,240
D) $13,440
Baxter International, a manufacturer of hospital supplies, acquired American Hospital
Supply, a distributor of hospital supplies. This is an example of
A) a conglomerate merger.
B) a horizontal merger.
C) a vertical merger.
D) a two-dimensional merger.
If a monopolist’s marginal revenue is $25 a unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output.
B) to maximize profit the firm should decrease output.
C) to maximize profit the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximize profit.
Table 18-6
Table 18-6 shows the income tax brackets and tax rates for single taxpayers in
Calpernia.
Refer to Table 18-6. Sasha is a single taxpayer with an income of $60,000. What is his
marginal tax rate and what is his average tax rate?
A) marginal tax rate = 38%; average tax rate = 23%
B) marginal tax rate = 17%; average tax rate = 21%
C) marginal tax rate = 38%; average tax rate = 24%
D) marginal tax rate = 23%; average tax rate = 38%
Which of the following is the largest source of revenue for the U.S. federal
government?
A) the individual income tax
B) social insurance taxes
C) sales taxes
D) property taxes
If, for a perfectly competitive firm, price exceeds the marginal cost of production, the
firm should
A) increase its output.
B) reduce its output.
C) keep output constant and enjoy the above normal profit.
D) lower the price.
Table 4-2
Refer to Table 4-2. The table above lists the highest prices five consumers are willing to
pay for a theater ticket. If the price of one ticket is $25
A) everyone will buy a ticket.
B) consumer surplus will be maximized.
C) Anya’s consumer surplus is $1.
D) no one will buy a ticket.
Some economists argue that Microsoft become a monopoly in the market for computer
software by developing MS-DOS, an operating system used for the first IBM personal
computers. The more people who used MS-DOS-based programs, the greater the
usefulness of a using a computer with an MS-DOS operating system. The explanation
for Microsoft’s monopoly is
A) the development of new technology that other firms could not copy.
B) control of a key resource which, in this case, is the MS-DOS operating system.
C) network externalities.
D) patents Microsoft obtained when it developed the MS-DOS operating system.
If a perfectly competitive apple farm’s marginal revenue exceeds the marginal cost of
the last bushel of apples sold, what should the farm do to maximize its profit?
A) determine what the total revenue and total cost of production are
B) increase output
C) decrease output
D) lower its price to sell more
Which of the following is not an example of price discrimination?
A) Adobe Systems offers software at discounted prices to students and faculty at K-12
and university levels.
B) Unlike foreign tourists, citizens of Cambodia are exempted from paying an
admission fee to the temples of Angkor.
C) Senior citizens may purchase special fare tickets for public transportation that are
not available to others.
D) Buyers at an automotive parts store receive a discount for bulk buying because the
store is able to pass on to its customers some of the lower average cost for producing
large quantities.
Figure 14-5
Netflix (N) was one of the first companies to offer streaming video services and is still
considered a leader in the industry. Spotify (S) offers a music streaming service and is
considering entering the video streaming business. At this point, Netflix has to decide
whether or not to lower its subscription price in order to deter Spotify’s entry into the
market. Figure 14-5 shows the decision tree for the Netflix-Spotify entry game.
Refer to Figure 14-5. If Netflix lowers its price, will this deter Spotify from setting up
a streaming video service?
A) Yes, because Spotify stands to lose $1 million if it competes with Netflix.
B) Yes, because Spotify will make a smaller profit than Netflix if it chooses to compete.
C) No, because Spotify will make a profit if it competes with Netflix.
D) No, because Spotify will make a larger profit than Netflix if it chooses to compete.
In the real world we don’t observe countries completely specializing in the production
of goods for which they have a comparative advantage. One reasons for this is
A) comparative advantage works better in theory than in practice.
B) some countries have more resources than other countries.
C) tastes for many traded goods are similar in many countries because of globalization.
D) production of most goods involves increasing opportunity costs.
In the United States, the average person mostly patronizes firms that operate in
A) perfectly competitive markets.
B) monopolistically competitive markets.
C) oligopoly markets.
D) monopoly markets.
As a firm hires more labor in the short run, the
A) level of total product stays constant.
B) output per worker rises.
C) extra output of another worker may rise at first, but eventually must fall.
D) costs of production are increasing at a fixed rate per unit of output.
Figure 4-6
Figure 4-6 shows the demand and supply curves for the almond market. The
government believes that the equilibrium price is too low and tries to help almond
growers by setting a price floor at Pf.
Refer to Figure 4-6. What area represents the portion of consumer surplus that has been
transferred to producer surplus as a result of the price floor?
A) B
B) B + C
C) B + E
D) E
Table 2-1
Production choices for Tomaso’s Trattoria
Refer to Table 2-1. Assume Tomaso’s Trattoria only produces pizzas and calzones. A
combination of 24 pizzas and 15 calzones would appear
A) along Tomaso’s production possibilities frontier.
B) inside Tomaso’s production possibilities frontier.
C) outside Tomaso’s production possibilities frontier.
D) at the horizontal intercept of Tomaso’s production possibilities frontier.
Minimum efficient scale is defined as the level of output at which
A) all economies of scale are exhausted.
B) diminishing returns affect average total cost.
C) the firm’s long-run average total cost starts falling.
D) the maximum output is produced.
Worker discrimination occurs when
A) workers refuse to perform risky tasks.
B) workers refuse to work with persons of a different race.
C) customers refuse to buy products produced by a racially diverse workforce.
D) employers pay different employees different wages based on race.
If a firm is the sole employer of a factor of production, it is known as
A) a monopoly.
B) a competitor.
C) a monopsony.
D) an economically discriminating firm.
The European Union established a cap-and-trade system which was designed to
A) eliminate air pollution and greenhouse gases by the year 2020.
B) reduce carbon dioxide emissions.
C) provide fast growing developing countries with the technology to reduce their
carbon emissions.
D) remove all taxes from polluting industries.
Figure 9-3
Since 1953 the United States has imposed a quota to limit the imports of peanuts.
Figure 9-3 illustrates the impact of the quota.
Refer to Figure 9-3. Without the quota, the domestic price of peanuts equals the world
price which is $2.00 per pound. What is the quantity of peanuts supplied by domestic
producers in the absence of a quota?
A) 10 million pounds
B) 28 million pounds
C) 30 million pounds
D) 40 million pounds
If a restaurant was a natural monopoly, dividing the restaurant equally into two separate
restaurants would
A) decrease marginal cost.
B) raise average total cost.
C) increase total revenue.
D) make marginal revenue less elastic.
If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for grapefruit.
B) a decrease in the demand for oranges, a substitute for grapefruit.
C) a decrease in the quantity of grapefruit demanded.
D) a decrease in the quantity of grapefruit supplied.
The income effect of a wage increase will cause a worker to devote
A) more time to labor and more time to leisure.
B) more time to labor and less time to leisure.
C) less time to labor and more time to leisure.
D) less time to labor and less time to leisure.
Figure 13-19
Refer to Figure 13-19 to answer the following questions.
a. What is the productively efficient output?
b. What is the allocatively efficient output?
c. What is the amount of excess capacity?
d. Suppose the firm is currently producing 14 units. What happens if it increases output
to 17 units?
In 1995 ________, which was established in 1948, was replaced by ________.
A) the GATT; the WTO
B) the WTO; NAFTA
C) the Smoot-Hawley Tariff; the GATT
D) NAFTA; the Smoot-Hawley Tariff
The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because
A) it was a public enterprise.
B) it had a patent on the manufacture of aluminum.
C) the company had a secret technique for making aluminum from bauxite.
D) it had control of almost all the available supply of bauxite.
A carbon tax which is designed to reduce pollution is an example of a
A) command-and-control policy.
B) government administrative rule.
C) noneffective incentive.
D) market-based policy.
Game theory was developed in the 1940s by John von Neuman, a mathematician, and
an economist named
A) John Nash.
B) John Maynard Keynes.
C) Oskar Morgenstern.
D) Milton Friedman.
An increase in a perfectly competitive firm’s demand for labor could be caused by
A) a decrease in the market wage rate.
B) an increase in the amount of human capital among the labor force.
C) an increase in the supply of labor.
D) a decrease in the market price of the product the firm produces.
Oligopolies exist and do not attract new rivals because
A) of competition.
B) of barriers to entry.
C) the firms keep profits and prices so low that no rivals are attracted.
D) there can be no product differentiation.