1) The decisions of buyers and sellers that affect people who are not participants in the
market create
a.market power.
b.externalities.
c.profiteering.
d.market equilibrium.
2) A local manufacturing plant that emitted sulfur dioxide was forced to stop production
because it did not comply with local clean air standards. This decision provides an
example of
a.a direct regulation of an externality.
b.corrective taxes.
c.a Coase theorem solution to an externality.
d.the misuse of a subsidy.
3) Table 12-22
A progressive tax is illustrated by tax
a.A.
b.B.
c.C.
d.D.
4) Figure 18-6
Refer to Figure 18-6. The graph above illustrates the market for bakers who make
homemade breads and breakfast pastries. If the wages paid to wedding cake bakers
decrease, what happens in the market for bread bakers?
a.Demand increases from D1 to D2.
b.Demand decreases from D2 to D1.
c.Supply increases from S1 to S2.
d.Supply decreases from S2 to S1.
5) Refer to Figure 9-17. When the country moves from free trade to trade and a tariff,
consumer surplus
a.decreases by $576 and producer surplus does not change.
b.decreases by $576 and producer surplus increases by $192.
c.decreases by $792 and producer surplus does not change.
d.decreases by $792 and producer surplus increases by $192.
6) For which of the following types of goods would the income elasticity of demand be
positive and relatively large?
a.all inferior goods
b.all normal goods
c.goods for which there are many complements
d.luxuries
7) Figure 13-1
Which of the following could explain why the total product curve would shift from TP1
to TP2?
a.There is less capital equipment available to the firm.
b.Labor skills have become rusty and outdated in the firm.
c.The firm has developed improved production technology.
d.The firm is now receiving a higher price for its product.
8) When the government redistributes income from the wealthy to the poor,
a.efficiency is improved, but equality is not.
b.both wealthy people and poor people benefit directly.
c.people work less and produce fewer goods and services.
d.the government collects more revenue in total.
9) A textbook is a
a.private good and the knowledge that one gains from reading the book is a common
resource.
b.private good and the knowledge that one gains from reading the book is a public
good.
c.common resource and the knowledge that one gains from reading the book is a public
good.
d.common resource and the knowledge that one gains from reading the book is a private
good.
10) Because a monopolist must lower its price in order to sell another unit of output,
a.marginal revenue is less than price.
b.long-term economic profits will be zero.
c.total revenue increases as price increases.
d.average revenue is less than price.
11) Medicaid is
a.the government’s health plan for the elderly.
b.the government’s health plan for the poor.
c.another name for Social Security.
d.Both a and c are correct.
12) Figure 10-12
Suppose, on the figure, Q represents the quantity of education and P represents the price
of education. Then the quantity represents
a.an inefficiency.
b.the extent of the negative externality that pertains to the market for education.
c.the amount of the tax that would be required to correct the negative externality that
pertains to the market for education.
d.the amount of the subsidy that would be required to correct the positive externality
that pertains to the market for education.
13) Figure 14-14
When the market is in long-run equilibrium at point W in panel (b), the firm represented
in panel (a) will
a.have a zero economic profit.
b.have a negative accounting profit.
c.exit the market.
d.choose to increase production to increase profit.
14) How long does it take a firm to go from the short run to the long run?
a.six months
b.one year
c.two years
d.It depends on the nature of the firm.
15) Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be
the case that
a.Iran is an exporter of lumber.
b.the domestic quantity of lumber supplied exceeds the domestic quantity of lumber
demanded at the world price without the tariff.
c.the world price without the tariff is less than the price of lumber without trade.
d.the world price without the tariff is greater than the price of lumber without trade.
16) A circular-flow diagram is a model that
a.helps to explain how participants in the economy interact with one another.
b.helps to explain how the economy is organized.
c.incorporates all aspects of the real economy.
d.Both (a) and (b) are correct.
17) Externalities tend to cause markets to be
a.inefficient.
b.unequal.
c.unnecessary.
d.overwhelmed.