1) At a price of $24, there is a
a.surplus of 4 units.
b.surplus of 8 units.
c.shortage of 4 units.
d.shortage of 8 units.
2) A popular resort restaurant will maximize profits if it chooses to stay open during the
lesscrowded €off season€ when its total revenues exceed its fixed costs.
a.True
b.False
3) If a person can prove that she was damaged by an illegal arrangement to restrain
trade, that person can sue and recover
a.the damages she sustained, as provided for in the Sherman Act.
b.the damages she sustained, as provided for in the Clayton Act.
c.three times the damages she sustained, as provided for in the Sherman Act.
d.three times the damages she sustained, as provided for in the Clayton Act.
4) Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer’s
income is $50. In addition, suppose the consumer’s budget constraint illustrates hot
wings on the horizontal axis and beer on the vertical axis.
Refer to Scenario 21-1. If the consumer’s income rises to $60, then the budget line for
hot wings and beer would
a.now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60
beers.
b.not change.
c.now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16
beers.
d.rotate outward along the beer axis.
5) Which of the following statements is valid when the market supply curve is vertical?
a.Market quantity supplied does not change when the price changes.
b.Supply is perfectly elastic.
c.An increase in market demand will increase the equilibrium quantity.
d.An increase in market demand will not increase the equilibrium price.
6) Total revenue minus only implicit costs is called
a.accounting profit.
b.economic profit.
c.opportunity cost.
d.None of the above is correct.
7) A model can be accurately described as a
a.theoretical abstraction with very little value.
b.device that is useful only to the people who created it.
c.realistic and carefully constructed theory.
d.simplification of reality.
8) Suppose that a professional photographer takes a prize-winning digital photo. She
can sell a 5″x7″ color print of the photo for $10. She can also sell the digital file for
$20. There are 500 people willing to buy the color print and 2,000 people willing to buy
the digital file. Assume the costs to the photographer are zero and that the people who
purchase the digital file cannot resell the file itself or any prints made from it. What
should she do in order to maximize her profits?
a.earn $5,000 by selling only the color prints
b.earn $40,000 by selling only the digital files
c.earn $45,000 by selling both the color prints and the digital files at their respective
prices
d.We do not have enough information with which to answer this question.
9) Figure 13-10
The firm experiences economies of scale if it changes its level of output from
a.Q1 to Q2.
b.Q2 to Q3.
c.Q3 to Q4.
d.Q4 to Q5.
10) The scientific method is
a.the use of modern technology to understand the way the world works.
b.the use of controlled laboratory experiments to understand the way the world works.
c.the dispassionate development and testing of theories about how the world works.
d.the search for evidence to support preconceived theories about how the world works.
11) As price rises from $7 to $8, the using the midpoint method is approximately
a. 0.09.
b. 0.58.
c. 0.65.
d. 1.53.
12) Which of the following examples does not illustrate the principle represented by the
adage, There is no such thing as a free lunch?
a.Melissa needs to pay her rent and her electric bill.
b.Kevin must choose between buying a new flat screen television and buying his
textbooks for this semester.
c.Robert must decide between studying for his psychology exam and working at his
part-time job.
d.Lisa can spend her money on a new smart phone or on a weekend trip.
13) Assume a farmer has the ability to produce corn and/or beans. Whenever the farmer
spends 1 hour less producing corn and 1 hour more producing beans, he reduces his
output of corn by 2 bushels and raises his output of beans by 3 bushels. In view of these
assumptions, the farmer’s production possibilities frontier is bowed out.
a.True
b.False
14) When a country allows trade and becomes an exporter of a good,
a.the gains of the domestic producers of the good exceed the losses of the domestic
consumers of the good.
b.the gains of the domestic consumers of the good exceed the losses of the domestic
producers of the good.
c.the losses of the domestic producers of the good exceed the gains of the domestic
consumers of the good.
d.the losses of the domestic consumers of the good exceed the gains of the domestic
producers of the good.
15) For Country A, the world price of soybeans exceeds the domestic equilibrium price
of soybeans. As a result, international trade allows buyers of soybeans in Country A to
experience greater consumer surplus than they otherwise would experience.
a.True
b.False
16) Figure 10-13. On the graph, Q represents the quantity of plastics and P represents
the price of plastics.
If 325 units of plastics are produced and consumed, then the
a.social optimum has been reached.
b.market equilibrium has been reached.
c.government must have imposed a corrective tax to guide the market to this outcome.
d.government must have offered a corrective subsidy to guide the market to this
outcome.
17) Table 17-13
Two home-improvement stores (Lopes and HomeMax) in a growing urban area are
interested in expanding their market share. Both are interested in expanding the size of
their store and parking lot to accommodate potential growth in their customer base. The
following game depicts the strategic outcomes that result from the game. Increases in
annual profits of the two home-improvement stores are shown in the table below.
Refer to Table 17-13. Pursuing its own best interest, HomeMax will
a.increase the size of its store and parking lot only if Lopes also increases the size of its
store and parking lot.
b.increase the size of its store and parking lot only if Lopes does not increase the size of
its store and parking lot.
c.increase the size of its store and parking lot regardless of the decision made by Lopes.
d.not increase the size of its store and parking lot regardless of the decision made by
Lopes.
18) When a profit-maximizing firm in a monopolistically competitive market is in
long-run equilibrium, marginal cost must lie below average total cost.
a.True
b.False
19)
Suppose Phil and Miss Kay are the only consumers in the market. If the price is $10,
then the market quantity demanded is
a.0 units.
b.2 units.
c.4 units.
d.6 units.
20) Cooperation is easier to achieve in ______ .
21) Economists use the term to refer to a situation in which the market on its own fails
to produce an efficient allocation of resources.
22) Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply
curve for restored historic buildings slopes upward. The production of the 50th restored
historic building entails the following:
♦ private cost of $800,000;
♦ private value of $650,000;
♦ social value of $800,000.
Could the government impose a tax or provide a subsidy to move the market to the
social optimum? If your answer is €Yes,€ should it be a tax or should it be a subsidy?
23) Scenario 10−3:
. What are the market equilibrium quantity and price?
24) Describe the difference between the short run and the long run.