In the game shown in Table 12.2, when the firms choose their dominant strategies:
Table 12.2
A) profits are lower than when the firms choose the strategy that is not the dominant
strategy.
B) the firms will make the highest profit.
C) the firms will have an incentive to choose the other strategy in the next round.
D) it is evidence that the firms are implicitly or explicitly fixing prices.
The prefrontal cortex (PFC) is the key region of the brain for:
A) cost valuation.
B) benefit valuation.
C) decision making.
D) all of the above
Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. The
consumer surplus at the new equilibrium with $2 tax is shown by:
A) Triangle A.
B) Triangle A + Rectangle B.
C) Rectangle B + Triangle C.
D) Triangle C + Rectangle E.
Recall Application 5, “Honeybees and the Price of Ice Cream,” to answer the
following questions:
According to the application, the increase in the price of ice cream is caused by:
A) a decrease in the output of fruit trees caused by the decline in the number of honey
bees that pollinate these fruit trees.
B) an increase in the output of fruit trees caused by the decline in the number of honey
bees that pollinate these fruit trees.
C) a decrease in the output of fruit trees caused by the rise in the number of honey bees
that pollinate these fruit trees.
D) an increase in the output of fruit trees caused by the rise in the number of honey bees
that pollinate these fruit trees.
Suppose Panama produces only two goods, bananas and hats. If Panama has a
comparative advantage in bananas, a move toward free trade will:
A) harm hat workers, benefit banana workers, but benefit the nation as a whole.
B) harm hat workers, harm banana workers, but benefit the nation as a whole.
C) benefit hat workers, harm banana workers, but harm the nation as a whole.
D) benefit hat workers, harm banana workers, but benefit the nation as a whole.
Figure 4.4 illustrates the supply of tacos. An increase in the price of ground beef, which
is used to make tacos, would most likely cause a movement from:
A) point a to point b.
B) point c to point b.
C) S2 to S1.
D) S0 to S1.
Refer to Figure 18.3. After trade and specialization begin, the maximum amount of
pogo sticks that Livonia can consume is:
Figure 18.3
A) 120.
B) 100.
C) 80.
D) 40.
Suppose the wage rate in a certain industry falls, yet firms hire fewer workers. The best
explanation of this is that labor:
A) demand fell.
B) demand increased.
C) supply fell.
D) supply increased.
Which of the following industries is a good example of a natural monopoly?
A) water systems
B) operating system software
C) military equipment sold to the federal government
D) none of the above
Firms expect to make money on repeat business because:
A) they think they can put one over on their customers.
B) all firms are monopolists.
C) firms have more power than customers.
D) the management of the firm expects both the firm and their customers to be made
better off by their exchange.
Suppose prices increase by 3% per year. What nominal percentage return on your
savings account would you require to get a 3% real return?
A) 3%
B) 6%
C) 8%
D) 9%
Suppose that Figure 10.4 shows an industry’s market demand, its marginal revenue, and
the production costs of a representative firm. If the industry was perfectly competitive,
it would produce a quantity of:
A) 30 units.
B) 50 units.
C) 60 units.
D) There is not sufficient information.
The economic approach to all of the external costs associated with automobiles is:
A) government setting a maximum on each type of external cost.
B) government subsidy.
C) internalizing the external costs using an optimal tax.
D) all of the above.
Which of the following laws prohibits predatory pricing?
A) the Sherman Act
B) the Robinson-Patman Act
C) the Clayton Act
D) the Federal Trade Commission Act
According to the application, how large was the change in relative price that helped the
poor that can be attributed to trade with China?
A) 1/3
B) 1/2
C) 1/4
D) 1/10
Which of the following is a question answered with positive economic analysis?
A) Should the college reduce tuition for out-of-state residents?
B) Should the college charge higher tuition for part-time students?
C) If the college increased its eligibility requirements for enrollment, will class sizes
decline?
D) Should the college eliminate its athletic program to cut its costs?
If the demand for illegal drugs is inelastic, then a government policy that causes illegal
drug price to rise would cause those who support their drug habit by property theft to:
A) increase their theft to pay for their drugs.
B) increase their drug dependency.
C) reduce their theft to pay for their drugs.
D) end their drug dependency.
Refer to Table 14.2. In which market do buyers underestimate the chance of getting a
lemon?
Table 14.2
A) 1 only
B) 2 only
C) 1 and 3 only
D) 2 and 3 only
A relatively high base income in a cash assistance program:
A) reduces the incentive to work.
B) increases the incentive to work.
C) does not affect the incentive to work.
D) will reduce the incentive to work through the substitution effect but will increase the
incentive to work through the income effect.
Taxes on a firm’s external costs:
A) are designed to encourage more production.
B) are meant to force some firms out of business.
C) are simply meant to force decision makers to consider the full costs of their actions.
D) are designed primarily as a way to raise money so that the government can
compensate the victims of the spillover.
The percentage change in the quantity of peanut butter demanded divided by the
percentage change in price of jelly measures:
A) the price elasticity of demand for peanut butter.
B) the price elasticity of demand for jelly.
C) the cross-price elasticity of demand for peanut butter with respect to the price of
jelly.
D) the cross-price elasticity of demand for jelly with respect to the price of peanut
butter.
The application about the impact inflation has on your potential future salary and the
repayment of student loans, more years of work would be required to pay off a student
loan if all prices:
A) remained stable.
B) increased by 20 percent.
C) decreased by 10 percent.
D) increased by 40 percent.
Refer to Table 17.4. Suppose the wage rate equals $8 per worker. How many workers
will the firm hire?
Table 17.4
A) 2
B) 3
C) 4
D) There is not enough information to tell.
In a monopoly, the market demand curve is:
A) the same as the demand curve facing the firm.
B) the summation of all the individual firm’s demand curves.
C) nonexistent.
D) the marginal cost curve above minimum average variable cost.
Refer to Figure 9.7. This firm’s shutdown point corresponds to Point:
A) A.
B) B.
C) C.
D) D.
Recall the Application. If a firm is able to use idle capital when increasing production,
the firm will experience ________ returns.
A) increasing
B) diminishing
C) constant
D) negative
Figure 8.3 shows a firm’s marginal cost, average total cost, and average variable cost
curves. The firm’s total fixed cost is:
A) $2,800.
B) $3,000.
C) $4,500.
D) $7,000.
Refer to Figure 8.2. Diminishing marginal returns set in after the ________ worker is
hired.
A) first
B) second
C) third
D) fifth
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.1 shows how much of each good Jesse and April can paint in one hour.
Table 3.1
Jesse’s opportunity cost of painting one kite is painting:
A) 1/12 of a snowboard.
B) 1/8 of a snowboard.
C) 1/3 of a snowboard.
D) 3 snowboards.
When a firm is experiencing diminishing marginal returns:
A) average cost is increasing.
B) average cost is decreasing.
C) marginal costs are increasing.
D) marginal costs are decreasing.
Refer to Figure 6.4. If the current market transactions occur only over the output level
where a buyer’s willingness to pay is greater than a seller’s willingness to accept, the
government could have set:
A) a maximum price at A
B) a minimum price at C.
C) a maximum price at C.
D) There is not sufficient information.