1) Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that
produce safe drinking water. Each week Kunal and Naj work together to decide how
many gallons of water to pump, to bring the water to town, and to sell it at whatever
price the market will bear. Assume Kunal and Naj can pump as much water as they
want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in
the table below.
Refer to Table 17-6. As long as Kunal and Naj operate as a profit-maximizing
monopoly, what will their combined weekly revenue amount to?
a.$450
b.$675
c.$875
d.$900
2) When a government program is justified not on its merits but on the number of jobs
it will create,
a.the program is an efficient use of taxpayer dollars.
b.it should be approved only if the unemployment rate is low.
c.taxes should be raised to fund the program.
d.it is known as the broken window fallacy.
3) Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into
two groups: barbers who are bald (or going bald) and those who have a full head of
hair. Assume that the barbers in this market have identical hair-cutting ability,
regardless of whether they are bald or not. Currently the equilibrium wage in the bald
barber market is lower than that in the nonbald market. Further assume that the market
for haircuts is competitive.
Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and
barbers with hair, then
a.all barbershops now earn a normal economic profit.
b.competition will ensure the difference in wages will persist.
c.barbershops that hire barbers with hair will be more profitable than those that don’t.
d.barbershops that hire bald barbers will be more profitable than those that don’t.
4) At a price of
a.$2, there is a shortage of 6 units.
b.$5, there is a surplus of 25 units.
c.$5, there is a shortage of $25.
d.$7, there is a shortage of 4 units.
5) When a firm experiences continually declining average total costs,
a.the firm is a price taker.
b.society is better served by having one firm supply the product.
c.the firm will earn higher profits than if average total costs are increasing.
d.All of the above are correct.
6) Which of the following is not a reason people choose to depend on others for goods
and services?
a.to improve their lives
b.to allow them to enjoy a greater variety of goods and services
c.to consume more of each good without working any more hours
d.to allow people to produce outside their production possibilities frontiers
7) For the general population, a 10 percent increase in the price of cigarettes leads to a
a.1 percent reduction in the quantity demanded of cigarettes.
b.4 percent reduction in the quantity demanded of cigarettes.
c.10 percent reduction in the quantity demanded of cigarettes.
d.12 percent reduction in the quantity demanded of cigarettes.
8) One tax system is less efficient than another if it
a.places a lower tax burden on lower-income families than on higher-income families.
b.places a higher tax burden on lower-income families than on higher-income families.
c.raises the same amount of revenue at a higher cost to taxpayers.
d.raises less revenue at a lower cost to taxpayers.
9) The job of night watchman at the Punxsutawny Phil Groundhog museum is known to
have a high wage. Which of the following would push the night watchman’s wage
higher?
a.The job does not require specialized skills.
b.The job is easy.
c.The job is incredibly dull.
d.The job has minimal risk of injury.
10) Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into
two groups: barbers who are bald (or going bald) and those who have a full head of
hair. Assume that the barbers in this market have identical hair-cutting ability,
regardless of whether they are bald or not. Currently the equilibrium wage in the bald
barber market is lower than that in the nonbald market. Further assume that the market
for haircuts is competitive.
Refer to Scenario 19-4. If some consumers in the market for haircuts have a strong
preference for having their hair cut by a barber who is not going bald, then
a.the difference in wages will eventually disappear since a haircut is a homogeneous
good.
b.barbershops that hire barbers with hair will be able to charge a higher price for a
haircut to those consumers who have a strong preference for barbers with hair.
c.barbershops that hire barbers with hair will always be much more profitable.
d.barbershops that hire bald barbers will always be much more profitable.