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1) Table 7-19
The following table shows the cost of producing a good for the only four producers in a
market.
Refer to Table 7-19. If these four producers bid in an auction to supply one unit to a
consumer, at what price will the good be sold?
2) Which of the following statements is correct?
a.Hidden actions and hidden characteristics are both associated with the moral-hazard
problem.
b.Hidden actions and hidden characteristics are both associated with the
adverse-selection problem.
c.Hidden actions are associated with the moral-hazard problem, whereas hidden
characteristics are associated with the adverse-selection problem.
d.Hidden actions are associated with the adverse-selection problem, whereas hidden
characteristics are associated with the moral-hazard problem.
3) Producer surplus measures the benefit to sellers from receiving a price above their
costs.
a.True
b.False
4) Figure 8-19
The vertical distance between points A and B represents the original tax.
If the government changed the per-unit tax
from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received
by sellers would be $3, and the quantity sold in the market would be 0.5 units.
Compared to the original tax rate, this higher tax rate would
a.increase government revenue and increase the deadweight loss from the tax.
b.increase government revenue and decrease the deadweight loss from the tax.
c.decrease government revenue and increase the deadweight loss from the tax.
d.decrease government revenue and decrease the deadweight loss from the tax.
5) Panel (a)
Panel (b)
Panel (c)
Panel (d)
Which of the four panels represents the market for cars as a result of the adoption of
new technology on assembly lines?
a.Panel (a)
b.Panel (b)
c.Panel (c)
d.Panel (d)
6) A firm produces the welfare-maximizing level of output
a.only when the market is perfectly competitive.
b.only when the market is a monopoly or monopolistically competitive.
c.only when the market is monopolistically competitive or perfectly competitive.
d.when the market is perfectly competitive, monopolistically competitive, or
monopolistic.
7) An advantage of a negative income tax is that it does not encourage the breakup of
families because the only criterion for assistance is family income.
a.True
b.False
8) Markets will always allocate resources efficiently.
a.True
b.False
9) Which of the following words and phrases best captures the notion of equality?
a.minimum waste
b.maximum benefit
c.sameness
d.efficiency
10) When the price of knee braces increased by 25 percent, the Brace Yourself
Company increased its quantity supplied of knee braces per week by 75 percent. BYC's
price elasticity of supply of knee braces is 0.33.
a.True
b.False
11) Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue
information.
What is the marginal cost of the 6th pair of shoes?
a. $44
b. $46
c. $55
d. $60
12) The concept of utility is fundamental to utilitarianism and describes the
a.optimal distribution of wealth in society.
b.level of satisfaction derived from a person's circumstances.
c.method by which society chooses to allocate resources.
d.method whereby wealth is stored.
13) Monopolistic competition is considered inefficient because
a.price exceeds marginal cost.
b.output is excessive.
c.long-run profits are positive.
d.barriers to entry limit the number of firms in the market.
14) Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and
paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15
to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 3
slices of pizza and 4 paperback novels?
a.Jack only
b.Diane only
c.both Jack and Diane
d.neither Jack nor Diane
15) Sue earns income of $80,000 per year. Her average tax rate is 30 percent. Sue paid
20 percent in taxes on the first $30,000 she earned. What was the marginal tax rate on
the rest of her income?
a.20 percent
b.24 percent
c.30 percent
d.36 percent
16)
The opportunity cost of obtaining 40 additional dryers by moving from point D to point
C is
a.0 washers.
b.20 washers.
c.40 washers.
d.None of the above; the economy cannot move from point D to point C.
17) Which of the following is not correct?
a.Poverty is correlated with race.
b.Poverty is correlated with age.
c.Poverty is correlated with family composition.
d.All of the above are correct.
18) Which of the following would not be considered a private good?
a.a pair of scissors
b.a pair of shoes
c.an SUV
d.cable TV service
