1) Along which of the supply curves does quantity supplied move proportionately more
than the price?
a.along supply curve B only
b.along supply curves B and C
c.along all three supply curves
d.None. Quantity supplied moves proportionately less than the price along all of the
three supply curves.
2) Ford Motor Company announces that next month it will offer $3,000 rebates on new
Mustangs. As a result of this information, today’s demand curve for Mustangs
a.shifts to the right.
b.shifts to the left.
c.shifts either to the right or to the left, but we cannot determine the direction of the
shift from the given information.
d.will not shift; rather, the demand curve for Mustangs will shift to the right next
month.
3) Policymakers should be aggressive in using their powers to place limits on firm
behavior, because business practices that appear to reduce competition never have any
legitimate purposes.
a.True
b.False
4) The distinction between efficiency and equality can be described as follows:
a.Efficiency refers to maximizing the number of trades among buyers and sellers;
equality refers to maximizing the gains from trade among buyers and sellers.
b.Efficiency refers to minimizing the price paid by buyers; equality refers to
maximizing the gains from trade among buyers and sellers.
c.Efficiency refers to maximizing the size of the pie; equality refers to producing a pie
of a given size at the least possible cost.
d.Efficiency refers to maximizing the size of the pie; equality refers to distributing the
pie fairly among members of society.
5) Which of the following is an example of a positive, as opposed to normative,
statement?
a.Inflation is more harmful to the economy than unemployment is.
b.If welfare payments increase, the world will be a better place.
c.Prices rise when the government prints too much money.
d.When public policies are evaluated, the benefits to the economy of improved equality
should be considered more important than the costs of reduced efficiency.
6) The flatter the demand curve that passes through a given point, the more inelastic the
demand.
a.True
b.False
7) Technology spillover occurs when
a.a firm passes the high costs of technical research on to society through higher prices.
b.a firm’s research yields technical knowledge that is used by society as a whole.
c.the government subsidizes firms engaged in high-tech research.
d.copyright laws prohibit firms from profiting from the research of others.
8) If baked potatoes and sour cream are complements, then an increase in the price of
sour cream decreases the demand for baked potatoes.
a.True
b.False
9) The goal of the consumer is to
a.maximize utility.
b.minimize expenses.
c.spend more income in the current time period than in the future.
d.All of the above are the goals of the consumer.
10) The profit motive counteracts
a.consumer discrimination.
b.discrimination in sports.
c.the beauty premium.
d.None of the above is correct.
11) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
When the tax is imposed in this market, sellers effectively pay what amount of the $10
tax?
a. $0
b.$4
c. $6
d. $10
12) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. Pursuing its own best interests, the U.S. will renew MFN status
with Farland
a.only if Farland does not impose trade sanctions against U.S. firms.
b.only if Farland imposes trade sanctions against U.S. firms.
c.regardless of whether Farland imposes trade sanctions against U.S. firms.
d.None of the above is correct. In pursuing its own best interests, the United States will
in no case renew MFN status with Farland.
13)
Inefficient production is represented by which point(s)?
a.K, M
b.L
c.L, M
d.M
14) Refer to Figure 9-12. With trade, the domestic price and domestic quantity
demanded are
a. $54 and 800.
b. $54 and 1,600.
c. $42 and 800.
d. $42 and 1,200.
15) Suppose that a firm operating in perfectly competitive market sells 200 units of
output at a price of $3 each. Which of the following statements is correct?
(i)Marginal revenue equals $3.
(ii)Average revenue equals $600.
(iii)Average revenue exceeds marginal revenue, but we don‘t know by how much.
a.(i) only
b.(iii) only
c.(i) and (ii) only
d.(i), (ii), and (iii)
16) A consensus view among economists regarding the possibility of labor-market
discrimination is that
a.most wage differences among groups are attributable to discrimination.
b.many employers use compensating differentials to hide discriminatory practices.
c.wage differences among groups are not sufficient by themselves to determine how
much discrimination there is.
d.all wage differences among groups are attributable to differences in human capital and
compensating differentials.
17) Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
If the market price is $4.00, the firm will earn
a.positive economic profits in the short run.
b.negative economic profits in the short run but remain in business.
c.negative economic profits and shut down.
d.zero economic profits in the short run.
18) Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each
company decides whether to charge a high price or a low price. In the figure, the dollar
amounts are payoffs and they represent annual profits for the two companies.
Refer to Figure 17-5. The situation faced by ABC and QRS is
a.one in which the players, pursuing their own interests, are likely to reach an outcome
that is not particularly good for either player.
b.one in which an agreement between the players to behave in a certain way is not
likely to hold up.
c.similar to the situation faced by Bonnie and Clyde in the prisoners’ dilemma game.
d.All of the above are correct.
19) Figure 19-5
Refer to Figure 19-5. Given demand for labor, D1, and supply of labor, S1, what is the
quantity demanded of labor if a minimum wage of $8 per hour is imposed on this
market?
a.100
b.200
c.300
d.400
20) Scenario 17-5
Assume that a local restaurant sells two items, salads and steaks. The restaurant’s only
two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr.
Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is
willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the
restaurant can provide each of these items at zero marginal cost.
Refer to Scenario 17-5. How much additional profit can the restaurant earn by
switching to the use of a tying strategy to price salads and steaks rather than pricing
these goods separately?
a.$20
b.$12
c.$7
d.$6