1) With no price discrimination, the monopolist sells every unit at the same price.
Therefore
a.marginal revenue is equal to price.
b.marginal revenue is equal to average revenue.
c.price is greater than marginal revenue.
d.Both a and b are correct.
2) Efficiency is illustrated by
a.both the production possibilities frontier and the circular-flow diagram.
b.neither the production possibilities frontier nor the circular-flow diagram.
c.the production possibilities frontier only.
d.the circular-flow diagram only.
3) In a market economy, economic activity is guided by
a.the government.
b.corporations.
c.central planners.
d.self-interest and prices.
4) For which of the following programs can a person qualify solely by having a low
income?
a.both Temporary Assistance for Needy Families (TANF) and Supplemental Security
Income (SSI)
b.Temporary Assistance for Needy Families (TANF) but not Supplemental Security
Income (SSI)
c.Supplemental Security Income (SSI) but not Temporary Assistance for Needy
Families (TANF)
d.neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security
Income (SSI)
5) The demand for gasoline will respond more to a change in price over a period of five
weeks than over a period of five years.
a.True
b.False
6) Table 22-16
The Johnson family is planning a vacation and, though Mr. and Mrs. Johnson will be
paying for the trip, they have decided to use a democratic voting process to choose their
destination. The family members’ preferences are reflected in the table below.
Refer to Table 22-16. Suppose that before the family can arrive at their decision,
Opryland announced that it will be closed for the season due to flooding. If the family
uses a Borda count, their vacation destination will be
a.Grand Canyon
b.Sea World
c.Disneyland
d.There is a tie between the Grand Canyon and Disneyland.
7) A monopolistically competitive market is like both a competitive market and a
monopoly in that
a.all three market structures feature easy entry by new firms in the long run.
b.firms in all three market structures maximize profit by producing an output level
where marginal revenue equals marginal cost.
c.firms in all three market structures produce the welfare-maximizing level of output.
d.All of the above are correct.
8) President Bush imposed temporary tariffs on imported steel in 2002. The reasons for
this trade restriction is most consistent with the
a.national-security argument.
b.infant-industry argument.
c.unfair competition argument.
d.protection-as-a-bargaining chip-argument.
9) Total revenue minus both explicit and implicit costs is called
a.accounting profit.
b.economic profit.
c.average total cost.
d.total cost.
10) Suppose a firm has a monopoly on the sale of a computer game and faces a
downward-sloping demand curve.
When selling the 50th game, the firm will always receive
a.less marginal revenue on the 50th game than it received on the 49th game.
b.more average revenue on the 50th game than it received on the 49th game.
c.more total revenue on the 50 games than it received on the first 49 games.
d.Both b and c are correct.
11) When quantity supplied exceeds quantity demanded at the current market price, the
market has a surplus, and market price will likely rise in the future to eliminate the
surplus.
a.True
b.False
12) At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds
of apples per day. At a price of
$1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using
the midpoint method, the price elasticity of supply is about
a. 1.14
b. 1.00
c. 0.875
d. 0.50
13) Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce
a good quality product or a poor quality product. In the figure, the dollar amounts are
payoffs and they represent annual profits for the two companies.
Refer to Figure 17-2. Acme and Pinnacle agree to cooperate so as to maximize total
profit. If this game is played repeatedly and Acme uses a tit-for-tat strategy, it will
choose a
a.good quality product in the first round and in subsequent rounds it will choose
whatever Pinnacle chose in the previous round.
b.poor quality product in the first round and in subsequent rounds it will choose
whatever Pinnacle chose in the previous round.
c.good quality product in all rounds, regardless of the choice made by Pinnacle.
d.poor quality product in all rounds, regardless of the choice made by Pinnacle.
14) Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
The equilibrium price will
a.increase in both the milk and beef markets.
b.increase in the milk market and decrease in the beef market.
c.decrease in the milk market and increase in the beef market.
d.decrease in both the milk and beef markets.
15) Suppose that the organic-produce industry is composed of a large number of small
firms. In recent years, these firms have suffered economic losses, and many sellers have
left the industry. Economic theory suggests that these conditions will
a.shift the demand curve outward so that price will rise to the level of production cost.
b.cause the remaining firms to collude so that they can produce more efficiently.
c.cause the market supply to decline and the price of organic produce to rise.
d.cause firms in the organic-produce industry to suffer long-run economic losses.
16) Economists face an obstacle that many other scientists do not face. What is that
obstacle?
a.It is often difficult to formulate theories in economics.
b.It is often impractical to perform experiments in economics.
c.Economics cannot be addressed objectively; it must be addressed subjectively.
d.The scientific method cannot be applied to the study of economics.
17) The following diagram shows two budget lines: A and B.
Which of the following could explain the change in the budget line from A to B?
a.a decrease in the price of X
b.an increase in the price of Y
c.a decrease in the price of Y
d.More than one of the above could explain this change.
18) A typical consumer consumes both coffee and donuts. After the consumer’s income
decreases, the consumer consumes more coffee but fewer donuts than before. For this
consumer, coffee is a normal good, but donuts are an inferior good.
a.True
b.False
19) If the demand for a good falls when income falls, then the good is called an inferior
good.
a.True
b.False
20) Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. If the poverty rate in Imagination is 25%, in what income range
on the table is the poverty line?
21) List and describe the characteristics of a perfectly competitive market.
22) Over the past century in the U.S., what has been federal government revenue as a
percentage of GDP? What has been state and local government revenue as a percentage
of GDP?
23) Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a
market. Assume that the world price in this market is $1 per unit.
Suppose the country imposes a $1 per unit tariff. If the country allows trade with a
tariff, how much is total surplus?
24) Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer
named Hannah. When young, Hannah works and earns income. When old, she is retired
and earns no income.
Refer to Figure 21-32. Which of the four labeled points is Hannah’s optimum?
25) If the two countries decide to trade with each other, which country should specialize
in producing radios?