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1) Kyle is planning to take a roadtrip. After he makes his plans, he has to make some
unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two
events should Kyle consider in deciding if it is still worthwhile to go on the trip?
a.the unexpected repairs and the increase in the price of gas
b.the unexpected increase for repairs, but not the increase in the price of gas
c.the increase in the price of gas, but not the unexpected repairs
d.neither the unexpected increase in the price of gas nor the unexpected repairs
2) The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic.
Both goods are considered to be normal goods by a majority of consumers. Suppose
that a large income tax increase decreases the demand for both goods by 10%.
Total consumer spending on aged cheddar cheese will
a.increase, and total consumer spending on bread will increase.
b.increase, and total consumer spending on bread will decrease.
c.decrease, and total consumer spending on bread will increase.
d.decrease, and total consumer spending on bread will decrease.
3) Table 15-5
A monopolist faces the following demand curve:
The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.
What is the profit-maximizing price?
a.$4
b.$39
c.$36
d.$42
4) Defenders of advertising argue that firms use advertising as a signal of quality, even
if the advertising delivers little helpful information about the product.
a.True
b.False
5)
Using the midpoint method, what is the price elasticity of supply between point B and
point C?
a.1.44
b.1.29
c.0.96
d.0.69
6) Taxes on labor tend to encourage the elderly to retire early.
a.True
b.False
7) The deadweight loss of an income tax is determined by the
a.amount of total tax revenue to the government.
b.marginal tax rate.
c.average tax rate.
d.ability-to-pay principle.
8) Economists play an important role in the complex debates over tax policy by
a.identifying efficiency as the most important goal of tax policy.
b.identifying equity as the most important goal of tax policy.
c.shedding light on the tradeoff between efficiency and equity in tax policy.
d.None of the above is correct.
9) Individual income taxes generate roughly 25% of the tax revenue for the federal
government.
a.True
b.False
10) Figure 15-21
What is the price and quantity for this natural monopolist under socially optimal
pricing?
a.A and J
b.E and J
c.F and K
d.H and L
11) To increase their individual profits, members of a cartel have an incentive to
a.charge a higher price than the other members of the cartel.
b.increase production above the level agreed upon.
c.ignore the choices made by the other firms and act as a monopolist.
d.charge the same price a monopolist would charge.
