1) Market failure associated with the free-rider problem is a result of
a.a problem associated with pollution.
b.benefits that accrue to those who don’t pay.
c.losses that accrue to providers of the product.
d.market power.
2) Figure 16-4
What price will the monopolistically competitive firm charge in this market?
a. $400
b. $600
c. $700
d. $800
3) Figure 7-16
If the price of the good is $500, then producer surplus amounts to
a. $450.
b. $575.
c. $700.
d. $800.
4) Which of the following is not a determinant of demand?
a.the price of a resource that is used to produce the good
b.the price of a complementary good
c.the price of the good next month
d.the price of a substitute good
5) Sunshine’s Organic Market sells organic produce. Assume that labor is the only input
that varies for the firm. The store manager has determined that if she hires 9 workers,
the store can sell 200 pounds of produce per day. If she hires 10 workers, the store can
sell 230 pounds of produce per day. The store earns $4 for each pound of produce that it
sells, and the manager pays each worker $60 per day. Which of the following is correct?
a.For the 10th worker, the marginal product is 20 pounds of produce per day.
b.For the 10th worker, the marginal revenue product is $120 per day.
c.The marginal profit from the 10th worker is $120.
d.All of the above are correct.
6) When the market price is below the equilibrium price, the quantity of the good
demanded exceeds the quantity supplied.
a.True
b.False
7) Because almost all economists oppose policies that restrict trade among nations,
policymakers do not restrict imports of certain goods.
a.True
b.False
8) Economists believe that production possibilities frontiers
a.never have a bowed shape.
b.rarely have a bowed shape.
c.often have a bowed shape.
d.always have a bowed shape.
9) Table 16-7
A monopolistically competitive firm faces the following demand schedule for its
product. In addition, the firm has total fixed costs equal to 20.
If the firm produces its profit-maximizing level of output and there is a constant
marginal cost of $7 per unit, which of the following is correct?
a.This firm is operating at its efficient scale.
b.This firm should expect its demand curve to shift to the left.
c.Firms will leave the market and profits for firms that remain in the market will rise.
d.This firm is in a long-run equilibrium.
10) Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie
channel (PMC) in its market area. Let’s assume that Black Box Cable pays $150,000 a
year for the exclusive marketing rights to PMC. Since Black Box has already installed
cable to all of the homes in its market area, the marginal cost of delivering PMC to
subscribers is zero. The manager of Black Box needs to know what price to charge for
the PMC service to maximize her profit. Before setting price, she hires an economist to
estimate demand for the PMC service. The economist discovers that there are two types
of subscribers who value premium movie channels. First are the 4,000 die-hard TV
viewers who will pay as much as $150 a year for the new PMC premium channel.
Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as
much as $20 a year for a subscription to PMC.
If Black Box Cable TV is unable to price discriminate, what price will it choose to
maximize its profit, and what is the amount of the profit?
a.price = $20; profit = $400,000
b.price = $20; profit = $330,000
c.price = $150; profit = $450,000
d.price = $150; profit = $600,000
11)
Which demand curve is unit elastic?
a.A
b.B
c.D
d.None of the above.
12) The movement from Da to Db could be
caused by
a.a decrease in price.
b.a decrease in income, assuming the good is inferior.
c.buyers expecting the price of the good to fall in the near future.
d.an increase in the price of a complement.