Suppose the production of a good results in positive externalities. If output occurs at the
intersection of the marginal social benefits curve and the supply curve, then
a. output will be at the socially optimal level.
b. the price of the product will be the same as it was when all benefits were not taken
into account.
c. more output will be produced than if all benefits were not taken into account.
d. a and c
e. a, b, and c
Exhibit 30-3
The real interest rate in year 3 is
a. 5 percent.
b. -5 percent.
c. 0 percent.
d. -10 percent.
e. 10 percent.
Which of the following statements is true?
a. The motivation for rent seeking is not the same as the motivation for profit seeking.
b. Economic rent is a payment in excess of opportunity cost.
c. The deadweight loss triangle is not considered the graphic representation of one of
the costs of monopoly; instead, it is one of the costs of not having a monopoly.
d. Rent seeking is almost always an irrational activity as far as the rent seekers are
concerned.
e. a and d
Suppose that the government imposes a price ceiling at a price of $10._________ units
would be exchanged in a free market, and ____________ units would be exchanged
with the price ceiling in effect.
a. 150; 220
b. 150; 70
c. 110; 180
d. 150; 90
Exhibit 4-3
If P1 is a price ceiling, the maximum (per-unit)
amount buyers are willing to pay to purchase Q1 units is
a. P1.
b. P2.
c. P3.
d. P1 + P2.
e. P3 – P1.
Exhibit 1-1
If the student whose study habits are illustrated here is currently studying for the 2nd
hour she should
a. cut back on the number of hours she is studying because the marginal benefit of
studying for the 2nd hour is less than the marginal cost of doing so.
b. cut back on the number of hours she is studying because the marginal benefit of
studying for the 2nd hour is greater than the marginal cost of doing so.
c. increase the number of hours she is studying because the marginal benefit of studying
for the 2nd hour is less than the marginal cost of doing so.
d. increase the number of hours she is studying because the marginal benefit of studying
for the 2ndhour is greater than the marginal cost of doing so.
A potato farmer who signs a futures contract is
a. speculating on the future price of potatoes, hoping it will be higher.
b. speculating on the future price of potatoes, hoping it will be lower.
c. eliminating his exposure to risk from a falling potato price.
d. trying to influence the price of potatoes to rise.
Smith drives his car numerous places.Sometimes he drives his car around his residential
neighborhood and sometimes he drives it on the highway.Occasionally, Smith gets
peeved with the way other people drive and makes a rude gesture to them.Based on one
of the theories discussed in the textbook, he is
a. more likely to make a rude gesture to another driver on the highway than in his
residential neighborhood.
b. less likely to make a rude gesture to another driver on the highway than in his
residential neighborhood.
c. equally likely to make a rude gesture to another driver on the highway as in the
residential neighborhood.
d. There is not enough information provided to answer this question.
Exhibit 3-4
A price of $6 in the market will result in a
a. shortage of 10 units.
b. surplus of 10 units.
c. surplus of 5 units.
d. shortage of 5 units.
An increase in the expected price of corn would likely do the following to the current
supply and demand for corn:
a. increase both the demand and the supply.
b. decrease both the demand and the supply.
c. increase the demand, but decrease the supply.
d. increase the supply, but decrease the demand.