1) Table 13-6
Wooden Chair Factory
Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine
is
$20 per day regardless of the number of chairs produced. If the factory produces at a
rate of 70 chairs per hour and operates 8 hours per day, what is the factory’s total labor
cost per day?
a.$72
b.$112
c.$576
d.$616
2) Which theory would support the idea that education does not enhance productivity
and therefore raising all workers’ educational levels would not affect wages?
a.signaling theory
b.human-capital theory
c.physical-capital theory
d.the efficient-market hypothesis
3) Which of the following offers an explanation as to why the principal-agent problem
exists for a firm?
a.The firm cares less about profit and more about cost when there are many competitors
in the market.
b.The firm offers an employeeincentive program in which employees share in the firm’s
profits.
c.The firm operates in a market with many competitors forcing the firm to pay its
employees more to keep them from switching to another firm.
d.The firm operates to maximize profit while the employees attempt to work as little as
possible to earn their paychecks.
4) Holding the nonprice determinants of demand constant, a change in price would
a.result in either a decrease in demand or an increase in demand.
b.result in a movement along a stationary demand curve.
c.result in a shift of supply.
d.have no effect on the quantity demanded.
5) Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
If there is only one unit of the good and if the buyers bid against each other for the right
to purchase it, then the consumer surplus will be
a.$0 or slightly more.
b.$10 or slightly less.
c.$30 or slightly more.
d.$45 or slightly less.
6) Figure 10-11
€The social value of the last unit produced exceeds the private cost of the last unit
produced by $13.50.€ This statement is correct at which quantity of output?
a.210 units
b.270 units
c.330 units
d.390 units
7) Suppose that in 2020 the average citizen’s federal tax bill is $9,372, and total federal
spending is $10,824 per person. In 2020, the federal government will have
a.a budget surplus.
b.a budget deficit.
c.horizontal equity.
d.vertical equity.
8) Table 17-28
Suppose that two firms determine that each could lower its costs and increase its profits
if both reduced their advertising budgets. But in order for the plan to work, each firm
must agree to refrain from advertising. Each firm believes that advertising works by
increasing the demand for the firm’s product, but each firm also believes that if neither
firm advertises, the cost savings will outweigh the lost sales. The table below lists each
firm’s individual profits:
Firm A
Breaks agreement Maintains agreement
and advertises and does not advertise
Refer to Table 17-28. Which of the following statements does not correctly
characterize the outcome of this game?
a.There is a Nash equilibrium.
b.Both firms collectively would earn the highest joint profits by maintaining the
agreement not to advertise.
c.Only one firm has a dominant strategy.
d.The game is an example of the Prisoners’ Dilemma.
9) Which of the following statements is true?
(i)When a competitive firm sells an additional unit of output, its revenue increases by
an amount less than the price.
(ii)When a monopoly firm sells an additional unit of output, its revenue increases by an
amount less than the price.
(iii)Average revenue is the same as price for both competitive and monopoly firms.
a.(ii) only
b.(iii) only
c.(i) and (ii) only
d.(ii) and (iii) only
10) Suppose that Barack and Michelle are duopolists. Barack is producing 300 units of
output, and Michelle is producing 400 units of output. When Michelle produces 400
units, Barack maximizes profit by producing 300 units. When Barack produces 300
units of output, Michelle maximizes profit by producing 400 units. Barack and Michelle
are
a.in a competitive market.
b.at a Nash equilibrium.
c.producing with no deadweight loss.
d.selling at a price higher than the monopoly price.
11) Experiments show that when real people play the ultimatum game, starting with
$100,
a.Player A usually proposes giving Player B more than $50.
b.Player B usually accepts Player A’s proposal if Player A proposes giving Player B $30
or $40.
c.players show themselves to be rational wealth-maximizers.
d.Both B and C are correct.
12) Assume that Brad and Theresa can switch between producing wheat and producing
beef at a constant rate.
Brad should specialize in the production of
a.wheat and Theresa should specialize in the production of beef.
b.beef and Theresa should specialize in the production of wheat.
c.both goods and Theresa should specialize in the production of neither good.
d.neither good and Theresa should specialize in the production of both goods.
13) The current price of blue jeans is $30 per pair, but the equilibrium price of blue
jeans is $25 per pair. As a result,
a.the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the
$30 price.
b.the equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price.
c.there is a surplus of blue jeans at the $30 price.
d.All of the above are correct.
14) Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive
market, and panel (b) depicts the linear market supply curve for a market with a fixed
number of identical firms.
If there are 600 identical firms in this market, what is the value of Q1?
a. 6,000
b. 12,000
c. 60,000
d. 120,000
15) 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. If this game is played only once, then the most likely outcome is
that
a.both firms charge a low price.
b.ABC charges a low price and QRS charges a high price.
c.ABC charges a high price and QRS charges a low price.
d.both firms charge a high price.
16) Another term for factors of production is
a.inputs.
b.output.
c.goods.
d.services.
17) In a market economy, government intervention
a.will always improve market outcomes.
b.reduces efficiency in the presence of externalities.
c.may improve market outcomes in the presence of externalities.
d.is necessary to control individual greed.
18) Profit-maximizing firms in a competitive market produce an output level where
a.marginal cost equals marginal revenue.
b.marginal cost equals average total cost.
c.marginal revenue is increasing.
d.price is less than marginal revenue.
19) Suppose Rebecca needs a dog sitter so that she can travel to her sister’s wedding.
Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for
Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of
$185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made
Rebecca and Susan worse off by a total of
a.$30.
b.$25.
c.$10.
d.$5.
20) In a monopolistically competitive market,
a.entry by new firms is impeded by barriers to entry; thus, the number of firms in the
market is never ideal.
b.entry by new firms is impeded by barriers to entry, but the number of firms in the
market is nevertheless always ideal.
c.free entry ensures that the number of firms in the market is ideal.
d.there may be too few or too many firms in the market, despite free entry.