1) If a firm experiences constant returns to scale at all output levels, then its long-run
average total cost curve would
a.slope downward.
b.be horizontal.
c.slope upward.
d.slope downward for low output levels and upward for high output levels.
2) Lump-sum taxes are rarely used in the real world because
a.while lump-sum taxes have low administrative burdens, they have high deadweight
losses.
b.while lump-sum taxes have low deadweight losses, they have high administrative
burdens.
c.lump-sum taxes are often viewed as unfair because they take the same amount of
money from both poor and rich.
d.lump-sum taxes are very inefficient.
3) When markets fail, public policy can
a.do nothing to improve the situation.
b.potentially remedy the problem and increase economic efficiency.
c.always remedy the problem and increase economic efficiency.
d.in theory, remedy the problem, but in practice, public policy has proven to be
ineffective.
4) Analyzing the behavior of the firm enhances our understanding of
a.what decisions lie behind the market supply curve.
b.how consumers allocate their income to purchase scarce resources.
c.how financial institutions set interest rates.
d.whether resources are allocated fairly.
5) Table 15-4
A monopolist faces the following demand curve:
The monopolist will not produce
a.5 units or fewer under any circumstances.
b.7.5 units or fewer under any circumstances.
c.7.5 units or more under any circumstances.
d.10 units or more under any circumstances.
6) Figure 14-14
Assume that the market starts in equilibrium at point W in panel (b) and that panel (a)
illustrates the cost curves facing individual firms. Suppose that demand increases from
D0 to D1. Which of the following statements is correct?
a.Points W, Y, and Z represent both short-run and long-run equilibria.
b.Points W, Y, Z, and X represent short-run equilibria.
c.Points W, Y, and Z represent long-run equilibria.
d.Points W and Z represent long-run equilibria.
7) The circular-flow diagram explains, in general terms, how the economy is organized
and how participants in the economy interact with one another.
a.True
b.False
8) As the economy’s income has grown, the government has
a.grown at about the same pace.
b.grown at a faster pace.
c.grown at a slower pace.
d.shrunk.
9) The diagram below pertains to the demand for turkey in the United States.
All else equal, the premature deaths of thousands of turkeys would cause a move from
a.DA to DB.
b.DB to DA.
c.x to y.
d.y to x.
10) Figure 7-9
If producer surplus is $19, then the price of the good is
a. $11.50.
b. $14.50.
c. $13.50.
d. $9.75.
11) Fiona uses all of her income to purchase popcorn and butter. At any two points A
and B on Fiona’s budget constraint,
a.Fiona is equally happy.
b.Fiona is spending more money on popcorn than she is spending on butter.
c.Fiona’s income is different.
d.the price of popcorn relative to the price of butter is the same.
12) The problems faced by oligopolies with three or more members are entirely
different from the problems faced by duopolies.
a.True
b.False
13) Figure 21-22
Refer to Figure 21-22. The shift from point B to point C in the figure is due to the
a.substitution effect of an increase in the price of potato chips.
b.income effect of an increase in the price of potato chips.
c.substitution effect of a decrease in the price of potato chips.
d.income effect of a decrease in the price of potato chips.
14) In order for antitrust laws to raise social welfare, the government must
a.disallow synergy benefits from accruing to monopolists.
b.disallow any mergers from taking place.
c.be able to determine which mergers are desirable and which are not.
d.always attempt to keep markets in their most competitive form.
15) In the circular-flow diagram, which of the following items represents a payment for
a factor of production?
a.interest
b.capital
c.spending by households on goods
d.spending by households on services
16) Table 17-5
The information in the table below shows the total demand for premium-channel digital
cable TV subscriptions in a small urban market. Assume that each digital cable TV
operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in
the market area and that the marginal cost of providing the premium channel service to
a household is zero.
Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV
companies operating in this market. Further assume that they are not able to collude on
the price and quantity of premium digital channel subscriptions to sell. How many
premium digital channel cable TV subscriptions will be sold altogether when this
market reaches a Nash equilibrium?
a. 6,000
b. 9,000
c. 12,000
d. 15,000