1) Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a
monopolistically competitive firm.
If the government forces this firm to produce at its efficient output level, how much
profit will this firm earn?
a.a $12 loss
b.a $13 profit
c.a $25 profit
d.a $32 profit
2) Table 14-12
Bill’s Birdhouses
What is the average revenue when 4 units are sold?
a.$0
b.$68
c.$80
d. $400
3) As we move downward and to the right along a linear, downward-sloping demand
curve,
a.both slope and elasticity remain constant.
b.slope changes but elasticity remains constant.
c.both slope and elasticity change.
d.slope remains constant but elasticity changes.
4) If Chad’s laborsupply curve is upwardsloping, then, for Chad,
a.an increase in the wage creates an income effect that is greater than the substitution
effect.
b.an increase in the wage creates a substitution effect that is greater than the income
effect.
c.leisure and consumption are perfect substitutes.
d.leisure and consumption are perfect complements.
5) The paradoxical nature of oligopoly can be demonstrated by the fact that, even
though the monopoly outcome is best for the oligopolists,
a.they collude to set the output level equal to the Nash equilibrium level of output.
b.they have incentives to increase production above the monopoly outcome.
c.they do not behave as profit maximizers.
d.self-interest juxtaposes the profits earned at the Nash equilibrium.
6) Which of the following is an example of a barrier to entry?
(i)A key resource is owned by a single firm.
(ii)The costs of production make a single producer more efficient than a large number
of producers.
(iii)The government has given the existing monopolist the exclusive right to produce
the good.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(i) only
d.(i), (ii), and (iii)
7) Which of the following is an example of a market?
a.a gas station
b.a garage sale
c.a barber shop
d.All of the above are examples of markets.
8)
Sellers’ total revenue would increase if the price
a.increased from $6 to $9.
b.increased from $33 to $36.
c.decreased from $15 to $12.
d.All of the above are correct.
9) Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes,
Q denotes the quantity of pollution and P represents the price of pollution.
The tax depicted on the graph
a.gives polluting firms an incentive to develop cleaner technologies.
b.is viewed by most economists as less effective than a command-and-control policy as
a means of reducing pollution.
c.has the effect of moving the allocation of resources further from the social optimum
than it would be in the absence of the tax.
d.All of the above are correct.
10) Assume that Aruba and Iceland can switch between producing coolers and
producing radios at a constant rate.
Which of the following represents Aruba’s production possibilities frontier when 100
labor hours are available?
a.
b.
c.
d.
11) Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the
tax is increased to $2.50 per unit, the deadweight loss from the new tax would be
a. $200.
b. $250.
c. $500.
d. $2,500.
12) Tyler purchases 5 pounds of hot dogs per month when his monthly income is
$2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler’s
income elasticity of demand for hot dogs is
a.2.33, and hot dogs are a normal good.
b.-2.33, and hot dogs are an inferior good.
c.0.43, and hot dogs are a normal good.
d.-0.43, and hot dogs are an inferior good.
13) On a downward-sloping linear demand curve, total revenue reaches its maximum
value at the
a.midpoint of the demand curve.
b.lower end of the demand curve.
c.upper end of the demand curve.
d.It is impossible to tell without knowing prices and quantities demanded.
14) A market demand curve shows
a.the relationship between price and the number of buyers in a market.
b.how quantity demanded changes when the number of sellers changes.
c.the sum of all prices that individual buyers are willing and able to pay for each
possible quantity of the good.
d.how much of a good all buyers are willing and able to buy at each possible price.
15) A particular cable TV company requires a household to subscribe to its high-speed
Internet service if it subscribes to cable TV, and vice versa. This practice
a.is referred to as tying.
b.is regarded by some economists as a form of price discrimination.
c.is controversial among economists because they disagree on whether it has adverse
effects for society as a whole.
d.All of the above are correct.
16) It would always be a mistake to view
a.a streetlight as a common resource.
b.a nontoll road as a public good.
c.the environment as a common resource.
d.a lighthouse as a public good.