1) Which of the following would cause
the demand curve to shift from Demand A to Demand B in the market for golf balls in
the United States?
a.a decrease in the price of golf balls
b.an increase in the price of green fees
c.an expectation by buyers that their incomes will increase in the very near future
d.a change in consumer tastes away from golf and toward tennis
2) In a market economy, economic activity is guided by
a.the government.
b.central planners.
c.large businesses.
d.prices and self-interest.
3) According to Adam Smith, the success of decentralized market economies is
primarily due to
a.the basic benevolence of society.
b.society’s legal system.
c.individuals’ pursuit of self-interest.
d.partnerships that are forged between business and government.
4) Suppose you are covered under health insurance or belong to a Health Maintenance
Organization (HMO), and you are insured against all or most of the costs of visits to the
doctor. As a result you are likely to make greater use of medical services of all kinds.
This tendency of people with insurance to change their behavior in a way that leads to
more claims against the insurance company is called
a.adverse selection.
b.moral hazard.
c.screening
d.signaling.
5) Table 20-11
Poverty Thresholds in 2011, by Size of Family and Number of Related Children
Under 18 Years [Dollars]
Source: U. S. Bureau of the Census, Current Population Survey.
Refer to Table 20-11. What is the poverty line for a family with one 35-year-old adult
and one child?
a.$11,702
b.$15,446
c.$15,504
d.$18,106
6) The is defined as the percentage change in price divided by the percentage change in
quantity demanded.
a.True
b.False
7) Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. The
deadweight loss caused by the tariff is
a. $6,000.
b. $9,000.
c. $12,000.
d. $15,000.
8) Figure 10-11
Taking into account private value and external benefits, the maximum total surplus that
can be achieved in this market is
a. $5,880.
b. $9,480.
c. $13,230.
d. $15,360.
9) How are the following three questions related: 1) Do all demand curves slope
downward? 2) How do wages affect labor supply? 3) How do interest rates affect
household saving?
a.They all relate to macroeconomics.
b.They all relate to monetary economics.
c.They all relate to the theory of consumer choice.
d.They are not related to each other in any way.
10) In the short run, if the market price is below the firm‘s average total cost of
production, the firm will always shut down.
a.True
b.False
11) Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that
produce safe drinking water. Each week Kunal and Naj work together to decide how
many gallons of water to pump, to bring the water to town, and to sell it at whatever
price the market will bear. Assume Kunal and Naj can pump as much water as they
want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in
the table below.
Refer to Table 17-6. Suppose the town enacts new antitrust laws that prohibit Kunal
and Naj from operating as a monopolist. Once the Nash equilibrium is reached, how
much profit will each producer earn?
a. $400.00
b. $437.50
c. $450.00
d. $800.00
12) A key determinant of the price elasticity of supply is the
a.number of close substitutes for the good in question.
b.extent to which buyers alter their quantities demanded in response to changes in
prices.
c.length of the time period.
d.extent to which buyers alter their quantities demanded in response to changes in their
incomes.
13) Scenario 13-7
Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax
and bookkeeping business were $150,000, and her expenses for the business were
$15,000. When she started her tax and bookkeeping business, Julia gave up her
supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet
sitting. Assume that she incurred no costs for her pet sitting business.
Julia’s economic profits are
a. $160,000.
b. $150,000.
c. $135,000.
d. $125,000.
14) Table 16-1
The following table shows the percentage of output supplied by the top eight firms in
four different industries.
What is the concentration ratio in Industry D?
a. 23%
b.39%
c.58%
d.72%
15) David’s firm experiences diminishing marginal product for all ranges of inputs. The
total cost curve associated with David’s firm
a.gets flatter as output increases.
b.gets steeper as output increases.
c.is constant for all ranges of output.
d.is unrelated to the production function.
16) Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
The government collects tax revenue that is the area
a.L.
b.B+D.
c.C+F.
d.F+G+L.
17) Price elasticity of supply measures how much the quantity supplied responds to
changes in the price.
a.True
b.False
18) Monopolistic competition is characterized by many buyers and sellers, product
differentiation, and free entry.
a.True
b.False