1) Zelzar has decided to end its policy of not trading with the rest of the world. When it
ends its trade restrictions, it discovers that it is importing incense, exporting steel, and
neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of
the new free-trade policy?
a.producers of incense and consumers of steel
b.consumers of all three goods
c.consumers of incense and producers of rugs
d.producers of steel and consumers of incense
2) Suppose that smoking creates a negative externality. If the government does not
interfere in the cigarette market, then
a.the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity
of cigarettes smoked.
b.the equilibrium quantity of cigarettes smoked will be greater than the socially optimal
quantity of cigarettes smoked.
c.the equilibrium quantity of cigarettes smoked will be less than the socially optimal
quantity of cigarettes smoked.
d.There is not enough information to answer the question.
3) Figure 19-2
Refer to Figure 19-2. This figure depicts labor demand and supply in a nonunionized
labor market. The original equilibrium is at $10. If a labor union subsequently
establishes a union shop and negotiates an hourly wage of
$12.50, then employment is a. 500
b.600
c.700
d.800
4) Scenario 21-2
Lawrence has recently graduated from college with a degree in journalism and
economics. He has decided to pursue a career as a freelance journalist writing for
business newspapers and magazines. Lawrence is typically awake for 112 hours each
week (he sleeps an average of 8 hours each day). For each hour Lawrence spends
writing, he can earn $75. Lawrence is such a good writer that he can get paid for as
many hours of writing as he chooses to work.
Refer to Scenario 21-2. If Lawrence’s wage increases to $90 per hour of writing, which
of the following points would fall on his budget constraint?
a.75 hours of leisure, $2,775 of consumption
b.80 hours of leisure, $2,400 of consumption
c.85 hours of leisure, $2,430 of consumption
d.90 hours of leisure, $1,650 of consumption
5) Along the horizontal axis of the production function we typically measure
a.revenue.
b.the marginal product of the input.
c.the quantity of input.
d.the quantity of output.
6) A 1990 study of the market for collectable baseball cards suggested
a.there was no evidence of price discrimination on the basis of player position (hitter
versus pitcher).
b.markets in which the product price is low are not typically characterized by
consumer-driven race discrimination.
c.cards for white players (both hitters and pitchers) were 10 to 13 percent higher than
those for comparable black players.
d.cards for black players (both hitters and pitchers) were 10 to 13 percent higher than
those for comparable white players.
7) A competitive market will typically experience entry and exit until accounting profits
are zero.
a.True
b.False
8) Table 17-7
The information in the table below shows the total demand for internet radio
subscriptions in a small urban market. Assume that each company that provides these
subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal
cost of providing an additional subscription is always $16.
Refer to Table 17-7. Assume that there are two profit-maximizing internet radio
providers operating in this market. Further assume that they are not able to collude on
the price and quantity of subscriptions to sell. How much profit will each firm earn
when this market reaches a Nash equilibrium?
a. $12,000
b. $16,000
c. $52,000
d. $64,000
9) What do American drivers on congested roads and Soviet shoppers waiting in line to
purchase clothing have in common?
a.Both the American drivers and the Soviet shoppers are consuming products at prices
that do not represent the full costs of the products.
b.Both the American drivers and the Soviet shoppers can purchase as much as they
want at the market price.
c.Both the American drivers and the Soviet shoppers could avoid waiting if the prices
were lowered.
d.American drivers and Soviet shoppers have nothing in common.
10) Scenario 20-1
The government is proposing switching from a progressive tax system in which
families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35%
of any income over $100,000 to a tax system in which every family pays 20% of their
income less $20,000.
Refer to Scenario 20-1. What would the libertarians think of the proposed policy
change?
a.They would favor the current progressive policy over the proposed policy because it
accounts for diminishing marginal utility.
b.They would favor the proposed tax policy over the current progressive policy because
it would result in a negative tax for the poorest families.
c.They would favor the current progressive tax policy over the proposed policy because
it rewards those who work the hardest.
d.They would oppose both tax policies because both redistribute income.
11)
The opportunity cost of this economy moving from point I to point H is
a.120 pillows.
b.120 blankets.
c.120 blankets and 120 pillows.
d.200 blankets.
12) For any given quantity, the price on a demand curve represents the marginal buyer’s
willingness to pay.
a.True
b.False