1) Alice and Betty’s Production Possibilities in one 8hour day.
Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier
d.All of the above are correct.
3) Figure 18-2
The figure below shows the production function for a particular firm.
Refer to Figure 18-2. Suppose the firm pays a wage equal to $320 per unit of labor and
sells its output at $15 per unit. How many units of labor should the firm hire to
maximize profit?
a.2 units
b.3 units
c.4 units
d.5 units
4) Antitrust laws in general are used to
a.prevent oligopolists from acting in ways that make markets less competitive.
b.encourage oligopolists to pursue cooperative-interest at the expense of self-interest.
c.encourage frivolous lawsuits among competitive firms.
d.encourage all firms to cut production levels and cut prices.
5) In some cases the government can make everyone better off by raising taxes to pay
for certain goods that the market fails to provide.
a.True
b.False
6) Which of the following practices would indicate that an employer is trying to
overcome a moral-hazard problem with his employees?
a.The employer pays his workers wages that are unusually high for the industry and
region.
b.The employer pays his employees year-end bonuses depending to how well the
business does and his observations of the employees’ efforts.
c.The employer has voluntarily removed video cameras from the factory floor.
d.Both A and B are correct.
7) The invisible hand works to promote general wellbeing in the economy primarily
through
a.government intervention.
b.the political process.
c.people’s pursuit of selfinterest.
d.altruism.
8) Table 13-17
Consider the following table of long-run total cost for four different firms:
Which firm has economies of scale and then diseconomies of scale as output increases
from 1 to 7?
a.Firm 1
b.Firm 2
c.Firm 3
d.Firm 4
9) While the scientific method is applicable to studying natural sciences, it is not
applicable to studying a nation’s economy.
a.True
b.False
10) Figure 8-17
Suppose the government imposes a $1 tax in each of the four markets represented by
demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market
represented by
a.D1.
b.D2.
c.D3.
d.D4.
11) A profit-maximizing firm in a monopolistically competitive market charges a price
equal to marginal cost.
a.True
b.False
12) When an economy is operating inside its production possibilities frontier, we know
that
a.there are unused resources or inefficiencies in the economy.
b.all of the economy’s resources are fully employed.
c.economic growth would have to occur in order for the economy to move to a point on
the frontier.
d.in order to produce more of one good, the economy would have to give up some of
the other good.
13) An equilibrium in which each firm in an oligopoly maximizes profit, given the
actions of its rivals, is called
a.a general equilibrium.
b.a dominant equilibrium.
c.a Nash equilibrium.
d.an oligopoly equilibrium.