1) If a market is allowed to move freely to its equilibrium price and quantity, then an
increase in supply will
a.increase consumer surplus.
b.reduce consumer surplus.
c.not affect consumer surplus.
d.Any of the above are possible.
2) Table 17-9
The table shows the demand schedule for a particular product.
Refer to Table 17-9. If the marginal cost of production in this market is $4, what is the
socially efficient quantity of output?
a.3 units
b.4 units
c.5 units
d.6 units
3) Taxes affect market participants by increasing the price paid by the buyer and
decreasing the price received by the seller.
a.True
b.False
4) In the simple circular-flow diagram, the participants in the economy are
a.firms and government.
b.households and firms.
c.households and government.
d.households, firms, and government.
5) Total surplus is represented by the area
a.under the demand curve and above the price.
b.above the supply curve and up to the price.
c.under the supply curve and up to the price.
d.between the demand and supply curves up to the point of equilibrium.
6) A decrease in income will cause a consumer’s budget constraint to
a.shift outward, parallel to its initial position.
b.shift inward, parallel to its initial position.
c.pivot along the horizontal axis.
d.pivot along the vertical axis.
7) If, at the current price, there is a shortage of a good, then
a.sellers are producing more than buyers wish to buy.
b.the market must be in equilibrium.
c.the price is below the equilibrium price.
d.quantity demanded equals quantity supplied.
8) The Black Death in fourteenth-century Europe resulted in
a.a lower marginal product of labor of surviving workers.
b.a higher marginal product of labor of surviving workers.
c.economic hardship for surviving peasants.
d.economic prosperity for surviving landowners.
9) The marginal firm in a competitive market will earn zero economic profit in the long
run.
a.True
b.False
10) According to recent research, the gas tax in the United States is lower than the
optimal level.
a.True
b.False
11) A competitive firm sells its output for $60 per unit. Assume that labor is the only
input that varies for the firm. The marginal product of the 10th worker is 20 units of
output per day; the marginal product of the 11th worker is 16 units of output per day.
The firm pays its workers a wage of $150 per day. For the 11th worker, the value of the
marginal product of labor is
a.$480.
b.$960.
c.$1,200.
d.$2,400.
12) Senator Brown wants to increase taxes on people with high incomes and use the
money to help the poor. Senator Johnson argues that such a tax will discourage
successful people from working and will therefore make society worse off. An
economist would say that
a.we should agree with Senator Brown.
b.we should agree with Senator Johnson.
c.a good decision requires that we recognize both viewpoints.
d.there are no tradeoffs between equity and efficiency.
13) Figure 9-10. The figure applies to Mexico and the good is rifles.
The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents
a.Mexico’s gains from trade.
b.the amount by which Mexico’s gain in consumer surplus exceeds its loss in producer
surplus due to trade.
c.Mexico’s gain in total surplus due to trade.
d.All of the above are correct.
14) If a firm in a monopolistically competitive market successfully uses advertising to
decrease the elasticity of demand for its product, the firm will
a.be able to increase its markup over marginal cost.
b.eventually have to reduce price to remain competitive.
c.increase the welfare of society.
d.reduce its average total cost.
15)
Total revenue when the price is P1 is represented by the area(s)
a.B + D
b.A + B
c.C + D
d.D
16) Job A is hard, dull, and dangerous. Job B is easy, fun, and safe. All else equal, we
would expect Job A to pay
a.higher wages than Job B because the labor supplied for Job B will be greater.
b.lower wages than Job B because the labor supplied for Job B will be greater.
c.higher wages than Job B because the labor supplied for Job A will be greater.
d.lower wages than Job B because the labor supplied for Job A will be greater.
17) For a firm in a perfectly competitive market, the price of the good is always
a.equal to marginal revenue.
b.equal to total revenue.
c.greater than average revenue.
d.equal to the firm‘s efficient scale of output.
18) In the short run, a market consists of 100 identical firms. The market price is $8,
and the total cost to each firm of producing various levels of output is given in the table
below. What will total quantity supplied be in the market?
a.200 units
b.300 units
c.400 units
d.500 units
19) An implication of the median voter theorem is that, in a race between Republicans
and Democrats,
a.if Republicans want to win, they will take a “middleoftheroad” stance on many issues.
b.if Democrats want to win, they will take an extreme stance on many issues.
c.Republicans and Democrats go to extremes to differentiate themselves from one
another.
d.Republicans and Democrats work hard to identify the fringe voters.
20) The loss in total surplus resulting from a tax is called
a.a deficit.
b.economic loss.
c.deadweight loss.
d.inefficiency.