1) If a small country imposes a tariff on an imported good, domestic sellers will gain
producer surplus, the government will gain tariff revenue, and domestic consumers will
gain consumer surplus.
a.True
b.False
2) Monopoly pricing prevents some mutually beneficial trades from taking place. These
unrealized, mutually beneficial trades are
a.not a concern if a market is perfectly competitive.
b.a deadweight loss to society.
c.a function of the reduction in the quantity produced by a monopolist in comparison to
a competitive market.
d.All of the above are correct.
3) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
The tax results in a deadweight loss that amounts to
a. $600.
b. $900.
c. $1,500.
d. $1,800.
4) If sellers respond to very small changes in price by adjusting their quantity supplied
by extremely large amounts, the price elasticity of supply approaches
a.zero, and the supply curve is horizontal.
b.zero, and the supply curve is vertical.
c.infinity, and the supply curve is horizontal.
d.infinity, and the supply curve is vertical.
5) Table 8-1
Suppose the government is considering levying a tax in one or more of the markets
described in the table. Which of the markets will maximize the deadweight loss(es)
from the tax?
a.market B only
b.markets A and C only
c.markets B and D only
d.market D only
6) Table 19-1
Source: US Census Bureau and Mankiw’s calculations
Refer to Table 19-1. Economists suspect that the increase in the earnings gap between
skilled and unskilled workers is likely due to
a.an increase in the demand for skilled labor relative to the demand for unskilled labor.
b.an increase in international trade.
c.improvements in technology.
d.All of the above are correct.
7) Many economists criticize monopolists because they
a.charge a price that equals marginal cost rather than a price that equals average cost.
b.do not innovate.
c.produce a large quantity of waste.
d.produce less than the socially efficient level of output.
8) In some cases, specialization allows larger factories to produce goods at a lower
average cost than smaller factories.
a.True
b.False
9) Figure 16-2. The figure is drawn for a monopolistically competitive firm.
The firm’s profitmaximizing level of output is
a.16 units.
b.24 units.
c.32 units.
d.48 units.
10) Laissez-faire is a French expression which literally means
a.to make do.
b.to get involved.
c.whatever works.
d.allow them to do.
11) The United States has greater income disparity than
a.Japan.
b.India.
c.South Africa.
d.Both a and b are correct.
12) In a competitive market the price is $8. A typical firm in the market has ATC = $6,
AVC = $5, and MC = $8. How much economic profit is the firm earning in the short
run?
a.$0 per unit
b.$1 per unit
c.$2 per unit
d.$3 per unit
13) The value of a business owner’s time is an example of
a.an opportunity cost.
b.a fixed cost.
c.an explicit cost.
d.total revenue.
14) What is Barbuda’s opportunity cost of one towel?
a.3/5 umbrellas
b.2/3 umbrellas
c.3/2 umbrellas
d.5/3 umbrellas
15) A dairy farmer must be able to calculate sunk costs in order to determine how much
revenue the farm receives for the typical gallon of milk.
a.True
b.False
16) An increase in the price of a good will
a.increase supply.
b.decrease supply.
c.increase quantity supplied.
d.decrease quantity supplied.