1) Figure 16-14
Which of the following represents the excess capacity of this firm?
a.BJ
b.GH
c.LM
d.There is no excess capacity.
2) In a monopolistically competitive market,
a.there are only a few sellers.
b.each firm takes the price of its product as given.
c.firms can enter or exit the market without restrictions.
d.each firm produces a product that is essentially identical to the products of other firms
in the market.
3) Which of the following statements is not correct?
a.Novels are likely to be produced in a monopolistically competitive industry.
b.Cable television is likely to be produced in a monopoly industry.
c.Milk is likely to be produced in a monopolistically competitive industry.
d.Cigarettes are likely to be produced in an oligopoly industry.
4) The supply curve of a firm in a competitive market is the average variable cost curve
above the minimum of marginal cost.
a.True
b.False
5) Trade
a.allows specialization, which increases costs.
b.allows specialization, which reduces costs.
c.reduces specialization, which increases costs.
d.reduces specialization, which reduces costs.
6) Studies show that during the March Madness college basketball tournament, the
productivity of the average company in the US falls considerably. This is an example of
a.the Condorcet Paradox.
b.signaling.
c.moral hazard.
d.screening.
7) When a tax is levied on a good,
a.government revenues exceed the loss in total welfare.
b.there is a decrease in the quantity of the good bought and sold in the market.
c.the price that sellers receive exceeds the price that buyers pay.
d.All of the above are correct.
8) Examples of graphs of a single variable include pie charts, bar graphs, and
time-series graphs.
a.True
b.False
9) Which of the following is likely to have the most price inelastic demand?
a.white chocolate chip with macadamia nut cookies
b.Mrs. Field’s chocolate chip cookies
c.milk chocolate chip cookies
d.cookies
10) Scott’s Painting Company paints houses. Since Scott’s business does not have the
name recognition of some of the bigger painting companies, Scott advertises a
“Five-Year Money Back Guarantee” to indicate to buyers that his service is of high
quality. This guarantee is an example of
a.screening.
b.signaling.
c.the seller’s curse.
d.the principal-agent problem.
11) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. If trade negotiators are able to communicate effectively about the
consequences of various trade policies (i.e., enter into an agreement about the policy
they should adopt), then we would expect the countries to agree to which outcome?
a.United States $35 b and Farland $285 b
b.United States $65 b and Farland $75 b
c.United States $140 b and Farland $5 b
d.United States $130 b and Farland $275 b
12) Which of the following events must result in a lower price in the market for
Snickers?
a.Demand for Snickers increases, and supply of Snickers decreases.
b.Demand for Snickers and supply of Snickers both decrease.
c.Demand for Snickers decreases, and supply of Snickers increases.
d.Demand for Snickers and supply of Snickers both increase