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1) Figure 8-22
Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.
Compared to the original tax rate, this lower tax rate would
a.increase tax revenue and increase the deadweight loss from the tax.
b.increase tax revenue and decrease the deadweight loss from the tax.
c.decrease tax revenue and increase the deadweight loss from the tax.
d.decrease tax revenue and decrease the deadweight loss from the tax.
2) Which of the following is not an example of a market?
a.A small town has only one seller of electricity.
b.In the United States, a sick person cannot legally purchase a kidney.
c.In Florida, there are many buyers and sellers of key lime pie.
d.The availability of Internet shopping has expanded the clothing choices for buyers
who do not live near large cities.
3) Assume that Falda and Varick can switch between producing wheat and producing
cloth at a constant rate.
Varick has an absolute advantage in the production of
a.wheat.
b.cloth.
c.both goods.
d.neither good.
4) Firms in monopolistically competitive markets and monopolies can earn long-run
profits due to barriers to entry.
a.True
b.False
5) The product-variety externality arises in monopolistically competitive markets
because
a.firms produce with excess capacity.
b.firms try to differentiate their products.
c.firms would like to produce homogeneous products, but the large number of firms
prohibits it.
d.entry and exit is restricted.
6) Based on the available evidence, which of the following groups benefits most from
mandatory seat belt laws?
a.automakers
b.pedestrians
c.drivers
d.owners of collision-repair shops
7) The Surgeon General announces that eating chocolate increases tooth decay. As a
result, the equilibrium price of chocolate
a.increases, and producer surplus increases.
b.increases, and producer surplus decreases.
c.decreases, and producer surplus increases.
d.decreases, and producer surplus decreases.
8) Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output.
At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11.
The firm sells its output for $12 per unit.
At Q = 1,000, the firm's profits equal
a. -$200.
b. $1,000.
c. $3,000.
d. $4,000.
9) Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
If the market price for the good is $20, who will purchase the good?
a.Ming-la only
b.Carlos and Quilana only
c.Quilana and Wilbur only
d.Quilana, Wilbur, and Ming-la only
10) Figure 8-11
The price labeled as P3on the vertical axis represents the price
a.received by sellers before the tax is imposed.
b.received by sellers after the tax is imposed.
c.paid by buyers before the tax is imposed.
d.paid by buyers after the tax is imposed.
11) Economists who attempt to explain the increasing earnings gap between skilled and
unskilled workers in the United States offer two main hypotheses. Both hypotheses
a.suggest that, over time, the demand for unskilled labor has risen relative to the
demand for skilled labor.
b.suggest that, over time, the demand for skilled labor has risen relative to the demand
for unskilled labor.
c.emphasize the shrinking importance of international trade in recent years.
d.emphasize the growing importance of women and teenagers in the workforce in
recent years.
12) In recent years, the Canadian province of British Columbia has increased its carbon
tax. Which of the following statements is correct?
a.Despite the increase in the carbon tax, emissions of greenhouse gases in British
Columbia have continued to increase at a rapid rate.
b.Along with the increase in the carbon tax, British Columbia has decreased income-tax
rates on individuals and corporations.
c.Few, if any, economists favor carbon taxes such as the one that British Columbia has
imposed.
d.All of the above are correct.
13) Consider the market for capital equipment. Suppose the value of the marginal
product of capital equipment increases. Holding all else constant, the equilibrium
quantity of capital equipment will
a.increase.
b.decrease.
c.not change.
d.It is not possible to determine what will happen to the equilibrium quantity of capital
equipment.
14) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The per-unit burden of the tax on buyers is
a. $20.
b. $200.
c. $300.
d. $500.
15) Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
At which level of production will the firm maximize profit?
a.3 units
b.4 units
c.5 units
d.6 units
