1) When a tax is justified on the basis that the taxpayers who pay the tax receive
specific government services from payment of the tax, the tax
a.is considered horizontally equitable.
b.burden is minimized.
c.satisfies the benefits principle.
d.is considered vertically equitable.
2) Figure 9-5
The figure illustrates the market for tricycles in a country.
The increase in total surplus resulting from trade is
a.$640, since consumer surplus increases by $1,760 and producer surplus falls by
$1,120.
b.$1,280, since consumer surplus increases by $3,520 and producer surplus falls by
$2,240.
c.$2,240, since consumer surplus increases by $3,240 and producer surplus falls by
$1,000.
d.$2,560, since consumer surplus increases by $7,040 and producer surplus falls by
$4,480.
3) A market is competitive if
(i)firms have the flexibility to price their own product.
(ii)each buyer is small compared to the market.
(iii)each seller is small compared to the market.
a.(i) and (ii) only
b.(i) and (iii) only
c.(ii) and (iii) only
d.(i), (ii), and (iii)
4) Figure 18-6
Refer to Figure 18-6. The graph above illustrates the market for bakers who make
homemade breads and breakfast pastries. If the bakery profession becomes less
attractive to young women and men because of news reports documenting health risks,
what happens in the market for bakers?
a.Demand increases from D1 to D2.
b.Demand decreases from D2 to D1.
c.Supply increases from S1 to S2.
d.Supply decreases from S2 to S1.
5) At a price of $35, there would be a
a.shortage of 400 units.
b.surplus of 200 units.
c.surplus of 400 units.
d.surplus of 600 units.
6) Peru’s Production Possibilities Frontier
Suppose Peru decides to increase its production of rubies by 30. What is the opportunity
cost of this decision?
a.1/8 emerald
b.1/3 emerald
c.1 emerald
d.3 emeralds
7) Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can
build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware
store. He can sell a birdhouse for $20 each.
The implicit cost for one birdhouse is
a. $4.
b.$5.
c.$8.
d.$9.
8) Figure 16-11
If this firm profit-maximizes, what price will it charge?
9) Figure 21-25
The figure pertains to a particular consumer. On the axes, X represents the quantity of
good X and Y represents the quantity of good Y.
Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5,
and the consumer’s income is $210. Then the consumer’s optimal choice is to buy
a.8 units of good X and 26 units of good Y.
b.11 units of good X and 20 units of good Y.
c.14 units of good X and 14 units of good Y.
d.18 units of good X and 6 units of good Y.
10) Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
If the market price is $5.00, the firm will earn
a.positive economic profits in the short run.
b.negative economic profits in the short run but remain in business.
c.negative economic profits and shut down.
d.zero economic profits in the short run.
11) Figure 8-12
Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected
by the government is
a. $7.50.
b. $15.00.
c. $22.50.
d. $45.00.