1) Table 13-16
Listed in the table are the long-run total costs for three different firms.
Which firm is experiencing constant returns to scale?
a.Firm A only
b.Firm B only
c.Firm C only
d.Firm A and Firm B only
2) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
At which of the following prices would both Maya and Miguel gain from trade with
each other?
a.4 mixers for 7 toasters
b.8 mixers for 10 toasters
c.12 mixers for 18 toasters
d.Maya and Miguel could not both gain from trade with each other at any price.
3) Diminishing marginal product exists when the production function becomes flatter as
inputs increase.
a.True
b.False
4) Scenario 15-5
An airline knows that there are two types of travelers: business travelers and
vacationers. For a particular flight, there are 100 business travelers who will pay $600
for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150
seats available on the plane. Suppose the cost to the airline of providing the flight is
$20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
How much profit will the airline earn if it engages in price discrimination?
a. -$5,000
b. $40,000
c. $55,000
d. $75,000
5)
The shift from S’ to S in the market for chocolate cake could be caused by a(n)
a.decrease in the number of commercial bakers.
b.improvement in oven technology.
c.decrease in the price of butter.
d.decrease in the price of chocolate cake.
6) If these are the only four sellers in the market, then when the price decreases from $4
to $2, the market quantity supplied
a.increases by 10 units.
b.decreases by 10 units.
c.decreases by 20 units.
d.decreases by 30 units.
7) Brazil’s Production Possibilities Frontier
If the production possibilities frontier shown is for two months of production, then
which of the following combinations of peanuts and cashews could Brazil not produce
in two months?
a.5 peanuts and 88 cashews
b.4 peanuts and 115 cashews
c.3 peanuts and 155 cashews
d.1 peanuts and 200 cashews
8) When a competitive market experiences an increase in demand that increases
production costs for existing firms and potential new entrants, which of the following is
most likely to arise?
a.The long-run market supply curve will be upward sloping.
b.The condition of free entry into the market will be violated.
c.Producer profits will fall in the long run.
d.The long-run market supply curve will be horizontal as new firms enter and drive the
price downward.
9) The provision of public goods gives rise to
a.positive externalities, as does the use of common resources.
b.positive externalities, whereas the use of common resources gives rise to negative
externalities.
c.negative externalities, whereas the use of common resources gives rise to positive
externalities.
d.negative externalities, as does the use of common resources.
10) Figure 16-3
This figure depicts a situation in a monopolistically competitive market.
What is the profit-maximizing price, quantity, and resulting profit?
a.P=$60, Q=20 units, profit=$200
b.P=$80, Q=20 units, profit=$200
c.P=$75, Q=25 units, profit=$100
d.P=$60, Q=40 units, profit=$0
11) The rate
of tradeoff between producing chairs and producing couches depends on how many
chairs and couches are being produced in
a.Panel (a).
b.Panel (b).
c.both Panel (a) and Panel (b).
d.neither Panel (a) nor Panel (b).
12) Of the following market structures, which are considered imperfectly competitive?
I.Perfect competition
II.Monopoly
III.Monopolistic competition
IV.Oligopoly
a.III only
b.II and III
c.III and IV
d.II, III, and IV
13) If we want to gauge the sacrifice made by a taxpayer, we should use the
a.average tax rate.
b.marginal tax rate.
c.lump-sum tax rate.
d.sales tax rate.
14) The best remedy for market failure is often
a.a market-based solution.
b.shutdown of the market.
c.no government intervention.
d.externalizing the externalities.
15) A higher price for batteries would result in a(n)
a.increase in the demand for flashlights.
b.decrease in the demand for flashlights.
c.increase in the demand for batteries.
d.decrease in the demand for batteries.
16) Some firms have an incentive to advertise because they sell a
a.homogeneous product and charge a price equal to marginal cost.
b.homogeneous product and charge a price above marginal cost.
c.differentiated product and charge a price equal to marginal cost.
d.differentiated product and charge a price above marginal cost.
17) Figure 7-15
When the price falls from P2 to P1, producer surplus
a.decreases by an amount equal to C.
b.decreases by an amount equal to A+B.
c.decreases by an amount equal to A+C.
d.increases by an amount equal to A+B.
18) When you calculate your true costs of going to college, what portion of your
room-and-board expenses should be included?
a.Your full room-and-board expenses should always be included.
b.None of your room-and-board expenses should ever be included.
c.You should include only the amount by which your room-and-board expenses exceed
the income you earn while attending college.
d.You should include only the amount by which your room-and-board expenses exceed
the expenses for rent and food if you were not in college.
19) The simple circular-flow diagram is a model that includes only some key players in
the real economy. Which of the following key players are omitted from the simple
circular-flow model?
a.households
b.firms
c.government
d.markets for factors of production
20) Which of the following is an activity
undertaken by the actors in rectangle 2?
a.produce and sell goods and services
b.hire and use factors of production
c.own and sell factors of production
d.exchange goods and services between firms and households
21) Explain the difference between inferior and normal goods. As a developing
economy experiences increases in income (measured by GDP), what would you predict
to happen to demand for inferior goods?
22) Jennifer takes 2 hours to make a loaf of bread and 1 hour to make a dozen cookies.
Janet takes 3 hours to make a loaf of bread and 3/4 hours to make a dozen cookies.
Who, if either, has an absolute advantage baking bread? Who, if either, has an absolute
advantage making cookies?
23) Suppose the number of buyers in a market decreases. As a result, would the demand
curve in this market shift to the right or to the left?
24) Suppose a freeze in Florida significantly reduces the supply of oranges this year. As
a result, would you expect the total revenue from the sale of orange juice to rise or fall?
Explain.
25) Name two occupations that have the two characteristics required for the superstar
phenomenon.
26) Figure 7-31
Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much
is the producer surplus for the producers entering the market after the price increase?
27) Define the marginal tax rate.