1) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. The deadweight loss due to the tax is
measured by the area
a.J+K+L+M.
b.J+K+L+M+N.
c.I+Y.
d.I+Y+B.
2) On holiday weekends thousands of people picnic in state parks. Some picnic areas
become so overcrowded the benefit or value of picnicking diminishes to zero. Suppose
that the Minnesota State Park Service institutes a variable fee structure. On weekdays
when the picnic areas get little use, the fee is zero. On normal weekends, the fee is $8
per person. On holiday weekends, the fee is $14 per person. The fee system corrects a
problem known as the
a.Coase theorem.
b.free rider problem.
c.Tragedy of the Commons.
d.public goods problem.
3)
Using the points on the figure, describe the change that would occur if the price of a
substitute for this good becomes more expensive.
4) Markets do not ensure that the air we breathe is clean because
a.clean air has no value.
b.the government prevents markets from doing so.
c.property rights are not well established for clean air.
d.clean air is impossible to produce .
5) Suppose you like to make, from scratch, pies filled with banana cream and vanilla
pudding. You notice that the price of bananas has increased. As a result, your demand
for vanilla pudding would
a.decrease.
b.increase.
c.be unaffected.
d.There is insufficient information given to answer the question.
6) Scenario 13-4
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000.
He withdraws $50,000 from his personal savings account. The interest rate on the loan
is 8%, and the interest rate on his savings account is 2%.
Abdul’s explicit cost of capital is
a. $8,000.
b. $4,000.
c. $2,000.
d. $1,000.
7) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Maya should specialize in the production of
a.mixers and Miguel should specialize in the production of toasters.
b.toasters and Miguel should specialize in the production of mixers.
c.both goods and Miguel should specialize in the production of neither good.
d.neither good and Miguel should specialize in the production of both goods.
8) Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each
company decides whether to charge a high price or a low price. In the figure, the dollar
amounts are payoffs and they represent annual profits for the two companies.
Refer to Figure 17-5. If the two companies make their pricing decisions independently,
then it is likely that QRS will
a.charge a low price only if ABC charges a low price.
b.charge a low price only if ABC charges a high price.
c.charge a low price regardless of whether ABC charges a high price or a low price.
d.None of the above are correct.
9) Which of the following is not an example of a welfare program?
a.Supplemental Security Income (SSI)
b.Temporary Assistance for Needy Families (TANF)
c.food stamps
d.minimum wage laws
10) In a moral hazard problem, the agent is unable to perfectly monitor the principal’s
behavior so the principal applies less effort than the agent considers desirable.
a.True
b.False
11) With careful planning, we can usually get something that we like without having to
give up something else that we like.
a.True
b.False
12) List and describe the characteristics of a perfectly competitive market.
13) Explain how trade with other countries is beneficial.
14) Suppose the socially-optimal quantity of good x is larger than the
market-equilibrium quantity of good x. Does the production of good x convey a
positive externality or does it convey a negative externality?
15) Table 19-2
Source: US Census Bureau and Mankiw’s calculations
Refer to Table 19-2. What are two possible hypotheses to explain the changes in
relative demand for high-skilled workers and low-skilled workers in recent years?
16) Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?
17) If the U.S. could produce 5 televisions per hour of labor and China could produce 3
televisions per hour of labor, would it necessarily follow that the U.S. should specialize
in television production? Explain your answer using the concepts of comparative and or
absolute advantage.
18) Who would be more likely to study the effects of government spending on the
unemployment rate, a macroeconomist or a microeconomist?