1) Scenario 20-6
Zooey is a single mother of two young children whose husband died in a tragic car
accident. She earns $20,000 per year working as a cashier at a grocery store. The
government uses a negative income tax system in which Taxes owed = (1/4 of income)
– $15,000.
Refer to Scenario 20-6. How much does Zooey owe or receive from the government?
a.She receives $10,000.
b.She owes $10,000.
c.She receives $15,000.
d.She owes $5,000
2) A person’s tax obligation divided by her income is called her
a.marginal social tax rate.
b.marginal private tax rate.
c.marginal tax rate.
d.average tax rate.
3) A restaurant that has market power can
a.minimize costs more efficiently than its competitors.
b.influence the market price for the meals it sells.
c.reduce its marketing budget more than its competitors.
d.ignore profit-maximizing strategies when setting the price for its meals.
4) If all firms have the same costs of production, then in long-run equilibrium,
a.price exceeds average total cost for all firms.
b.price exceeds marginal cost for all firms.
c.some firms may earn positive economic profits.
d.all firms have zero economic profits and just cover their opportunity costs.
5) Government programs that take money from high-income people and give it to
low-income people typically
a.improve economic efficiency by reducing poverty.
b.reduce economic efficiency because they distort incentives.
c.have no effect on economic efficiency because they both reduce poverty and distort
incentives.
d.sometimes improve, sometimes reduce, and sometimes have no effect on economic
efficiency.
6) Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that
produce safe drinking water. Each week Abby and Brad work together to decide how
many gallons of water to pump. They bring water to town and sell it at whatever price
the market will bear. To keep things simple, suppose that Abby and Brad can pump as
much water as they want without cost so that the marginal cost is zero. The weekly
town demand schedule and total revenue schedule for water is shown in the table
below:
Refer to Table 17-2. Suppose the town enacts new antitrust laws that prohibit Abby
and Brad from operating as a monopoly. How much profit will Abby and Brad each
earn once they reach a Nash equilibrium?
a.$36
b.$32
c.$18
d.$16
7) Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 – Q. For this
market demand curve, marginal revenue is MR = 20 – 2Q.
If the marginal cost of producing this good is 0, what quantity would a
profit-maximizing monopolist produce?
a.Q = 0
b.Q = 2
c.Q = 5
d.Q = 10
8) Hosne’s Production Possibilities FrontierMerve’s Production Possibilities
Frontier
Hosne has a comparative advantage in the production of
a.purses and Merve has a comparative advantage in the production of wallets.
b.wallets and Merve has a comparative advantage in the production of purses.
c.both goods and Merve has a comparative advantage in the production of neither good.
d.neither good and Merve has a comparative advantage in the production of both goods.
9) Figure 21-1
The downwardsloping line on the figure represents a consumer’s budget constraint.
Refer to Figure 21-1. If the price of a CD is $12, then the consumer’s income amounts
to
a. $140.
b. $180.
c. $210.
d. $240.
10) Regardless of the cost structure of firms in a competitive market, in the long run
a.firms will experience rising demand for their products.
b.the marginal firm will earn zero economic profit.
c.firms will experience a less competitive market environment.
d.exit and entry is likely to lead to a horizontal long-run supply curve.
11) In a market characterized by monopoly, the market demand curve is
a.upward sloping.
b.horizontal.
c.downward sloping.
d.vertical.
12) Refer to Table 7-5. If the market price of an orange is $0.70, then the market
quantity of oranges demanded per day is
a.5
b.6
c.4
d.7
13) With regard to elasticity, if a firm has a longer time to adjust to a price increase,
supply will be more
14) Scenario 13-22
Suppose that a small hair styling salon had revenues of $150,000 in a given year. The
owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair
coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors,
curling irons, etc.), including maintenance. The owner could have earned $50,000
working at another salon.
What is the economic profit for the hair styling salon?
15) Suppose a shift of the demand curve for strawberry pickers causes the equilibrium
wage of strawberry pickers to increase by $2. The price of strawberries is $3 per pound
before and after the shift. Does the shift increase the marginal product of the last picker
hired, or does it decrease it? What is the amount of the increase or decrease?
16) In the debate between the critics and defenders of advertising, what conclusion have
policymakers come to regarding the effect of advertising on competition – advertising
makes markets more competitive or less competitive?
17)
18) To function as a monopoly, OPEC and other cartels rely on _______ among
members.
19) Figure 15-23
If the firm profit-maximizes, what amount of output will it produce?
20) Who has a greater opportunity cost of leisure – a president of a major corporation or
a babysitter?
21) What is the most efficient tax and why?
22) Table 22-24
The citizens of Mayville are having a severe budget shortage and are faced with
eliminating athletics from the town high school. The town administrator has determined
that the town can afford to maintain one sport. Exactly one of the three choices will
prevail, and the choice will be made by way of pairwise voting, with the majority
determining the outcome on each vote. The preferences of the voters are summarized in
the table below.
Voter Type
Refer to Table 22-24. Suppose the townspeople vote and choose hockey but the town
administrator overrules the vote and chooses football because the town’s football team
has a chance of winning the state championship. Which of the properties of Arrow’s
impossibility theorem is violated?