1) The self-interest of the participants in an economy is guided into promoting general
economic self-interest by
a.the invisible hand.
b.market power.
c.government intervention.
d.oikonomos.
2) One characteristic of a monopoly market is that the product is virtually identical to
products produced by competing firms.
a.True
b.False
3)
Table 12-15
In this tax system which of the following is possible?
a.vertical and horizontal equity
b.vertical but not horizontal equity
c.horizontal but not vertical equity
d.neither horizontal nor vertical equity
4) One effect of the government-imposed seat belt law in the U.S. has been
a.a dramatic decrease in the number of pedestrian deaths.
b.safer driving.
c.an increase in the number of accidents.
d.a dramatic decrease in the number of driver deaths.
5) If these are the only four sellers in the market for ice cream, then when the price
decreases from $10 to $8, the market quantity supplied decreases by
a.2.5 gallons.
b.4 gallons.
c.10 gallons.
d.50 gallons.
6) The difference in total surplus between the socially efficient level of production and
the monopolist’s level of production is
a.offset by regulatory revenues.
b.called a deadweight loss.
c.equal to the monopolist’s profit.
d.Both b and c are correct.
7) If the price were $8, a
a.shortage of 20 units would exist, and price would tend to rise.
b.surplus of 25 units would exist, and price would tend to fall.
c.shortage of 25 units would exist, and price would tend to rise.
d.surplus of 45 units would exist, and price would tend to fall.
8) Answer each of the following questions about supply and producer surplus.
a.What is producer surplus, and how is it measured?
b.What is the relationship between the cost to sellers and the supply curve?
c.Other things equal, what happens to producer surplus when the price of a good rises?
Illustrate your answer on a supply curve.
9) When Republicans and Democrats offer similar platforms in an election campaign, a
likely explanation is the
a.Arrow impossibility theorem.
b.Condorcet paradox.
c.median voter theorem.
d.fact that politicians are more interested in the national interest than their own
self-interest.
10) Figure 10-3
What price and quantity combination best represents the optimum price and number of
concerts that should be organized?
a.P1, Q1
b.P2, Q0
c.P2, Q1
d.The optimum quantity is zero concerts as long as residents in surrounding
neighborhoods are adversely affected by noise and congestion.
11) A tariff on a product
a.is a direct quantitative restriction on the amount of a good that can be imported.
b.increases the domestic quantity supplied.
c.increases domestic consumer surplus.
d.All of the above are correct.
12) The cost of producing an additional unit of a good is not the same as the average
cost of the good.
a.True
b.False
13) Scenario 20-1
The government is proposing switching from a progressive tax system in which
families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35%
of any income over $100,000 to a tax system in which every family pays 20% of their
income less $20,000.
Refer to Scenario 20-1. Which group would be most in favor of the switch from the
current progressive tax policy to the new policy?
a.Utilitarians, because they want to maximize the utility to the worst-off person in
society
b.Liberals, because of the maximin criterion
c.Libertarians, because they believe in diminishing marginal utility
d.All three groups would be equally in favor of the switch.
14) The rate
of tradeoff between producing chairs and producing couches is constant in
a.Panel (a).
b.Panel (b).
c.both Panel (a) and Panel (b).
d.neither Panel (a) nor Panel (b).
15) Susan buys automobile insurance from Provident Insurance Company. If Susan
avoids having an accident for three years, Provident will reduce the premiums she has
to pay for her insurance. Nevertheless, she routinely drives while eating or texting and
speeds up to try to make it through yellow lights.
a.This is an adverse selection problem which should be corrected with government
intervention.
b.Susan is a principal and Provident is an agent in this principal-agent problem.
c.This is a moral hazard problem.
d.There is no way for Provident to determine whether Susan is a cautious or risky
driver.
16)
Using the points on the figure, describe the change that would occur if consumer
incomes increase and this is an inferior good.
17) Figure 9-1
The figure illustrates the market for coffee in Guatemala.
In the absence of trade, total surplus in Guatemala is represented by the area
a.A + B + C.
b.A + B + C + D + F.
c.A + B + C + D + F + G.
d.A + B + C + D + F + G + H.
18) Society would be better off if the welfare system were abolished is a normative
statement, not a positive statement.
a.True
b.False
19) Table 14-6
The following table presents cost and revenue information for a firm operating in a
competitive industry.
What is the total revenue from selling 4 units?
a. $120
b. $257
c. $317
d. $480