1) Assume, for Mexico, that the domestic price of beets without international trade is
higher than the world price of beets. This suggests that, in the production of beets,
a.Mexico has a comparative advantage over other countries and Mexico will export
beets.
b.Mexico has a comparative advantage over other countries and Mexico will import
beets.
c.other countries have a comparative advantage over Mexico and Mexico will export
beets.
d.other countries have a comparative advantage over Mexico and Mexico will import
beets.
2) Figure 17-1
Refer to Figure 17-1. Suppose this market is served by two firms who each face the
marginal cost curve shown in the diagram. The marginal revenue curve that a
monopolist would face in this market is also shown. If the firms are able to collude
successfully,
a.the total output will be 2 units and the price will be $6.00 per unit.
b.the total output will be 2 units and the price will be $8.00 per unit.
c.the total output will be 4 units and the price will be $6.00 per unit.
d.there will be no deadweight loss.
3) President Truman once said he wanted to find a one-armed economist because when
he asked his economists for advice, they always answered, On the one hand, … On the
other hand, … Truman’s observation that economists’ advice is not always
straightforward
a.is rooted in the principle that people face tradeoffs.
b.indicates that economists recognize that there are opportunity costs associated with
policy decisions.
c.confirms that economists are not suited to be presidential advisers.
d.More than one of the above is correct.
4) Figure 21-22
Refer to Figure 21-22. If the consumer is currently at point A in the figure, a movement
to point B as a result of a decrease in the price of potato chips represents the
a.substitution effect.
b.income effect.
c.budget effect.
d.price effect.
5) Deadweight loss
a.measures monopoly inefficiency.
b.exceeds monopoly profits.
c.equals monopoly profits.
d.equals monopoly revenues minus profits.
6) The two types of taxes that are most important to state and local governments as
sources of revenue are
a.individual income taxes and corporate income taxes.
b.sales taxes and individual income taxes.
c.sales taxes and property taxes.
d.social insurance taxes and property taxes.
7) Which of the following expressions represents a ?
a.percentage change in quantity demanded of bread divided by percentage change in
quantity supplied of bread
b.percentage change in quantity demanded of bread divided by percentage change in
price of butter
c.percentage change in price of bread divided by percentage change in quantity
demanded of bread
d.percentage change in quantity demanded of bread divided by percentage change in
income
8) Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the
entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and
pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza.
Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne.
Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
Refer to Scenario 22-4. Maria recommends using a vote by majority rule and proposes
first choosing between spaghetti and lasagne, then choosing between the winner of the
first vote and ravioli, and finally choosing between the winner of the second vote and
pizza. If everyone votes according to his or her preferences,
a.the winner of the first vote will be spaghetti, the winner of the second vote will be
ravioli, and the winner of the final vote will be ravioli.
b.the winner of the first vote will be spaghetti, the winner of the second vote will be
spaghetti, and the winner of the final vote will be spaghetti.
c.the winner of the first vote will be lasagne, the winner of the second vote will be
ravioli, and the winner of the final vote will be ravioli.
d.the winner of the first vote will be lasagne, the winner of the second vote will be
lasagne, and the winner of the final vote will be ravioli.
9) A supply curve slopes upward because
a.as more is produced, total cost of production falls.
b.an increase in input prices increases supply.
c.the quantity supplied of most goods and services increases over time.
d.an increase in price gives producers an incentive to supply a larger quantity.
10) If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive
market, then the individual farmer‘s elasticity of demand
a.will also be -0.3.
b.depends on how large a crop the farmer produces.
c.will range between -0.3 and -1.0.
d.will be infinite.
11) A profit-maximizing competitive firm will hire workers up to the point at which the
wage equals the marginal product of labor.
a.True
b.False
12) Figure 9-12
Consumer surplus after trade is
a. $6,400.
b. $9,600.
c. $12,800.
d. $14,400.
13) Assume that a monopolist decides to maximize revenue rather than profit. How
does this operating objective change the size of the deadweight loss? If you are a
“benevolent” manager of a monopoly firm and are interested in reducing the
deadweight loss of monopoly, should you maximize profits or maximize revenue?
Explain your answer.
14) What does the term marginal change mean?
15) Table 13-18
What is the total output of four workers?
16) Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Jacque
can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is $20.
Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals?
Explain.
17) What can the government do to solve the problem of excessive use of common
resources?
18) Assume the role of a defender of advertising. Describe the characteristics of
advertising that enhance the effectiveness of markets and increase the social welfare of
society.
19) Describe the relationship between average variable cost and average total cost. How
are the general shapes of the AVC and ATC curves related?
20) Rational people make decisions at the margin by comparing .
21) Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a
market.
Suppose the world price in this market is
$7. If the country allows free trade, will the country import or export this good, and
how many units will be imported/exported?