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1) Which of the following is not a difference between monopolies and perfectly
competitive markets?
a.Monopolies can earn profits in the long run while perfectly competitive firms break
even.
b.Monopolies charge a price higher than marginal cost while perfectly competitive
firms charge a price equal to marginal cost.
c.Monopolies choose to produce the quantity at which marginal revenue equals
marginal cost while perfectly competitive firms do not.
d.Monopolies face downward sloping demand curves while perfectly competitive firms
face horizontal demand curves.
2) Which of the following is an example of something economists study?
a.Mitch chooses to work overtime to earn extra income for his family.
b.Megan sells her physics textbook from last semester to her roommate for half the
price of a new textbook.
c.The unemployment rate in the United States has fallen by two percentage points in the
last few years.
d.All of the above are correct.
3) When a consumer experiences a price increase for an inferior good, if the income
effect is
a.greater than the substitution effect, the demand curve will be downward sloping.
b.greater than the substitution effect, the demand curve will be upward sloping.
c.less than the substitution effect, the demand curve will be upward sloping.
d.less than the substitution effect but the substitution effect is positive, the demand
curve will be upward sloping.
4)
Which of the following would cause the supply curve to shift from Supply A to Supply
C in the market for beach towels?
a.an increase in the price of beach towels
b.an expectation by firms that the price of beach towels will increase in the very near
future
c.a decrease in the price of cotton
d.a decrease in the number of firms selling beach towels
5) Zora can produce 4 quilts in a week and she can produce 1 corporate website in a
week. Lou can produce 9 quilts in a week and he can produce 2 corporate websites in a
week. Zora has the comparative advantage in quilts and the absolute advantage in
neither good, while Lou has the comparative advantage in corporate websites and the
absolute advantage in both goods.
a.True
b.False
6) A profit-maximizing competitive firm will hire workers up to the point at which the
wage equals the price of the final good.
a.True
b.False
7) Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With
trade and a tariff, total surplus is
a. $96,000.
b. $114,000.
c. $120,000.
d. $126,000.
8) Consider a good to which a per-unit tax applies. The size of the deadweight that
results from the tax is smaller, the
a.less elastic is the demand for the good.
b.less elastic is the supply of the good.
c.smaller is the amount of the tax.
d.All of the above are correct.
9) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
We could use the information in the table to draw a production possibilities frontier for
Maya and a second production possibilities frontier for Miguel. If we were to do this,
measuring mixers along the horizontal axis, then
a.the slope of Maya's production possibilities frontier would be 2 and the slope of
Miguel's production possibilities frontier would be -2.
b.the slope of Maya's production possibilities frontier would be 0.5 and the slope of
Miguel's production possibilities frontier would be -0.5.
c.the slope of Maya's production possibilities frontier would be 1.67 and the slope of
Miguel's production possibilities frontier would be -1.67.
d.the slope of Maya's production possibilities frontier would be 0.6 and the slope of
Miguel's production possibilities frontier would be -0.6.
10) Which of the Ten Principles of Economics do governments run into when they
redistribute income to achieve greater equality?
a.Trade can make everyone better off.
b.The cost of something is what you give up to get it.
c.People face trade-offs.
d.Markets are usually a good way to organize economic activity.
11) €Chuckie's Pizza Palace produces gourmet pizzas that sell for $20 each. Assume
that labor is the only input that varies for the firm. If Chuckie hires 10 workers, he can
produce and sell 600 pizzas per week. If he hires 11 workers, he can produce and sell
650 pizzas per week. Chuckie pays each of his workers $400 per week. Which of the
following is correct?
a.For the 11th worker, the marginal profit is $1,000.
b.For the 11th worker, the marginal revenue product is $1,000.
c.The firm is maximizing its profit.
d.If the firm is employing 11 workers, then its profit would increase if it cut back to 10
workers.
12) Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota.
Because the market for butter is generally considered to be competitive, LML does not
a.choose the quantity of butter to produce.
b.set marginal revenue equal to marginal cost to maximize profit.
c.have any fixed costs of production.
d.choose the price at which it sells its butter.
