1) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Japan has an absolute advantage in the production of
a.cars and a comparative advantage in the production of cars.
b.cars and a comparative advantage in the production of airplanes.
c.neither good and a comparative advantage in the production of cars.
d.neither good and a comparative advantage in the production of airplanes.
2) Three business people meet for lunch at an Indian restaurant. They decide that each
person will order an item off the menu, and they will share all dishes. They will split the
cost of the final bill evenly among each of the people at the table. When the food is
delivered to the table, each person faces incentives similar to the
a.consumption of a common resource good.
b.production of a public good.
c.consumption of a club good.
d.production of a private good.
3) “Equality of opportunities is more important than equality of incomes.” This
statement would be most likely attributed to which political philosophy?
a.utilitarianism
b.liberalism
c.libertarianism
d.welfarism
4) Figure 7-21
When the price is P1, area C represents
a.total benefit.
b.producer surplus.
c.consumer surplus.
d.None of the above is correct.
5) A small island off the coast of Cape Cod contains two restaurants and two retail
stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown
in the economy, tourists are less willing to pay for the boat ride to visit the island. The
owners of the restaurants and stores on the island – Restaurants 1 and 2, and Stores A
and B – think that if tourists could ride the ferry for free, they would be happy to visit
the island, eat and shop. The business owners are considering contributing to a pool of
money that will be used to pay for roundtrip ferry service each day. The table represents
their willingness to pay, that is, the maximum amount that each business owner is
willing to contribute, per day, to pay for each ferry trip.
Suppose the cost to run the ferry for each roundtrip is $750. Then total surplus for the 4
business owners is
a.$750 if there is 1 ferry trip.
b.$40 if there are 2 ferry trips.
c.$150 if there are 3 ferry trips.
d.-$400 if there are 4 ferry trips.
6) Absolute advantage is found by comparing different producers’
a.opportunity costs.
b.payments to land, labor, and capital.
c.input requirements per unit of output.
d.locational and logistical circumstances.
7) Figure 7-23
Refer to Figure 7-23. The efficient price-quantity combination is
a.P1 and Q1.
b.P2 and Q2.
c.P3 and Q1.
d.P4 and 0.
8) Figure 15-3
Which panel could represent the demand curve facing a local cable television provider
if that firm in a monopolist?
a.Panel A
b.Panel B
c.Panel C
d.Panel D
9) Table 15-10
The monopolist faces the following demand curve:
If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is
the profit-maximizing level of output?
a.7 units
b.16 units
c.23 units
d.31 units
10) A monopolistically competitive industry is characterized by
a.many firms selling products that are similar but not identical.
b.many firms selling identical products.
c.a few firms selling products that are similar but not identical.
d.a few firms selling highly different products.
11) A tit-for-tat strategy starts out
a.conciliatory and then encourages an optimal social outcome among the other players.
b.unfriendly and then encourages friendly strategies among players.
c.friendly, then penalizes unfriendly players, and forgives them if warranted.
d.aggressive, then compensates losing players, and eventually forgives unfriendly
players.
12) In the study done by Lee Benham on advertising for eyeglasses,
a.advertising increased the average price.
b.advertising decreased the average price.
c.there was no difference in price, but quality was better in the states that didn’t allow
advertising.
d.advertising appeared to have no effect whatsoever in the states that permitted
advertising.
13) Libertarians believe that
a.it is more important to evaluate the process by which economic outcomes are
produced than the outcomes themselves.
b.government should attempt to redistribute income from the rich to the poor when the
gap between rich and poor is more than 20%.
c.equality of income is more important than equality of opportunity.
d.it is more important to evaluate economic outcomes first and then the process that
produced them.