1) Oligopoly is characterized by a few sellers offering similar products, whereas
monopolistic competition is characterized by many sellers offering differentiated
products.
a.True
b.False
2) Table 17-15
This table shows a game played between two players, A and B. The payoffs in the table
are shown as (Payoff to A, Payoff to B).
Refer to Table 17-15. If player B chooses Right, player A should choose
a.Up and earn a payoff of 1.
b.Middle and earn a payoff of 5.
c.Middle and earn a payoff of 7.
d.Down and earn a payoff of 4.
3) Which of the following statements is not correct?
a.In the long run, there are no fixed costs.
b.Marginal cost is independent of fixed costs.
c.Economies of scale is a short-run concept.
d.Diminishing marginal product explains increasing marginal cost.
4) Figure 16-2. The figure is drawn for a monopolistically competitive firm.
If the average variable cost is $24 at the profitmaximizing quantity, and if the firm’s
fixed costs amount to $60, then the firm’s maximum profit is
a. $-60.
b. $196.
c. $228.
d. $288.
5) A monopolist’s supply curve is vertical.
a.True
b.False
6) Scenario 13-15
Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she
plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800
pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and
seeds are her only cost.
Joan’s totalcost curve is
a.increasing at an increasing rate.
b.increasing at a decreasing rate.
c.increasing at a constant rate.
d.decreasing.
7) A competitive market is a market in which
a.an auctioneer helps set prices and arrange sales.
b.there are only a few sellers.
c.the forces of supply and demand do not apply.
d.no individual buyer or seller has any significant impact on the market price.
8) As a result of a successful attempt by government to cut the economic pie into more
equal slices,
a.the pie gets larger, and there will be more pie overall.
b.the pie gets smaller, and there will be less pie overall.
c.it increases the reward for working hard, resulting in people producing more goods
and services.
d.those who earn more income pay less in taxes.
9) A country club usually only allows members to purchase tickets for its celebrity golf
tournament, but the club is considering allowing non-members to purchase tickets this
year. The demand and supply schedules are as follows:
If both members and non-members are allowed to purchase tickets to this year’s
celebrity golf tournament and the country club sets the ticket price at $20, then there
will be
a.a shortage of 300 tickets.
b.a surplus of 300 tickets.
c.300 tickets sold.
d.600 tickets unsold.
10) Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
Producer surplus before the tax was levied
is represented by area
a.A.
b.A+B+C.
c.D+H+F.
d.F.
11) Because a monopolistically competitive firm has some market power, in the
long-run the price of its product exceeds its
a.average revenue.
b.average total cost.
c.marginal cost.
d.None of the above is correct.
12) A firm with a very good product
a.has a higher cost of signaling (advertising) than does a firm with an inferior product.
b.has more to gain by signaling (advertising) than does a firm with an inferior product.
c.does not need to signal (advertise) because the product’s quality speaks for itself.
d.will signal (advertise) effectively if signaling is free.
13) The decision of which assumptions to make is
a.an easy decision for an economist, but a difficult decision for a physicist or a chemist.
b.not a particularly important decision for an economist.
c.usually regarded as an art in scientific thinking.
d.usually regarded as the easiest part of the scientific method.
14) The less freedom people are given to choose the date of their retirement, the
a.more elastic is the supply of labor.
b.less elastic is the supply of labor.
c.flatter is the labor supply curve.
d.smaller is the decrease in employment that will result from a tax on labor.
15) According to the Coase theorem, private markets will solve externality problems
and allocate resources efficiently as long as
a.the externalities that are present are positive, not negative.
b.government assigns property rights to the harmed party.
c.private parties can bargain with sufficiently low transaction costs.
d.businesses determine an appropriate level of production.
16) If the marginal cost of producing the tenth unit of output is $2.50, and if the average
total cost of producing the tenth unit of output is $3, then at ten units of output, average
total cost is rising.
a.True
b.False
17) According to the median voter theorem, majority rule will
a.always produce an inconclusive outcome.
b.produce the outcome least preferred by the median voter.
c.produce the outcome most preferred by the median voter.
d.produce an outcome that is inconsistent with transitive preferences.
18) Firms with substantial monopoly power are quite common because many goods are
unique.
a.True
b.False
19) Economic profit
a.will never exceed accounting profit.
b.is most often equal to accounting profit.
c.is always at least as large as accounting profit.
d.is a less complete measure of profitability than accounting profit.
20) This economy cannot currently produce 70
washers and 70 dryers because
a.it is not using all of its resources.
b.it is not using the most efficient production process.
c.it does not have the resources and technology to produce that level of output.
d.All of the above are correct.
21) Table 17-14
This table shows a game played between two players, A and B. The payoffs in the table
are shown as (Payoff to A, Payoff to B).
Refer to Table 17-14. If both players choose their best strategies, player A will earn a
payoff of
a.0
b.2
c.4
d.6
22) Refer to Table 20-13. The Human Development Report computes a measure of
inequality by dividing the income of the richest 10% of the population by the income of
the poorest 10%. If the value for this measure of inequality in the US is 15.9 and the
value for India is 8.6, how does Imagination compare to these two nations?
23) Why are Pigovian taxes preferred to regulatory policies as methods to remedy
negative externalities?
24) Figure 15-23
If a regulator requires the firm to charge a marginal cost price, what quantity will the
firm produce?
25) Figure 8-26
What are the equilibrium price and equilibrium quantity in this market?
26) Table 13-19
What is the average variable cost of producing 400 units of output?
27) 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 accounting profit for the hair styling salon?