1) A tit-for-tat strategy, in a repeated game, is one in which a player starts by
cooperating and then does whatever the other player did last time.
a.True
b.False
2) A production function is a relationship between inputs and
a.quantity of output.
b.revenue.
c.costs.
d.profit.
3) Figure 16-5
Which of the graphs depicts a short-run equilibrium that will encourage the exit of
some firms from a monopolistically competitive industry?
a.panel a
b.panel b
c.panel c
d.panel d
4) The idea that “externalities arise because something of value has no price attached to
it” is associated with
a.public goods, but not with common resources.
b.common resources, but not with public goods.
c.both public goods and common resources.
d.neither public goods nor common resources.
5) For a firm, the production function represents the relationship between
a.implicit costs and explicit costs.
b.quantity of inputs and total cost.
c.quantity of inputs and quantity of output.
d.quantity of output and total cost.
6) A life insurance company requires new applicants to have a medical exam prior to
writing the insurance policy. This requirement is an example of
a.signaling.
b.screening.
c.moral hazard.
d.adverse selection.
7) Which of the following can be used to help explain wage differences among different
groups of workers?
a.human capital and compensating differentials
b.human capital but not compensating differentials
c.compensating differentials but not human capital
d.neither human capital nor compensating differentials
8) Assume that Max and Min can switch between producing mittens and producing hats
at a constant rate.
Assume that Max and Min each has 36 labor hours available. If each person divides
his/her time equally between the production of mittens and hats, then total production is
a.18 mittens and 6 hats.
b.18 mittens and 7.5 hats.
c.16 mittens and 12 hats.
d.36 mittens and 15 hats.
9) Which of the following groups or entities has the authority to initiate legal suits to
enforce antitrust laws?
a.the U.S. Justice Department
b.private citizens
c.corporations
d.All of the above are correct.
10) A stairwell in a certain office building is always congested at 12:00 p.m. and 1:00
p.m. The congestion is so bad that people have been complaining to the building’s
owner. Which of the following methods would be the most efficient way of reducing
congestion?
a.Assign each person in the building a time when they are allowed to use the stairwell.
b.Encourage people to voluntarily keep off the stairwell during peak times.
c.Charge everyone who uses the stairwell when it is congested the same fee. People
who value the use of the stairs the most will be the ones who use the stairwell at peak
times.
d.Hold a lottery to determine who wins the right to use the stairwell at peak times.
11) A consumer chooses an optimal consumption point where the
a.marginal rate of substitution exceeds the relative price ratio.
b.slope of the indifference curve equals the slope of the budget constraint.
c.ratio of the prices equals one.
d.All of the above are correct.
12) Firms do not need to be concerned about striking a balance between the price effect
and the output effect when making production decisions in which of the following types
of markets?
a.oligopoly
b.duopoly
c.monopoly
d.competitive markets
13) Table 18-7
Refer to Table 18-7. The fact that the marginal product falls as the number of workers
increases illustrates a property called
a.diminishing marginal product.
b.utility maximization.
c.supply and demand.
d.labor theory.
14) Suppose the only two goods that Lorenzo consumes are wine and cheese. When
wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine
and 4 pounds of cheese – spending his entire income of $100. One day the price of wine
falls to $5 a bottle, and the price of cheese increases to $20 a pound, while his income
does not change. If you illustrate wine on the vertical axis and cheese on the horizontal
axis, then
a.the slope of Lorenzo’s budget has not changed.
b.the slope of Lorenzo’s budget constraint is flatter at the new prices.
c.the slope of Lorenzo’s budget constraint is steeper at the new prices.
d.Lorenzo’s budget constraint has shifted in a parallel fashion to the budget constraint
with the old prices.
15) Suppose a market has the demand function Qd=20-0.5P. Using the midpoint
method, what is the between $30 and $40?
16) Evaluate the following statement in the context of business-stealing and
product-variety externalities: “We have too many student apartments in this town
already. Statistics show that vacancy rates average 15 percent during any given
semester.”
17) It costs a company $35,000 to produce 700 graphing calculators. The company’s
cost will be $35,070 if it produces an additional graphing calculator. The company is
currently producing 700 graphing calculators.
What is the company’s marginal cost?
18) Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual
flavors of organic, homemade ice cream so he has a monopoly over his own ice cream,
though he competes with many other firms selling ice cream in Fairfield for the same
customers. Peter’s demand and cost values for sales per day are given in the table below.
(Everyone who purchases Peter’s ice cream buys a double scoop cone because it’s so
delicious.)
How many ice cream cones should Peter sell in one day to maximize his profits?
19) Figure 7-32
Refer to Figure 7-32. If the government imposed a price ceiling at $20 in this market,
how much are consumer surplus, producer surplus, and total surplus?
20) Does a change in the price in a market result in a shift of the demand curve or in a
movement along the demand curve?
21) Economists measure a market’s domination by a small number of firms with a
statistic called the
22) Suppose demand is given by the equation:
Using the midpoint method, what is the between $2 and $4?
23) It costs a company $30,000 to produce 600 heart rate monitors. The company’s cost
will be $30,070 if it produces an additional heart rate monitor. The company is currently
producing 600 heart rate monitors.
What is the company’s average cost?
24) Considering perfect competition, monopolistic competition, and monopoly, which
of the market structures results in production of the welfare-maximizing level of
output?