1) Knowledge that is patented is a
a.public good, whereas knowledge that is not patented is a common resource.
b.private good, whereas knowledge that is not patented is a club good.
c.common resource, whereas knowledge that is not patented is a private good.
d.club good, whereas knowledge that is not patented is a public good.
2) If the demand for textbooks is inelastic, then an increase in the price of textbooks
will
a.increase total revenue of textbook sellers.
b.decrease total revenue of textbook sellers.
c.not change total revenue of textbook sellers.
d.There is not enough information to answer this question.
3) In 2011, state and local government education spending was more than five times
highway spending.
a.True
b.False
4) Part of the administrative burden of a tax is
a.the money people pay to the government in taxes.
b.reducing the size of the market because of the tax.
c.the hassle of filling out tax forms that is imposed on taxpayers who comply with the
tax.
d.the cost of administering programs that use tax revenue.
5) Table 12-3
What is the average tax rate for a person who makes $60,000?
a. 20%
b.30%
c.40%
d.50%
6) Most studies have found that tobacco and marijuana are complements rather than
substitutes.
a.True
b.False
7) Suppose that cookie producers create a positive externality equal to $2 per dozen.
What is the relationship between the equilibrium quantity and the socially optimal
quantity of cookies to be produced?
a.They are equal.
b.The equilibrium quantity is greater than the socially optimal quantity.
c.The equilibrium quantity is less than the socially optimal quantity.
d.There is not enough information to answer the question.
8) The lower the price, the lower the producer surplus, all else equal.
a.True
b.False
9) An industry is a natural monopoly when
(i)the government assists the firm in maintaining the monopoly.
(ii)a single firm owns a key resource.
(iii)a single firm can supply a good or service to an entire market at a smaller cost than
could two or more firms.
a.(ii) only
b.(iii) only
c.(i) and (ii) only
d.(ii) and (iii) only
10) Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
The equilibrium quantity will
a.increase in both the milk and beef markets.
b.increase in the milk market and decrease in the beef market.
c.decrease in the milk market and increase in the beef market.
d.decrease in both the milk and beef markets.
11) The economic theory of labor markets suggests that wages are determined by labor
supply and labor demand.
a.True
b.False
12) Figure 8-13
Suppose the government places a $5 per-unit tax on this good. The per-unit burden of
the tax on sellers is
a.$1.
b.$2.
c.$3.
d.$5.
13) Scenario 15-9
Suppose executives at an art museum know that 100 adults are willing to pay $12 for
admission to the museum on a weekday. Suppose the executives also know that 200
students are willing to pay $8 for admission on a weekday. The cost of operating the
museum on a weekday is $2,000.
How much profit will the museum earn if it charges all customers $12 for admission?
a. -$800
b. $100
c. $800
d. $1,200
14) The Golden Rule is an example of a private solution for
a.subsidizing higher education.
b.internalizing externalities.
c.increasing production.
d.reducing scarcity.
15) The profit motive that stems from private ownership means that elephant
populations are best protected as common resources.
a.True
b.False
16) Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per
unit.
– When the firm produces and sells 150 units of output, its average total cost is $24.50.
– When the firm produces and sells 151 units of output, its average total cost is $24.55.
How does the firm‘s marginal revenue (MR) compare to its marginal cost (MC) when it
increases its output from 150 units to 151 units?
a.MR exceeds MC by $7.95.
b.MR exceeds MC by $11.05.
c.MC exceeds MR by $11.05.
d.MC exceeds MR by $13.50.
17) The invisible hand of the marketplace acts to allocate resources
a.efficiently but does not necessarily ensure that resources are allocated fairly.
b.both fairly and efficiently.
c.fairly but does not necessarily ensure that resources are allocated efficiently.
d.neither fairly nor efficiently.
18) Economists at which administrative department help enforce the nation’s antitrust
laws?
19) Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on
an advertising campaign featuring a world famous actor to promote its new Bomber
Burger.
What two benefits are conveyed by the brand name Burger Bonanza?
20) Why does the commercial value of ivory threaten the elephant, while the
commercial value of beef protects the cow?
21) A rather large city has only one fire station, two fire trucks, and four firefighters. Is
fire protection in this city characterized by rivalry in consumption?
22) What might cause economies of scale?
23) 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.)
What price should Peter charge to maximize his profits?
24) Which two types of goods are excludable?