1)
Boxes A and B of this circular-flow diagram represent
a.firms and households.
b.households and government.
c.the markets for goods and services and the markets for financial assets.
d.the markets for goods and the markets for services.
2) A reduction in a monopolist’s fixed costs would
a.decrease the profit-maximizing price and increase the profit-maximizing quantity
produced.
b.increase the profit-maximizing price and decrease the profit-maximizing quantity
produced.
c.not effect the profit-maximizing price or quantity.
d.possibly increase, decrease or not effect profit-maximizing price and quantity,
depending on the elasticity of demand.
3) To say that a firm is competitive in the labor market is to say that the firm
a.has little or no control over the number of workers it hires.
b.has little or no control over the wage it pays its workers.
c.is aggressive in pursuing the most skilled workers in the labor market.
d.is aggressive in trying to keep its workers’ wages low.
4) Suppose you bought a ticket to a football game for $30 and that you place a $35
value on seeing the game. If you lose the ticket, then what is the maximum price you
should pay for another ticket? Assume that losing the ticket does not alter how you
value it.
a.$5
b.$30
c.$35
d.$65
5) Consumer surplus
a.is the amount a buyer pays for a good minus the amount the buyer is willing to pay for
it.
b.is represented on a supply-demand graph by the area below the price and above the
demand curve.
c.measures the benefit sellers receive from participating in a market.
d.measures the benefit buyers receive from participating in a market.
6) People cannot be prevented from using a good if the good is
a.a private good or a public good.
b.a private good or a common resource.
c.a public good or a common resource.
d.a public good or a club good.
7) Many species of animals are common resources, and many must be protected by law
to keep them from extinction.
Why is the cow not one of these endangered species even though there is such a high
demand for beef?
a.Cows reproduce at a high rate and have adapted well to their environment.
b.Public policies protect cows from predators and diseases.
c.Cows are privately owned, whereas many endangered species are owned by no one.
d.There is a natural ecological balance between the birth rate of cows and human
consumption.
8) When a tax is levied on buyers of a good,
a.government collects too little revenue to justify the tax if the equilibrium quantity of
the good decreases as a result of the tax.
b.there is an increase in the quantity of the good supplied.
c.a wedge is placed between the price buyers pay and the price sellers effectively
receive.
d.the effective price to buyers decreases because the demand curve shifts leftward.
9) Figure 14-10
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive
market, and panel (b) depicts the linear market supply curve for a market with a fixed
number of identical firms.
If there are 700 identical firms in this market, what is the value of Q2? a. 140,000
b. 210,000
c. 280,000
d. 420,000
10) Figure 16-3
This figure depicts a situation in a monopolistically competitive market.
Which of the following will occur in the long run in this industry?
a.Firms will exit this industry.
b.Firms will enter this industry.
c.This firm will continue to earn positive economic profits.
d.This firm will incur losses.
11) A consumer chooses an optimal consumption point where the
a.marginal rate of substitution equals the relative price ratio.
b.slope of the indifference curve equals the slope of the budget constraint.
c.ratio of the marginal utilities equals the ratio of the prices.
d.All of the above are correct.
12) Table 16-7
A monopolistically competitive firm faces the following demand schedule for its
product. In addition, the firm has total fixed costs equal to 20.
If this firm profit maximizes and faces a constant marginal cost of $7, does it have
excess capacity? How do you know?
13) Comparing firms in perfectly competitive markets to monopoly firms, which
charges higher prices?
14) As a means of dealing with pollution, do economists generally prefer corrective
taxes or do they prefer regulations?
15) Briefly describe why some economists prefer a value-added tax (VAT) to an income
tax.
16) Tyler owns a dog and receives a $300 benefit from owning it. Tyler’s neighbor, Liz,
incurs a cost of $450 from the dog’s barking. Suggest a deal between Tyler and Liz that
would result in both individuals becoming better off.
17) What are the three categories of the costs of taxes to taxpayers?
18) The following table shows the supply and demand schedules in a market.
What is the equilibrium price in this market?
19) A consumer’s indifference curves are right angles when, for the consumer, the goods
in question are _________________.
20) As a person’s or family’s income rises, the marginal federal income tax rate.
21) Table 19-2
Source: US Census Bureau and Mankiw’s calculations
Refer to Table 19-2. What conclusion can you draw about the changes in the gaps in
earnings between skilled and unskilled workers between 1975 and 2011?