1) Frank owns a dog-grooming business. Which of the following costs would be
implicit costs?
(i)dog shampoo
(ii)rent on the storefront
(iii)wages Frank could earn as a substitute elementary-school teacher
(iv)interest that Frank’s money was earning before he spent his savings to set up the
dog
grooming business
a.(i) and (ii) only
b.(iv) only
c.(iii) and (iv) only
d.(i), (ii), (iii), and (iv)
2) Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Which of the following points would be on Juanita’s production possibilities frontier,
based on a 40-hour week?
a.(120 cellular phones programmed, 295 cellular phones tested)
b.(130 cellular phones programmed, 225 cellular phones tested)
c.(140 cellular phones programmed, 155 cellular phones tested)
d.Both (a) and (b) would be on Juanita’s production possibilities frontier.
3) Based on U.S. income data from 2011, the top fifth of all families received
a.about 3.8 percent more than the bottom fifth.
b.about 49 percent more than the bottom fifth.
c.approximately 5 times more income than the bottom fifth.
d.more than 12 times more income than the bottom fifth.
4) A firm operating in a perfectly competitive industry will continue to operate in the
short run but earn losses if the
market price is less than that firm‘s average variable cost.
a.True
b.False
5) Table 18-11
Consider the following daily production data for MadeFromScratch, Inc.
MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per
day.
Refer to Table 18-11. Suppose that there is a technological advance that allows
MadeFromScratch employees to
produce more cupcakes than they could before. Because of this change, the firm’s
a.demand for labor shifts right.
b.demand for labor shifts left.
c.supply of labor shifts right.
d.supply of labor shifts left.
6) The principle of comparative advantage states that, regardless of the price at which
trade takes place, everyone will benefit from trade if they specialize in the production of
the good for which they have a comparative advantage.
a.True
b.False
7) Labor taxes may distort labor markets greatly if
a.labor supply is highly inelastic.
b.many workers choose to work 40 hours per week regardless of their earnings.
c.the number of hours many part-time workers want to work is very sensitive to the
wage rate.
d.”underground” workers do not respond to changes in the wages of legal jobs because
they prefer not to pay taxes.
8) Patent and copyright laws encourage
a.creative activity.
b.lower prices due to decreasing average total costs.
c.competition among firms.
d.All of the above are correct.
9) Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
The farmer has a comparative advantage in the production of
a.pork.
b.tomatoes.
c.both goods.
d.neither good.
10) In a long-run equilibrium, the marginal firm has
a.price equal to average total cost.
b.total revenue equal to total cost.
c.economic profit equal to zero.
d.All of the above are correct.
11) The overuse of a common resource relative to its economically efficient use is
called
a.the free rider problem.
b.the Tragedy of the Commons.
c.a public good.
d.cost-benefit analysis.
12) The Get-There-Safe Bus company incurs an average cost of $45 for each passenger
it carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four
seats remain unsold. The bus company could increase its profit only if it
a.charged any ticket price above $0 for the four remaining seats.
b.charged at least $11.25 for each of the four remaining seats.
c.charged at least $45 for each of the four remaining seats.
d.paid four people to occupy the four remaining seats.
13) A perfectly price-discriminating monopolist is able to
a.maximize profit and produce a socially-optimal level of output.
b.maximize profit, but not produce a socially-optimal level of output.
c.produce a socially-optimal level of output, but not maximize profit.
d.exercise illegal preferences regarding the race and/or gender of its employees.
14) At the profit-maximizing quantity of output for a monopolist, average revenue,
marginal revenue, and price are all equal.
a.True
b.False
15) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The producer surplus without the tax is
a. $3,000.
b. $8,000.
c. $12,000.
d. $24,000.
16) Critics of free trade sometimes argue that allowing imports from foreign countries
causes a reduction in the number of domestic jobs. An economist would argue that
a.foreign competition may cause unemployment in import-competing industries, but the
effect is temporary because other industries, especially exporting industries, will be
expanding.
b.foreign competition may cause unemployment in import-competing industries, but the
increase in consumer surplus due to free trade is more valuable than the lost jobs.
c.the critics are correct, so countries must protect their industries with tariffs or quotas.
d.foreign competition may cause unemployment in import-competing industries, but the
increase in the variety of goods consumers can choose from is more valuable than the
lost jobs.
17) Table 18-7
Refer to Table 18-7. The fact that the production function exhibits diminishing
marginal productivity implies that
a.total production decreases beyond a certain level of output.
b.labor markets are not always competitive.
c.the additions to total output get smaller as more workers are hired.
d.marginal profit is negative.
18) If a country allows trade and, for a certain good, the domestic price without trade is
lower than the world price,
a.the country will be an exporter of the good.
b.the country will be an importer of the good.
c.the country will be neither an exporter nor an importer of the good.
d.Additional information is needed about demand to determine whether the country will
be an exporter of the good, an importer of the good, or neither.
19) Taxes cause deadweight losses because taxes
a.reduce the sum of producer and consumer surpluses by more than the amount of tax
revenue.
b.prevent buyers and sellers from realizing some of the gains from trade.
c.cause marginal buyers and marginal sellers to leave the market, causing the quantity
sold to fall.
d.All of the above are correct.
20) For a vertical demand curve,
a.the slope is undefined, and the is equal to 0.
b.the slope is equal to 0, and the is undefined.
c.both the slope and are undefined.
d.both the slope and are equal to 0.