1) The classic example of adverse selection is the
a.market for used cars.
b.market for new cars.
c.relationship between shareholders and managers.
d.relationship between a coach and an athlete.
2) Figure 10-1
This graph represents the tobacco industry. The socially optimal price and quantity are
a.$1.90 and 38 units, respectively.
b.$1.80 and 35 units, respectively.
c.$1.60 and 42 units, respectively.
d.$1.35 and 58 units, respectively.
3) Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents
the price of cars.
In the country for which the figure
is drawn, total surplus with international trade in cars
a.is represented by the area A + B + C.
b.is represented by the area A + B + D.
c.is smaller than producer surplus without international trade in cars.
d.is larger than total surplus without international trade in cars.
4) Figure 8-13
Suppose the government places a $5 per-unit tax on this good. The amount of
deadweight loss resulting from this tax is
a. $120.
b.$80.
c.$50.
d.$25.
5) In 2011, what percentage of federal government receipts came from corporate
income taxes?
a.7%
b.12%
c.25%
d.43%
6) The law of supply states that, other things equal, when the price of a good rises, the
quantity supplied of the good falls.
a.True
b.False
7) When a production function exhibits a diminishing, but positive, marginal product of
labor,
a.output increases, but at an increasing rate, as more workers are employed.
b.output increases, but at a decreasing rate, as more workers are employed.
c.output declines as more workers are employed.
d.the effects on marginal product are ambiguous.
8) According to economic historians, streetcars in southern cities in the early 1900s
were racially segregated because the owners of the firms believed that segregation
raised the firms’ profits.
a.True
b.False
9) Patent and copyright laws encourage
a.creative activity.
b.research and development.
c.competition among firms.
d.Both a and b are correct.
10) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Japan should specialize in the production of
a.cars and import airplanes.
b.airplanes and import cars.
c.both goods and import neither good.
d.neither good and import both goods.
11) Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output.
At Q = 1,000, the firm‘s marginal cost equals $15 and its average total cost equals $11.
The firm sells its output for $12 per unit.
To maximize its profit, the firm should
a.increase its output.
b.continue to produce 1,000 units.
c.decrease its output but continue to produce.
d.shut down.
12) If the tax on a good is doubled, the deadweight loss of the tax
a.increases by 50 percent.
b.doubles.
c.triples.
d.quadruples.
13) When the government places a tax on a product, the cost of the tax to buyers and
sellers
a.is less than the revenue raised from the tax by the government.
b.is equal to the revenue raised from the tax by the government.
c.exceeds the revenue raised from the tax by the government.
d.Without additional information, such as the elasticity of demand for this product, it is
impossible to compare the cost of a tax to buyers and sellers with tax revenue.
14) Which of the following is not an administrative burden of our tax system?
a.government resources used to enforce tax laws
b.keeping tax records throughout the year
c.paying the taxes owed
d.time spent in April filling out forms
15) Timmy can edit 2 pages in one minute and he can type 80 words in one minute.
Olivia can edit 1 page in one minute and she can type 100 words in one minute. Timmy
has an absolute advantage and a comparative advantage in editing, while Olivia has an
absolute advantage and a comparative advantage in typing.
a.True
b.False
16) When a monopolist is able to sell its product at different prices, it is engaging in
a.distribution pricing.
b.quality-adjusted pricing.
c.arbitrage.
d.price discrimination.
17) A professor spends 10 hours per day giving lectures and writing papers. For the
professor, a graph that shows his various possible mixes of output (lectures given per
day and papers written per day) is called his
a.line of tastes.
b.trade-off curve.
c.production possibilities frontier.
d.consumption possibilities frontier.