1) For economists, conducting experiments is often difficult and sometimes impossible.
a.True
b.False
2) Which of the following events must cause equilibrium quantity to fall?
a.demand increases and supply decreases
b.demand and supply both decrease
c.demand decreases and supply increases
d.demand and supply both increase
3) Scenario 17-5
Assume that a local restaurant sells two items, salads and steaks. The restaurant’s only
two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr.
Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is
willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the
restaurant can provide each of these items at zero marginal cost.
Refer to Scenario 17-5. If the restaurant is able to use tying to price salads and steaks,
what is the profit- maximizing price to charge for the “tied” good?
a.$27
b. $20
c. $19
d. $15
4) Scenario 17-1.
Assume that the countries of Irun and Urun are the only two producers of crude oil.
Further assume that both countries have entered into an agreement to maintain certain
production levels in order to maximize profits. In the world market for oil, the demand
curve is downward sloping.
Refer to Scenario 17-1. The fact that both countries have colluded to earn higher profit
shows their desire to keep their combined level of output
a.above the monopoly level.
b.below the Nash equilibrium level.
c.equal to the Nash equilibrium level.
d.above the Nash equilibrium level.
5) Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
At which price range will the firm continue to operate in the short run but earn negative
profits?
a.any price higher than P4
b.any price higher than P3 but less than P4
c.any price higher than P2 but less than P3
d.any price lower than P1
6) Which of the following is not correct?
a.Pairwise voting never produces transitive preferences.
b.The order of pairwise voting can affect the result.
c.Majority voting by itself does not tell us what outcome a society really wants.
d.No voting system can satisfy all of the following properties: unanimity, transitivity,
independence of irrelevant alternatives, and no dictators.
7) Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that
produce safe drinking water. Each week Abby and Brad work together to decide how
many gallons of water to pump. They bring water to town and sell it at whatever price
the market will bear. To keep things simple, suppose that Abby and Brad can pump as
much water as they want without cost so that the marginal cost is zero. The weekly
town demand schedule and total revenue schedule for water is shown in the table
below:
Refer to Table 17-2. If this market for water were perfectly competitive instead of
monopolistic, what would be the price for water?
a.$0
b.$4
c.$6
d.$12
8) Funsters, Inc., the largest toy company in the country, sells its most popular doll for
$15. It has just learned that its leading competitor, Toysorama, is mass-producing an
excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters
should
a.”fight fire with fire” by decreasing supply of its doll for six weeks and then increasing
the supply.
b.increase the supply of its doll now before the other doll hits the market.
c.increase the price of its doll now.
d.discontinue its doll.
9) The percentage of families with incomes below the poverty line
a.is defined as the 10 percent of U.S.households with the lowest incomes.
b.is known as the poverty rate.
c.is known as the unemployment rate.
d.rises as the general income level rises.
10) Which of the following accurately describes how earnings from capital eventually
get paid to households?
a.Households can own a stock of capital and rent it to firms.
b.Households lend money to firms, who then pay interest to the households.
c.Households that own stock in firms receive dividends.
d.All of the above are correct.