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1) Refer to Figure 7-22.
Assume demand increases, which causes the equilibrium price to increase from $50 to
$70.
The increase in producer surplus to producers already in the market would be
a. $1,600.
b. $600.
c. $800.
d. $1,200.
2) A person who makes decisions that are "merely good enough" is called a(n)
a.optimizer.
b.rational person.
c.satisficer.
d.maxi-minimizer.
3) In the 1990s, inflation in the United States was
a.very close to zero.
b.about 3 percent per year.
c.about 6 percent per year.
d.commonly referred to as public enemy number one.
4) You are trying to design a tax system that will simultaneously achieve both of the
following goals: 1) two people with the same total income would pay taxes of the same
amount, and 2) a high-income person would pay a higher fraction of income in taxes
than a low-income person. Which of the following tax systems could achieve both
goals?
a.a lump-sum tax
b.a regressive tax
c.a progressive tax
d.a proportional tax
5) Which field of economics studies how the number of firms affects the prices in a
market and the efficiency of market outcomes?
a.macroeconomics
b.industrial organization
c.labor economics
d.monetary economics
6) Monopolistically competitive markets differ from perfectly competitive markets due
to
(i)the number of sellers.
(ii)the barriers to entry.
(iii)the product differentiation among the sellers.
a.(i) only
b.(iii) only
c.(i) and (iii) only
d.(ii) and (iii) only
7) The theory of consumer choice illustrates that people face tradeoffs, which is one of
the Ten Principles of Economics.
a.True
b.False
8) Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Suppose Japan decides to increase its production of cars by 45. What is the opportunity
cost of this decision?
a.9 airplanes
b.15 airplanes
c.135 airplanes
d.225 airplanes
9) Table 12-4
What is the marginal tax rate for a person who makes $50,000?
a. 25%
b.28%
c.40%
d.60%
10) Suppose a firm operates in the short run at a price above its average total cost of
production. In the long run the firm should expect
a.new firms to enter the market.
b.the market price to fall.
c.its profits to fall.
d.All of the above are correct.
11) Economists defend brand names as useful to consumers because brand names
a.provide consumers with information about quality when quality cannot easily be
judged in advance of purchase.
b.give firms a financial incentive to maintain the high quality associated with their
brand name.
c.convince consumers to spend more for products nearly identical to generic versions.
d.Both a and b are correct.
12) Which of the following statements is not correct concerning government attempts to
reduce the flow of illegal drugs into the country? Drug interdiction
a.raises prices and total revenue in the drug market.
b.can increase drug-related crime.
c.shifts the demand curve for drugs to the left.
d.shifts the supply curve of drugs to the left.
13) When a country that exported a particular good abandons a free-trade policy and
adopts a no-trade policy,
a.consumer surplus increases and total surplus increases in the market for that good.
b.consumer surplus increases and total surplus decreases in the market for that good.
c.consumer surplus decreases and total surplus increases in the market for that good.
d.consumer surplus decreases and total surplus decreases in the market for that good.
