1) Figure 7-24
Refer to Figure 7-24. If 6 units of the good are produced and sold, then
a.efficiency is achieved in this market.
b.the marginal value to buyers equals the marginal cost to sellers.
c.the sum of consumer surplus and producer surplus is maximized.
d.All of the above are correct.
2) A tax system exhibits vertical equity when taxpayers with similar abilities to pay
contribute the same amount.
a.True
b.False
3) Government intervention is always preferable to doing nothing when reducing the
social inefficiencies of monopoly.
a.True
b.False
4) Consumer 1
Consumer 2
If these are the only two consumers in the market, then the market quantity demanded
at a price of $10 is
a.0 units.
b.5 units.
c.8.33 units.
d.25 units.
5) When externalities exist, buyers and sellers
a.neglect the external effects of their actions, but the market equilibrium is still
efficient.
b.do not neglect the external effects of their actions, and the market equilibrium is
efficient.
c.neglect the external effects of their actions, and the market equilibrium is not efficient.
d.do not neglect the external effects of their actions, and the market equilibrium is not
efficient.
6) Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces
and sells envelopes. The time frame is one week.
Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for
$7.50. How many workers should the firm hire?
a.2
b.3
c.4
d.5
7) Figure 21-5
Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good X
is
a. $12.
b.$16.
c.$20.
d.$24.
8) Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs:
If the firm is maximizing profit, how much profit is it earning?
a. $0.50
b. $7.50
c.$10
d.There is insufficient data to determine the firm‘s profit.
9) The basic tools of supply and demand apply to
a.both markets for goods and services and markets for labor services.
b.markets for goods and services but not to markets for labor services.
c.markets for goods and services but not to markets for factors of production.
d.all markets except those in which demand is derived demand.
10) Figure 9-5
The figure illustrates the market for tricycles in a country.
Bearing in mind that this country is ‘small,” what would happen if there were a decrease
in
the price of tricycle helmets within this country, given that tricycles and tricycle helmets
are complements?
a.The quantity of tricycles that this country imports would increase.
b.The quantity of tricycles that this country imports would decrease, but the country
would still be an importer of tricycles.
c.This country would switch from being an importer of tricycles to an exporter of
tricycles.
d.The domestic price without trade would move closer to the world price.
11) If the government allowed a free market for transplant organs such as kidneys to
exist, the
a.shortage of organs would be eliminated, and there would be no surplus of organs.
b.shortage of organs would be eliminated, but a surplus of organs would develop.
c.shortage of organs would persist.
d.overall well-being of society would remain unchanged.
12) If a 15% change in price results in a 20% change in quantity supplied, then the price
elasticity of supply is about
a.1.33, and supply is elastic.
b.1.33, and supply is inelastic.
c.0.75, and supply is elastic.
d.0.75, and supply is inelastic.
13) Traci consumes two goods, lemonade and pretzels. Lemonade costs $1 per glass,
and she consumes it to the point where the marginal utility she receives from her last
glass of lemonade is 3. Pretzels cost $2 per bag. The relationship between the marginal
utility Traci gets from eating a bag of pretzels and the number of bags she eats per
month is as follows:
If Traci is maximizing his utility, how many bags of pretzels does he buy each month?
a.3
b.4
c.5
d.6
14) Table 18-9
The following table shows the production function for a particular business. The
numbers represent the various labor and output combinations the firm may choose for
its output on a daily basis.
Refer to Table 18-9. Suppose this firm charges a price of $5 per unit of output and pays
workers a wage equal to $160 per day. What is the value of the marginal product of
labor for the second worker?
a.$300
b.$650
c.$9,600
d.$20,800
15) If the government were to impose a fine of $4,000 for each unit of air-pollution
released by a fertilizer plant, the policy would be considered
a.a subsidy.
b.a regulation.
c.a corrective tax.
d.an application of the Coase theorem.
16) Consider the labor market for short-order cooks. An increase in immigration will
cause
a.both equilibrium wages and equilibrium employment to increase.
b.both equilibrium wages and equilibrium employment to decrease.
c.equilibrium wages to increase and equilibrium employment to decrease.
d.equilibrium wages to decrease and equilibrium employment to increase.
17) Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Canada’s opportunity cost of one unit of Good X is
a.1/2 unit of Good Y and Mexico’s opportunity cost of one unit of Good X is 1/2 unit of
Good Y.
b.1/2 unit of Good Y and Mexico’s opportunity cost of one unit of Good X is 2 units of
Good Y.
c.2 units of Good Y and Mexico’s opportunity cost of one unit of Good X is 1/2 unit of
Good Y.
d.2 units of Good Y and Mexico’s opportunity cost of one unit of Good X is 2 units of
Good Y.
18) The slope at any point on an indifference curve equals the absolute price at which a
consumer is willing to substitute one good for the other.
a.True
b.False
19) A market supply curve shows
a.the total quantity supplied at all possible prices.
b.the average quantity supplied by producers at all possible prices.
c.how quantity supplied changes when consumer income changes.
d.suppliers’ responses, in terms of the amounts they will supply, to the demands of
buyers.
20) Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that
produce safe drinking water. Each week Rochelle and Alec work together to decide how
many gallons of water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that Rochelle and Alec can
pump as much water as they want without cost so that the marginal cost of water equals
zero. The weekly town demand schedule and total revenue schedule for water is shown
in the table below:
Refer to Table 17-1. If the market for water were perfectly competitive instead of
monopolistic, how many gallons of water would be produced and sold?
a.0 gallons
b.600 gallons
c.900 gallons
d.1,200 gallons
21) What are the three main sources of barriers to entry for monopolies?
22) d.
23) Is the following a positive or normative statement? The Federal Reserve should set
an inflation target and employ policies to meet the target.
24) Table 13-19
What is the average total cost of producing 425 units of output?
25) In what way do common resources give rise to negative externalities?
26) What does the slope of a consumer’s indifference curve represent?
27) Suppose the world price of coffee is $3 per pound and Brazil’s domestic price of
coffee without trade is $2 per pound. If Brazil allows free trade, will Brazil be an
importer or an exporter of coffee?
28) For Antonio, the income effect of an interest-rate increase is stronger than the
substitution effect. In response to a higher interest rate, will Antonio save more or will
he save less?