1) The opportunity cost of obtaining more of one good is shown on the production
possibilities frontier as the
a.amount of the other good that must be given up.
b.market price of the additional amount produced.
c.amount of resources that must be devoted to its production.
d.number of dollars that must be spent to produce it.
2) Adam Smith developed the theory of comparative advantage as we know it today.
a.True
b.False
3) Economists have found that asymmetric information is not very prevalent.
a.True
b.False
4) If the demand for a product decreases, then we would expect equilibrium price
a.to increase and equilibrium quantity to decrease.
b.to decrease and equilibrium quantity to increase.
c.and equilibrium quantity to both increase.
d.and equilibrium quantity to both decrease.
5) Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.
The for this good is
a.inelastic and equal to 0.67
b.elastic and equal to 0.67
c.inelastic and equal to 1.50
d.elastic and equal to 1.50
6) Taking cause and effect into account, which
of the following interpretations would be most reasonable regarding the relationship
between coffee and hours without sleep?
a.The less coffee a person drinks per day, the more time he can go without sleep.
b.There is no relationship between how much coffee per day a person drinks and how
long he can go without sleep.
c.The more coffee a person drinks per day, the more time he can go without sleep.
d.The more coffee a person drinks per day, the less time he can go without sleep.
7) The nature of a firm’s cost (fixed or variable) depends on the
a.firm’s revenues.
b.time horizon under consideration.
c.price the firm charges for output.
d.explicit but not implicit costs.
8) A corrective tax
a.can be used to internalize a negative externality.
b.imposed on sellers shifts the supply curve to the left.
c.imposed on buyers shifts the demand curve to the left.
d.All of the above are correct.
9) 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.
Juanita has an absolute advantage in
a.programming cellular phones and a comparative advantage in programming cellular
phones.
b.programming cellular phones and a comparative advantage in testing cellular phones.
c.testing cellular phones and a comparative advantage in programming cellular phones.
d.testing cellular phones and a comparative advantage in testing cellular phones.
10) Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are
a. $25.
b. $124.50.
c. $125.
d. $150.
11) Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a
good quality product or a poor quality product. In the figure, the dollar amounts are
payoffs and they represent annual profits for the two companies.
Refer to Figure 17-2. The more frequently this game is played, the more likely it is that
a.both firms will produce a good quality product.
b.both firms will produce a poor quality product.
c.both firms experience a reduction in profits compared to the Nash equilibrium
outcome.
d.one firm will experience an increase in profits and the other will experience a
decrease in profits.
12) The marginal product of any input is the
a.increase in total cost associated with a one-unit increase in production.
b.change in total output associated with a $1.00 increase in total cost.
c.increase in total cost resulting from the hiring of an additional worker.
d.increase in total output obtained from one additional unit of that input.
13) Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center,
or an arena. Exactly one of the three choices will prevail, and the choice will be made
by way of pairwise voting, with the majority determining the outcome on each vote.
The preferences of the voters are summarized in the table below.
Voter Type
Refer to Table 22-5. If (1) the first vote pits “library” against “recreation center,” and (2)
the second vote pits “arena” against the winner of the first vote, then the outcome is as
follows:
a.”Library” wins the first vote and “library” wins the second vote, so they build a
library.
b.”Library” wins the first vote and “arena” wins the second vote, so they build an arena.
c.”recreation center” wins the first vote and “recreation center” wins the second vote, so
they build a recreation center.
d.”recreation center” wins the first vote and “arena” wins the second vote, so they build
an arena.
14) A seller in a competitive market can
a.sell all he wants at the going price, so he has little reason to charge less.
b.influence the market price by adjusting his output.
c.influence the profits earned by competing firms by adjusting his output.
d.All of the above are correct.
15) Which of the following equations is valid?
a.Consumer surplus = Total surplus – Cost to sellers
b.Producer surplus = Total surplus – Consumer surplus
c.Total surplus = Value to buyers – Amount paid by buyers
d.Total surplus = Amount received by sellers – Cost to sellers
16) Which of the following is an example of an externality?
a.cigarette smoke that permeates an entire restaurant
b.a flu shot that prevents a student from transmitting the virus to her roommate
c.a beautiful flower garden outside of the local post office
d.All of the above are correct.
17) If the producers of canned green beans expect the price of canned green beans to
increase in the future due to an increase in demand, they may put some of their current
production into storage and supply less in the market today.
a.True
b.False
18) One way that governments can improve market outcomes is to ensure that
individuals are able to own and exercise control over their scarce resources.
a.True
b.False