1) Patent and copyright laws
a.encourage creative activity.
b.promote competition among firms.
c.discourage creative activity.
d.Both a and b are correct.
2) Price cannot fall so low that some sellers choose to supply a quantity of zero.
a.True
b.False
3) Consider two individuals – Marquis and Serena – each of whom would like to wear
sweaters and eat tasty food. The gains from trade between Marquis and Serena are most
obvious in which of the following cases?
a.Marquis is very good at knitting sweaters and at cooking tasty food, but Serena’s skills
in both of these activities are very poor.
b.Marquis and Serena both are very good at cooking tasty food, but neither has the
necessary skills to knit a sweater.
c.Marquis’s cooking and knitting skills are very poor, and Serena’s cooking and knitting
skills are also very poor.
d.Marquis’s skills are such that he can produce only sweaters, and Serena’s skills are
such that she can produce only tasty food.
4) Deadweight loss measures the loss in society’s welfare that occurs because a
monopolist can earn profits without the concern of new firms entering its industry.
a.True
b.False
5) Table 16-1
The following table shows the percentage of output supplied by the top eight firms in
four different industries.
Which industry has the highest concentration ratio?
a.Industry A
b.Industry B
c.Industry C
d.Industry D
6) An increase in the wages paid to high-school student who detassle corn will increase
the labor supply of high-school students who weed soybean fields, all else equal.
a.True
b.False
7) Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food
market. Each firm has just come up with an idea for a new “frozen meal for two”which
it would sell for $9. Assume that the marginal cost for each new product is a constant
$2, and the only fixed cost is for advertising. Each company knows that if it spends $12
million on advertising it will get 1.5 million consumers to try its new product. YumYum
has done market research which suggests that its product does not have any ‘staying”
power in the market. Even though it could get 1.5 million consumers to buy the product
once, it is unlikely that they will continue to buy the product in the future. Bertollini’s
market research suggests that its product is very good, and consumers who try the
product will continue to be consumers over the ensuing year. On the basis of its market
research, Bertollini estimates that its initial 1.5 million customers will buy one unit of
the product each month in the coming year, for a total of 18 million units.
If YumYum decides to advertise its product it can expect to
a.incur a loss of $15 million.
b.incur a loss of $1.5 million.
c.earn a profit of $1.5 million.
d.earn a profit of $13.5 million.
8) When oligopolistic firms interacting with one another each choose their best strategy
given the strategies chosen by other firms in the market, we have
a.a cartel.
b.a group of oligopolists behaving as a monopoly.
c.a Nash equilibrium.
d.the perfectly competitive outcome.
9) When two countries trade with one another, it is most likely because
a.the wealthy people in each of the two countries are able to benefit, through trade, by
taking advantage of other people who are poor.
b.some people involved in the trade do not understand that one of the two countries will
become worse-off because of the trade.
c.the opportunity costs of producing various goods are identical for the two countries.
d.the two countries wish to take advantage of the principle of comparative advantage.
10) Which of the following
movements would illustrate the effect in the market for golf balls of an increase in
green fees?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
11) A “Just Say No” drug education policy that successfully educates consumers to
reduce their demand for drugs will lower drug prices and reduce the quantity of drugs
demanded.
a.True
b.False
12) Which of the following would decrease the demand for labor?
(i)a decrease in the output price
(ii)an increase in the output price
(iii)a labor-saving technological advance
(iv)a labor-augmenting technological advance
a.(i) only
b.(i) and (iii) only
c.(ii) only
d.(ii) and (iv) only
13) Arturo’s Production Possibilities FrontierDina’s Production Possibilities
Frontier
a.3/4 taco and Dina’s opportunity cost of one burrito is 1/2 taco.
b.3/4 taco and Dina’s opportunity cost of one burrito is 2 tacos.
c.4/3 tacos and Dina’s opportunity cost of one burrito is 1/2 taco.
d.4/3 tacos and Dina’s opportunity cost of one burrito is 2 tacos.