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1) As a firm moves along its long-run average cost curve, it is adjusting the size of its
factory to the quantity of production.
a.True
b.False
2) The externality associated with technology spillovers
a.cannot be internalized by government.
b.is a negative externality.
c.can be internalized, potentially, through taxation of firms that are responsible for
technology spillovers.
d.can be internalized, potentially, through patent protection.
3) Residents of Hong Kong are able to find restaurants that advertise a dish that
contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased
from a private producer of animal paws, we can likely conclude that
a.international laws making it illegal to sell grizzly bear paws are likely to be very
effective at eliminating these offerings at Hong Kong restaurants.
b.higher penalties for poaching grizzly bears will prevent poachers from killing.
c.there are likely to be very few grizzly bear poachers.
d.allowing individuals to own and raise grizzly bears for meat would likely reduce the
threat of extinction to grizzly bear populations.
4) Economists generally agree that the most important tax in the U.S. economy is the
a.income tax.
b.tax on labor.
c.inheritance or death tax.
d.tax on corporate profits.
5) Economists at the Department of the Treasury
a.design U.S. currency and coins.
b.provide Congress with the annual budget.
c.enforce the U.S. antitrust laws.
d.provide advice on tax policy to the President.
6) Both tariffs and import quotas
a.increase the quantity of imports and raise the domestic price of the good.
b.increase the quantity of imports and lower the domestic price of the good.
c.decrease the quantity of imports and raise the domestic price of the good.
d.decrease the quantity of imports and lower the domestic price of the good.
7) Figure 13-2
The graph illustrates a typical
a.total-cost curve.
b.production function.
c.production possibilities frontier.
d.marginal product of labor curve.
8) Elasticity of demand is closely related to the slope of the demand curve. The more
responsive buyers are to a change in price, the
a.steeper the demand curve will be.
b.flatter the demand curve will be.
c.further to the right the demand curve will sit.
d.closer to the vertical axis the demand curve will sit.
9) Table 16-1
The following table shows the percentage of output supplied by the top eight firms in
four different industries.
Which industry is the least competitive?
a.Industry A
b.Industry B
c.Industry C
d.Industry D
10) The income tax requires that taxpayers pay 10percent on the first $40,000 of
income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What
were her marginal and average tax rates?
a.20 percent and 12 percent, respectively
b.20 percent and 15 percent, respectively
c.10 percent and 12 percent respectively
d.10 percent and 15 percent respectively
11) Suppose a subsidy is offered to consumers of education as a means of internalizing
the externalities associated with education. If the subsidy accurately reflects the
external benefits of education, then the new demand curve for education coincides with
which other curve?
12) Figure 15-23
If a regulator requires the firm to charge a marginal cost price, what is the amount of
profit or loss earned by the firm?
13) Is the following a positive or normative statement? The United States government
should mandate that every citizen purchases health insurance.
14) There has been much discussion of deregulating electricity and natural gas delivery
companies in the United States. Discuss the likely effect of deregulation on prices in
these two industries.
15) Consider a small family wheat farm. List some examples of explicit costs of
farming.
16) What is significant about a point on a graph at which an indifference curve is
tangent to a budget constraint?
17) A group of firms working together and acting as a supplier of a product is called a
cartel. A group of employees working together and acting as a single supplier of labor is
called a
