1) Which of the following examples illustrates an oligopoly market?
a.a farmers’ market with many individuals selling sweet corn and tomatoes
b.a city whose electrical service is provided by one electric co-operative
c.a city with two firms who are licensed to sell school uniforms for the local schools
d.a city with many independently-owned hair styling salons
2) In monopolistically competitive markets, economic losses
a.suggest that some existing firms will exit the market.
b.suggest that new firms will enter the market.
c.are minimized through government-imposed barriers to entry.
d.are never possible.
3) Colombia would incur an opportunity cost of 24 pounds of coffee if it increased its
production of soybeans by
a.12 pounds.
b.18 pounds.
c.36 pounds.
d.48 pounds.
4) Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:
If the market price is $10, what is the firm‘s total cost?
a.$15
b.$30
c.$35
d.$50
5) In the United States, the overall level of prices more than doubled during the
a.1950s.
b.1960s.
c.1970s.
d.1980s.
6) Which of the following industries is least likely to exhibit the characteristic of free
entry?
a.bookstores
b.hairstyling salons
c.yoga studios
d.satellite radio
7) The fact that people are willing to pay much more for a diamond, which is not
needed for survival, than they are willing to pay for a cup of water, which is needed for
survival, is an example of irrational behavior.
a.True
b.False
8) Private parties may choose not to solve an externality problem if the transaction costs
are large enough.
a.True
b.False
9) The United States has greater income
a.disparity than most other economically advanced countries, but a more equal income
distribution than some developing countries.
b.disparity than both other economically advanced and all developing countries.
c.equality than most other economically advanced countries but greater income
disparity than some developing countries.
d.equality than both other economically advanced and developing countries.
10) Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and
paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15
to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 5
slices of pizza and 5 paperback novels?
a.Jack only
b.Diane only
c.both Jack and Diane
d.neither Jack nor Diane
11) A budget constraint illustrates bundles that a consumer prefers equally, while an
indifference curve illustrates bundles that are equally affordable to a consumer.
a.True
b.False
12) Figure 16-11
If this firm profit-maximizes, how much cost will it incur?
13) When Mario’s income decreases, he buys more pasta. For Mario, pasta is a normal
good.
a.True
b.False
14) Consider the indifference curve map and budget constraint for two goods, beef and
potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good.
Beef is measured on the vertical axis and is a normal good. When the price of potatoes
increases, the substitution effect causes
a.an increase in the consumption of potatoes, and the income effect causes a decrease in
the consumption of potatoes. The substitution effect is less than the income effect.
b.a decrease in the consumption of potatoes, and the income effect causes an increase in
the consumption of potatoes. The substitution effect is greater than the income effect.
c.an increase in the consumption of potatoes, and the income effect causes a decrease in
the consumption of potatoes. The substitution effect is greater than the income effect.
d.a decrease in the consumption of potatoes, and the income effect causes an increase in
the consumption of potatoes. The substitution effect is less than the income effect.
15)
Which of the following would cause the supply curve to shift from Supply A to Supply
C in the market for sail boats?
a.an increase in the price of sailboats
b.a decrease in the number of firms selling sailboats
c.a decrease in the price of fiberglass and sail cloth
d.a decrease in the price of America’s Cup sailing tshirts