1) If a competitive firm is currently producing a level of output at which marginal
revenue exceeds marginal cost, then
a.a one-unit increase in output will increase the firm‘s profit.
b.a one-unit decrease in output will increase the firm‘s profit.
c.total revenue exceeds total cost.
d.total cost exceeds total revenue.
2) Jane was a partner at a law firm earning $223,000 per year. She left the firm to open
her own law practice. In the first year of business she generated revenues of $347,000
and incurred explicit costs of $163,000. Jane’s economic profit from her first year in her
own practice is
a. -$39,000.
b. $124,000.
c. $163,000.
d. $184,000.
3) If a tariff is placed on watches, the price of both domestic and imported watches will
rise by the amount of the tariff.
a.True
b.False
4) Table 12-11
If Al has taxable income of $165,000, his tax liability is
a. $23,800.
b. $36,000.
c. $45,000.
d. $47,698.
5) Who observed that “in this world nothing is certain but death and taxes”?
a.Mark Twain
b.P.T. Barnum
c.Ben Franklin
d.Richard Nixon
6) Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
Who experiences the largest loss of consumer surplus when the price of an orange
increases from $0.70 to $1.40?
a.Allison
b.Bob
c.Charisse
d.All three individuals experience the same loss of consumer surplus.
7) Grace consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per
bottle. Her income is $500 per month. Grace spends all her income each month. She
purchases 50 bottles of iced tea and 100 servings of spaghetti. What is the price of a
serving of spaghetti?
a.$10
b.$5
c.$4
d.$2
8) Corrective taxes are typically advocated to correct for the effects of
a.positive externalities.
b.negative externalities.
c.patents.
d.All of the above are correct.
9) In corporations, which of the following are agents but not principals?
a.shareholders
b.the board of directors
c.managers
d.workers
10) If something happens to alter the quantity supplied at any given price, then
a.we move along the supply curve.
b.the supply curve shifts.
c.the supply curve becomes steeper.
d.the supply curve becomes flatter.