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1) A monopolistically competitive firm has the following cost structure:
The firm faces the following demand curve:
If the government forces this firm to produce at its efficient scale, it will
a.produce 3 units and make $9.
b.produce 4 units and make $6.
c.produce 5 units and lose $5.
d.produce 7 units and lose $49.
2)
Once good x is provided, policymakers need to be concerned about how much of it is
used. Good x is an example of the type of good represented by Box
a.A.
b.B.
c.C.
d.D.
3) Just like models constructed in other areas of science, economic models
a.incorporate assumptions that contradict reality.
b.incorporate all details of the real world.
c.complicate reality.
d.avoid the use of diagrams and equations.
4) When a nation first begins to trade with other countries and the nation becomes an
importer of corn,
a.this is an indication that the world price of corn exceeds the nation's domestic price of
corn in the absence of trade.
b.this is an indication that the nation has a comparative advantage in producing corn.
c.the nation's consumers of corn become better off and the nation's producers of corn
become worse off.
d.All of the above are correct.
5)
If the price decreases in the region of the demand curve between points A and B, we can
expect total revenue to
a.increase.
b.stay the same.
c.decrease.
d.first decrease, then increase until total revenue is maximized.
6) When an individual's income goes up, that individual may choose to supply less
labor, resulting in a backwardsloping labor supply curve.
a.True
b.False
7) Total surplus in a market will increase when the government
a.imposes a binding price floor or a binding price ceiling on that market.
b.imposes a tax on that market.
c.Both a and b are correct.
d.Neither a nor b is correct.
8) When there are economies of scale over the relevant range of output for a monopoly,
the
monopoly
a.is a natural monopoly.
b.is a government-granted monopoly.
c.has monopoly power due to the ownership of a patent or copyright.
d.has monopoly power due to the ownership of a key production resource.
9) Which of the following is a characteristic of a competitive market?
a.There are many buyers but few sellers.
b.Firms sell differentiated products.
c.There are many barriers to entry.
d.Buyers and sellers are price takers.
10) The slope of a line that passes through the points (5, 8) and (12, 12) is
a.-7/4.
b.-4/7.
c.4/7.
d.7/4.
11) Whose demand does not obey the law of demand?
a.Bert's
b.Ernie's
c.Grover's
d.Oscar's
12) Table 16-2
The following table shows the total output produced by the top six firms as well as the
total industry output for each industry.
Which industry has the highest concentration ratio?
a.Industry J
b.Industry K
c.Industry L
d.Industry M
13) Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per
unit.
- When the firm produces and sells 150 units of output, its average total cost is $24.50.
- When the firm produces and sells 151 units of output, its average total cost is $24.55.
Let Q represent the quantity of output. Which of the following magnitudes has the same
value at Q = 150 and at Q = 151?
a.average fixed cost
b.average revenue
c.total cost
d.total revenue
14) Taxes drive a wedge into the market by raising the price that sellers receive and
lowering the price that buyers pay.
a.True
b.False
15) If government regulation sets the maximum price for a natural monopoly equal to
its marginal cost, then the natural monopolist will
a.earn economic losses.
b.earn economic profits.
c.earn zero economic profits.
d.produce a lower quantity of output than is socially optimal.
16) Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a
market. Assume that the world price in this market is $1 per unit.
With no trade allowed, what are the equilibrium price and equilibrium quantity in this
market?
17) Mary's Production Possibilities Frontier Kate's Production Possibilities
Frontier
What is Kate's opportunity cost of one muffin?
18) Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire
extinguishers slopes upward. The production of the 500th fire extinguisher entails the
following:
♦ a private cost of $10;
♦ an external cost of $0;
♦ a private value of $9;
♦ an external benefit of $3.
Is the socially-optimal quantity of fire extinguishers less than, equal to, or greater than
500? Explain.
19) In the markets for goods and services in the circular flow diagram, households act
as
20) Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer
named Hannah. When young, Hannah works and earns income. When old, she is retired
and earns no income.
Refer to Figure 21-32. How much income does Hannah earn when she is young?
21) Explain the concept of externality and give an example.
22) Willie's wage increased, and he responded by enjoying more hours of leisure per
day. Is Willie's behavior consistent with an upward-sloping labor-supply curve?
23)
Using the midpoint method, what is the price elasticity of supply between $5 and $15?
24) Suppose the price of gas increases by 20%. Will demand be more elastic if
consumers have 3 weeks or 3 years to adjust to this price change?
25) Figure 8-25
Suppose the government places a $4 tax per unit on this good. How many units of this
good will be bought and sold after the tax is imposed?
