1)
Using the midpoint method, what is the price elasticity of supply between points C and
D? a. 0.21
b.0.29
c.0.73
d.1.36
2) Gwen has decided to start her own photography studio. To purchase the necessary
equipment, Gwen withdrew $2,000 from her savings account, which was earning 3%
interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%.
What is Gwen’s annual opportunity cost of the financial capital that has been invested in
the business?
a.$60
b.$280
c.$340
d.$660
3) Figure 15-19
If the monopoly firm is not allowed to price discriminate, then the deadweight loss
amounts to
a.$0.
b. $1,562.50.
c. $3,125.
d. $6,250.
4)
Inefficient production is represented by which point(s)?
a.A, B
b.C
c.C, D
d.D
5) Sometimes economists disagree because their scientific judgments differ. Which of
the following instances best reflects this source of disagreement?
a.One economist believes everyone should pay the same percentage of their income in
taxes; another economist believes that wealthier citizens should pay a higher percentage
of their income in taxes.
b.One economist believes that manufacturing firms should face greater regulation to
preserve the environment; another economist believes the government should not
intervene in free markets.
c.One economist believes that equality should be valued over efficiency in policy
decisions; another economist believes that efficiency should be valued over equality in
policy decisions.
d.One economist believes the government should tax a household’s income¾ another
economist believes the government should tax a household’s consumption.
6) Robert and Neal are playing the ultimatum game, starting with $100. Based on the
coin toss, Robert is the player to propose a division of the $100. If Robert acts as
economic theory assumes and Neal acts as experimental evidence shows, Neal will
a.accept Robert’s proposal of keeping $99 and offering Neal $1.
b.accept Robert’s proposal of keeping $60 and offering Neal $40.
c.reject Robert’s proposal of keeping $99 and offering Neal $1.
d.reject Robert’s proposal of keeping $60 and offering Neal $40.
7) A tax on all forms of income will
a.lower the effective rate of interest on savings.
b.have no effect on savings.
c.enhance social welfare because the benefits will outweigh the costs.
d.enhance the incentives to save.
8) According to the Coase theorem, the private market will need government
intervention in order to reach an efficient outcome.
a.True
b.False
9) Monopolistic competition is an inefficient market structure because
a.marginal revenue equals marginal cost.
b.it has a deadweight loss, just as monopoly does.
c.long-run profits are zero due to free entry.
d.All of the above are correct.
10) Figure 21-16
Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer’s
income is $40. Which point represents the consumer’s optimal choice?
a.A
b.B
c.C
d.D
11) Figure 18-10
Refer to Figure 18-10. When the relevant labor demand curve is D1 and the labor
market is in equilibrium,
a.the value of the marginal product of labor to firms is less than W1.
b.the opportunity cost of leisure to workers is greater than W1.
c.the wage is W1.
d.All of the above are correct.
12) All else equal, an increase in supply will cause an increase in consumer surplus.
a.True
b.False