1) As a result of a fire, a small business owner loses some of her computers and other
equipment. If the property of diminishing returns applies to all factors of production,
she should expect to see
a.an increase in the marginal productivity of her remaining capital and an increase in
the marginal productivity of her labor.
b.an increase in the marginal productivity of her remaining capital and a decrease in the
marginal productivity of her labor.
c.a decrease in the marginal productivity of her remaining capital and an increase in the
marginal productivity of her labor.
d.a decrease in the marginal productivity of her remaining capital and a decrease in the
marginal productivity of her labor.
2) Using the midpoint method, which of the three supply curves has the most inelastic
price elasticity of supply?
a.Supply curve X
b.Supply curve Y
c.Supply curve Z
d.There is no difference in the elasticities of the three supply curves.
3) Suppose a market has the demand function Qd=20-0.5P. Between which of the
following price ranges is demand most inelastic?
a.$0 to $10
b. $10 to $20
c. $20 to $30
d. $30 to $40
4) Which of the following could be the for two goods that are complements?
a. -1.3
b.0
c.0.2
d.1.4
5) Which of the following would not shift the supply curve for mp3 players?
a.an increase in the price of mp3 players
b.a decrease in the number of sellers of mp3 players
c.an increase in the price of plastic, an input into the production of mp3 players
d.an improvement in the technology used to produce mp3 players
6) Table 15-1
What is the marginal revenue for the monopolist for the sixth unit sold?
a.$3
b.$5
c.$11
d.$17
7) To improve living standards, policymakers should
a.impose restrictions on foreign competition.
b.formulate policies designed to increase productivity.
c.impose tougher immigration policies.
d.provide tax breaks for the middle class.
8) Suppose that Firms A and B each produce high-resolution computer monitors, but
Firm A can do so at a lower cost. Cassie and David each want to purchase a
high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm
B produces a monitor that David buys, then the market outcome illustrates which of the
following principles?
(i)Free markets allocate the supply of goods to the buyers who value them most highly,
as measured by their willingness to pay.
(ii)Free markets allocate the demand for goods to the sellers who can produce them at
the least cost.
a.(i) only
b.(ii) only
c.both (i) and (ii)
d.neither (i) nor (ii)
9) Trade raises the economic well-being of a nation in the sense that
a.the gains of the winners exceed the losses of the losers.
b.everyone in an economy gains from trade.
c.since countries can choose what products to trade, they will pick those products that
are most beneficial to society.
d.the nation joins the international community when it begins to engage in trade.
10) Figure 7-21
When the price is P1, area A represents
a.total benefit.
b.producer surplus.
c.consumer surplus.
d.None of the above is correct.
11) Discuss how brand names may enhance the efficiency of markets in a less
developed country.
12) Can economic profit ever exceed accounting profit?
13) Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40, how much tax revenue will be collected from this tax?
14) Figure 8-25
Suppose the government places a $4 tax per unit on this good. How much is producer
surplus after the tax is imposed?
15) Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car
accident. She earns $20,000 per year working as a cashier at a grocery store. The
government uses a negative income tax system in which Taxes owed = (1/4 of income)
– $15,000.
Refer to Scenario 20-7. Zooey’s friend Alfredo owes $0 in taxes. How much does he
earn?