1) Which of the following require firms to pay to pollute?
(i)corrective taxes
(ii)tradable pollution permits
(iii)pollution regulations
a.(i) only
b.both (i) and (ii)
c.(iii) only
d.both (ii) and (iii)
2) In the long run, a firm will exit a competitive industry if
a.total revenue exceeds total cost.
b.the price exceeds average total cost.
c.average total cost exceeds the price.
d.Both a and b are correct.
3) When a profit-maximizing firm is earning profits, those profits can be identified by
a.P x Q.
b.(MC – AVC) x Q.
c.(P – ATC) x Q.
d.(P – AVC) x Q.
4) When can two countries gain from trading two goods?
a.when the first country can only produce the first good and the second country can
only produce the second good
b.when the first country can produce both goods, but can only produce the second good
at great cost, and the second country can produce both goods, but can only produce the
first good at great cost
c.when the first country is better at producing both goods and the second country is
worse at producing both goods
d.Two countries could gain from trading two goods under all of the above conditions.
5) In the long run,
a.inputs that were fixed in the short run remain fixed.
b.inputs that were fixed in the short run become variable.
c.inputs that were variable in the short run become fixed.
d.variable inputs are rarely used.
6) Assume the market for handkerchiefs is competitive. A new invention leads to
labor-augmenting technological progress in the production of handkerchiefs. This
development
a.decreases the demand for workers who make handkerchiefs and decreases their
equilibrium wage.
b.increases the demand for workers who make handkerchiefs and increases their
equilibrium wage.
c.increases the supply of workers who make handkerchiefs and decreases their
equilibrium wage.
d.increases the supply of workers who make handkerchiefs and increases their
equilibrium wage.
7) A firm will shut down in the short run if revenue is not sufficient to cover its variable
costs of production.
a.True
b.False
8) Germany could have avoided the high inflation that it experienced in the 1920s by
a.not directing so many of its resources toward preparation for World War II.
b.not increasing taxes so much on the German middle class.
c.not allowing the quantity of money to increase so rapidly.
d.using government policies to stimulate the economy more so than what was done.
9) A tax placed on a good
a.causes the effective price to sellers to increase.
b.affects the welfare of buyers of the good but not the welfare of sellers.
c.causes the equilibrium quantity of the good to decrease.
d.creates a burden that is usually borne entirely by the sellers of the good.
10) The Three Amigo’s company produced and sold 500 dog beds. The average cost of
production per dog bed was $50. Each dog be sold for a price of $65. The Three
Amigo’s total costs are
a. $7,500.
b. $25,000.
c. $32,500.
d. $67,500.
11) The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The
average cost of production per tree is $50. Each tree sells for a price of $65. The
Carolina Christmas Tree Corporation’s total revenues are
a. $7,500.
b. $25,000.
c. $32,500.
d. $67,500.
12) The income elasticity of demand is defined as the percentage change in quantity
demanded divided by the percentage change in price.
a.True
b.False
13) A firm that produces and sells furniture gets to choose
a.how many workers to hire in both the short run and the long run.
b.the size of its factories in the short run but not in the long run.
c.which short-run average-total-cost curve to use in both the short tun and the long run.
d.All of the above are correct.
14) Emission controls on automobiles are an example of a
a.corrective tax.
b.command-and-control policy to increase social efficiency.
c.policy that reduces pollution by allocating resources through market mechanisms.
d.policy to reduce congestion on urban freeways.