1) An example of a firm with market power is a
a.delicatessen in New York.
b.cable TV provider in Tulsa.
c.clothing store in Chicago.
d.family farm in Kansas.
2) Figure 9-9
Total surplus in this market before trade is
a.A + B.
b.A + B + C.
c.A + B + C + D.
d.B + C + D.
3) An increase in the number of college scholarships issued by private foundations
would
a.increase the supply of education.
b.decrease the supply of education.
c.increase the demand for education.
d.decrease the demand for education.
4) Profit is defined as total revenue
a.plus total cost.
b.times total cost.
c.minus total cost.
d.divided by total cost.
5) Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their
Sunday afternoon. They all agree that they should do one of three things: go to a movie,
play golf, or go to a baseball game. They also agree that they will have two pairwise
votes to determine how to spend their afternoon, with the majority determining the
outcome on each vote. The first, second, and third choices for each person are as
indicated in the table below.
Refer to Table 22-2. If Allen, Brian, and Cody use a Borda count, rather than pairwise
majority voting, to decide how to spend their afternoon, then they will
a.watch a movie.
b.play golf.
c.watch a baseball game.
d.None of the above is correct; a Borda count fails to produce a winner in this instance.
6) The owners of capital resources are compensated according to the
a.purchase price of the capital stock.
b.marginal product of capital.
c.value of the marginal product of capital.
d.absolute level of production of final goods and services.
7) Suppose the market consists of Adam and Barb only. If the price rises by $2, the
quantity demanded in the market falls by
a.4 units.
b.6 units.
c.8 units.
d.10 units.
8) In a monopolistically competitive market,
a.the entry of new firms creates externalities.
b.the absence of restrictions on entry by new firms ensures that there will be no
deadweight loss.
c.there are always too many firms in the market relative to the socially-optimal number
of firms.
d.firms cannot earn positive economic profits in the short run.
9) The supply of oil is likely to be
a.inelastic in both the short run and long run.
b.elastic in both the short run and long run.
c.elastic in the short run and inelastic in the long run.
d.inelastic in the short run and elastic in the long run.
10) Figure 9-13
With trade, domestic production and domestic consumption, respectively, are
a. 600 and 600.
b.600 and 300.
c.300 and 900.
d.600 and 900.
11) Refer to Figure 9-20. In the absence of trade, total surplus in the Vietnamese rice
market amounts to
a. 9,250.
b. 10,000.
c. 12,000.
d. 13,000.
12) When a certain competitive firm produces and sells 100 units of output, marginal
revenue is $80. When the same firm produces and sells 200 units of output, what is
average revenue?
a.$40
b.$80
c.$160
d. This cannot be determined from the given information.
13) Joe and Fred are economists. Joe thinks that the wealthiest 10% of the US
population should be taxed a rate higher than the rest of society because they can better
afford it. Fred thinks that everyone should be taxed at the same rate because that is the
fairest scenario and the wealthy should not be penalized for their success. In this
example, Joe and Fred
a.disagree about the validity of a positive theory.
b.have different normative views about tax policy.
c.must both be incorrect because tax policy is never that simple.
d.None of the above is correct.
14) Authors are allowed to be monopolists in the sale of their books in order to
a.promote a society in which people think for themselves and learn from whichever
books they please.
b.correct for the negative externalities that the Internet and television impose.
c.satisfy literary advocacy groups that exercise their lobbying power.
d.None of the above is correct.
15) In the experiment conducted by economists Muriel Niederle and Lise Vesterlund
a.men were better at adding than women.
b.women chose the tournament payoff scheme more than men.
c.men thought they won the four-player tournament part of the experiment more often
than women thought they won the four-player tournament.
d.the researchers demonstrated that women face significant wage discrimination in
stock brokerages.
16) The government may not be able to improve the inefficiencies of a monopolistically
competitive market.
a.True
b.False
17) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. The area measured by L+M+Y
represents
a.consumer surplus after the tax.
b.consumer surplus before the tax.
c.producer surplus after the tax.
d.producer surplus before the tax.
18) Scenario 17-4.
Consider two cigarette companies, PM Inc. and Brown Inc. If neither company
advertises, the two companies split the market and earn $50 million each. If they both
advertise, they again split the market, but profits are lower by $10 million since each
company must bear the cost of advertising. Yet if one company advertises while the
other does not, the one that advertises attracts customers from the other. In this case, the
company that advertises earns $60 million while the company that does not advertise
earns only $30 million.
Refer to Scenario 17-4. The likely outcome of this game is that PM Inc. earns
a.$30 million and Brown Inc. earns $60 million.
b.$40 million and Brown Inc. earns $40 million.
c.$50 million and Brown Inc. earns $50 million.
d.$60 million and Brown Inc. earns $30 million.
19) When a production possibilities frontier is bowed outward, the opportunity cost of
one good in terms of the other is constant.
a.True
b.False