1) Energy drinks and granola bars are normal goods. When the price of energy drinks
decreases, the income effect causes a
a.shift to a lower indifference curve, and the consumer buys fewer granola bars.
b.shift to a higher indifference curve, and the consumer buys more granola bars.
c.movement along the indifference curve, and the consumer buys fewer granola bars.
d.movement along the indifference curve, and the consumer buys more granola bars.
2) Figure 15-4
The average total cost curve for a monopoly firm is depicted by curve
a.A.
b.B.
c.C.
d.D.
3) Figure 10-10
An increase in output from 120 units to 160 units would
a.move the market from a socially efficient outcome to a socially inefficient outcome.
b.increase the external cost per unit of output.
c.increase total economic well-being.
d.be an action of which a benevolent social planner would approve.
4) Suppose Max values a concert ticket at $45. Charles values the same concert ticket at
$ The pre-tax price of a concert ticket is $30. The government imposes a tax of $5 on
each concert ticket, and the price rises to $35. The deadweight loss from the tax is
a.$15.
b.$10.
c.$5.
d.$0.
5) Most markets in the economy are
a.markets in which sellers, rather than buyers, control the price of the product.
b.markets in which buyers, rather than sellers, control the price of the product.
c.perfectly competitive.
d.highly competitive.
6) In the long run, when marginal cost is above average total cost, the average total cost
curve exhibits
a.economies of scale.
b.diseconomies of scale.
c.constant returns to scale.
d.efficient scale.
7) A family’s ability to buy goods and services depends largely on its
a.permanent income, which is its normal, or average, income.
b.permanent income, which is the lowest annual income the family has received over a
10-year period.
c.transitory income, which is the measure of income used by the government to analyze
the distribution of income and the poverty rate.
d.transitory income, which is its money income plus any in-kind transfers it receives.
8) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Suppose Juba is willing to trade one bowl to Bintu for every two cups that Bintu makes
and sends to Juba. Which of the following combinations of bowls and cups could Bintu
then consume, assuming Bintu specializes in making cups and Juba specializes in
making bowls?
a.1 bowl and 7 cups
b.2 bowls and 4 cups
c.3 bowls and 3 cups
d.4 bowls and 1 cup
9) There are four homes along Belmont Circle, which surrounds a small plot of land.
The land currently has no trees, and the 4 homeowners — Adams, Benitez, Chen, and
Davis — are considering the idea of contributing to a pool of money that will be used to
plant up to 4 trees. The table represents their willingness to pay, that is, the maximum
amount that each homeowner is willing to contribute toward each tree.
Suppose the cost to plant each tree is $340 and the 4 homeowners have agreed to split
all tree-planting costs equally. Which homeowner(s) would be in favor of planting at
least 1 tree?
a.only Benitez
b.only Benitez and Chen
c.only Benitez, Chen, and Davis
d.Adams, Benitez, Chen, and Davis
10) If your local gasoline station raised its price by 20 percent, its sales of gasoline
would decrease substantially because your local gas station
a.has little or no market power.
b.is small relative to the size of the gasoline market.
c.is a competitive firm.
d.All of the above are correct.
11) Figure 16-3
This figure depicts a situation in a monopolistically competitive market.
How much output will the monopolistically competitive firm produce in this situation?
a.20 units
b.25 units
c.40 units
d.80 units
12) A patent gives a single person or firm the exclusive right to sell some good or
service for a specific period of time.
a.True
b.False
13) Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his
will, Seymour donates the land to the state with the understanding that the land will be
used as a state beach that anyone may use without paying any fees. This state beach
a.will tend to be overused because it is nonexcludable.
b.is a common resource when it becomes crowded on sunny summer weekends.
c.is rival in consumption when it becomes crowded on sunny summer weekends.
d.All of the above are correct.
14) Citizens expect the government to provide various goods and services making taxes
a.inefficient.
b.equitable.
c.inevitable.
d.intolerable.
15) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. Total surplus after the tax is measured
by the area
a.I+Y.
b.J+K+L+M.
c.I+Y+B.
d.I+J+K+L+M+Y.
16) If all economists were laid end to end, they would not reach a conclusion. Who
made this whimsical observation?
a.Harry Truman
b.George Bernard Shaw
c.John Maynard Keynes
d.Ronald Reagan
17) Figure 9-27
The following diagram shows the domestic demand and supply curves in a market.
Assume that the world price in this market is $20 per unit.
Suppose the country imposes a $5 per unit tariff. If the country allows trade with a
tariff, how much are consumer surplus, producer surplus, tariff revenue, and total
surplus?
18) The distribution of water to residents of a town and an infrequently used bridge are
examples of __________.
19) The theory of education that states firms use educational attainment as a way of
sorting between high-ability and low-ability workers is called
20) Figure 8-26
Suppose the government places a $3 tax per unit on this good. How much is producer
surplus after the tax is imposed?
21) Table 13-19
What is the shape of this firm’s totalcost curve?
22) What is the term for a measure of happiness or satisfaction a person receives from
his or her circumstances?
23) What does the slope of a budget constraint represent?
24) Goods x and y are available to Jeff. At Jeff’s optimum, the marginal utility per
dollar spent on good x equals__________________.
25) Assume each gallon of gasoline that is produced gives rise to an external cost of
$1.25. On any given day, the production of the 10,000th gallon of gasoline entails a
private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000th
gallon?
26) The demand for rocket scientists is inseparably linked to the supply of.