1) Figure 14-14
Assume that the market starts in equilibrium at point W in panel (b) and that panel (a)
illustrates the cost curves facing individual firms. Suppose that demand increases from
D0 to D1. Which of the following statements is not correct?
a.Point W is a long-run equilibrium point.
b.Points W, Y, and Z are short-run equilibria points.
c.Point Y is a long-run equilibrium point.
d.Point Z is a long-run equilibrium point.
2) Scenario 17-2.
Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the
fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs
$5 million per well. If each company drills one well, each will get half of the oil and
earn a $67 million profit ($72 million in revenue – $5 million in costs). Assume that
having X percent of the total wells means that a company will collect X percent of the
total revenue.
Refer to Scenario 17-2. If BQ were to drill a second well, what would its profit be if
Exxoff did not drill a second well?
a.$43 million
b.$67 million
c.$86 million
d.$129 million
3) In the case of oligopolistic markets, self-interest makes cooperation difficult and it
often leads to an undesirable outcome for the firms that are involved.
a.True
b.False
4) Melissa engages in an activity that influences the well-being of a bystander. In order
for Melissa€s activity to give
rise to an externality, it must be the case that
a.Melissa fails to recognize the impact of her activity on the bystander€s wellbeing.
b.the bystander fails to recognize the impact of Melissa€s activity on his or her well-
being.
c.the wellbeing of the bystander is adversely impacted by Melissa€s activity.
d.Melissa neither pays nor receives any compensation for her activity.
5) At a consumer’s optimal choice, the consumer chooses the combination of goods
such that the ratio of the marginal utilities equals the ratio of the prices.
a.True
b.False
6) Which of the following is a characteristic of a more efficient tax system?
a.The system minimizes deadweight loss.
b.The system raises the same amount of revenue at a lower cost.
c.The system minimizes administrative burdens.
d.All of the above are correct.
7) Scenario 20-5
Suppose the government implemented a negative income tax and used the following
formula to compute a family’s tax liability:
Taxes owed = (1/4 of income) – $10,000
Refer to Scenario 20-5. This negative income tax would guarantee what minimum
level of income to every family?
a.$5,000
b.$10,000
c.$15,000
d.$25,000
8) Figure 8-12
Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by
sellers to
a.decrease by $3.
b.increase by $2.
c.decrease by $1.
d.increase by $6.
9) Total revenue equals
a.marginal revenue – marginal cost.
b.price/quantity.
c.price x quantity.
d.output – input.
10) Figure 7-18
Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125. Then total
surplus is maximized if
a.1 unit of the good is produced and sold.
b.2 units of the good are produced and sold.
c.3 units of the good are produced and sold.
d.4 units of the good are produced and sold.
11) If these are the only four buyers in the market, then the market quantity demanded
at a price of $2 is
a.0 units.
b.3.5 units.
c.12 units.
d.14 units.