1) Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive
market, and panel (b) depicts the linear market supply curve for a market with a fixed
number of identical firms.
When 100 identical firms participate in this market, at what price will 15,000 units be
supplied to this market?
a. $1.00
b. $1.50
c. $2.00
d. The price cannot be determined from the information provided.
2) Scenario 15-1
Consider a transportation corporation named Reading’s that has just completed the
development of a new light rail system in Minneapolis. Currently, there are plenty of
seats on the train, and it is never crowded. Its capacity far exceeds the needs of the city.
After just a few years of operation, the shareholders of Reading’s experienced
incredibly high rates of return on their investment due to the profitability of the
corporation.
Which of the following statements is most likely to be true?
(i)New entrants to the market know they will have a smaller market share than
Reading’s
currently has.
(ii)Reading’s is most likely experiencing decreasing average total cost.
(iii)Reading’s is a natural monopoly.
a.(i) and (ii) only
b.(ii) and (iii) only
c.(i) and (iii) only
d.(i), (ii), and (iii)
3) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
What happens to consumer surplus when the tax is imposed in this market?
a.Consumer surplus falls by $3,600.
b.Consumer surplus falls by $2,700.
c.Consumer surplus falls by $1,800.
d.Consumer surplus falls by $900.
4)
The opportunity cost of this economy moving from point I to point F is
a.zero.
b.40 blankets.
c.120 pillows.
d.360 blankets.
5) Refer to Figure 9-21. With free trade, the domestic price and domestic quantity
demanded are a. $30 and 1,200.
b. $40 and 800.
c. $30 and 800.
d. $40 and 1,600.
6) The Environmental Protection Agency (EPA) cannot reach a target level of pollution
through the use of pollution permits.
a.True
b.False
7) The amount of deadweight loss that results from a tax of a given size is determined
by
a.whether the tax is levied on buyers or sellers.
b.the number of buyers in the market relative to the number of sellers.
c.the price elasticities of demand and supply.
d.the ratio of the tax per unit to the effective price received by sellers.
8) Producer surplus equals
a.Value to buyers – Amount paid by buyers.
b.Amount received by sellers – Costs of sellers.
c.Value to buyers – Costs of sellers.
d.Value to buyers – Amount paid by buyers + Amount received by sellers – Costs of
sellers.
9) In the markets for goods and services in the circular-flow diagram,
a.households and firms are both buyers.
b.households and firms are both sellers.
c.households are buyers and firms are sellers.
d.households are sellers and firms are buyers.
10) Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
The price that sellers effectively receive
after the tax is imposed is
a.P1.
b.P2.
c.P3.
d.P4.
11) Scenario 13-13
Christine is an artist who creates custom cookie jars. Her annual revenue from selling
the cookie jars is $90,000. The annual explicit costs of the materials used to make the
cookie jars are $54,000.
Christine used $5,000 from her personal savings account to buy pottery tools for her
business. The savings account paid 1% annual interest. Christine could earn $6,000 per
year as a tax preparer. What is the annual accounting profit of her cookie jar business?
a. $36,000
b. $35,950
c. $30,000
d. $29,950
12) Bill and Bev are playing the ultimatum game, starting with $ A coin flip results in
Bev being the one to propose a division of the $ If Bev acts as economic theory
assumes, she should propose that
a.she gets $30 and Bill gets $20.
b.she gets $25 and Bill gets $25.
c.she gets $24 and Bill gets $26.
d.she gets $49 and Bill gets $1.
13) Suppose the price of natural gas, a typical fuel for heating homes, rises in January
in Alaska. Would you expect the for natural gas to more inelastic immediately after the
price increase or at some point in the future?
14) Which country has an absolute advantage in producing compasses?
15) The theory of labor supply is based on the trade-off between.
16) Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a
market.
Suppose the world price in this market is
$7. If the country allows free trade, by how much do consumer surplus, producer
surplus, and total surplus change with trade?
17) Figure 16-14
The difference between the
price charged by the monopolistically competitive firm and the price that would be
charged if this firm operated in a perfectly competitive market is represented by which
line segment?
18) Describe the Laffer curve.
19) Figure 15-25
If a regulator requires this firm to charge a fair return price, which letter represents the
amount of output it will produce?
20) Bill is a laborer. What is the relationship between Bill’s wage and his opportunity
cost of an hour of leisure?