1) In the circular-flow diagram, firms produce
a.goods and services using factors of production.
b.output using inputs.
c.factors of production using goods and services.
d.Both (a) and (b) are correct.
2) Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a
monopolistically competitive firm.
If the government forces this firm to produce at its efficient output level, how much
output will this firm produce?
a.0 units of output
b.3 units of output
c.4 units of output
d.5 units of output
3) Suppose Rebecca needs a dog sitter so that she can travel to her sister’s wedding.
Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for
Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of
$185. Suppose the government imposes a tax of $30 on dog sitting. What is the
deadweight loss of the tax?
a.the maximum value that Rebecca would pay for dog sitting
b.the $30 tax
c.the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for
Rebecca
d.the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the
one who would pay the tax
4) With respect to monopolistic competition,
a.both the business-stealing externality and the product-variety externality are positive
externalities.
b.the business-stealing externality is a positive externality, while the product-variety
externality is a negative externality.
c.the business-stealing externality is a negative externality, while the product-variety
externality is a positive externality.
d.both the business-stealing externality and the product-variety externality are negative
externalities.
5) Figure 7-11
If the supply curve is S and the demand curve shifts from D to D’, what is the increase
in producer surplus to existing producers?
a. $625
b. $2,500
c. $3,125
d. $5,625
6) Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates
identified by their last names and are going to vote on which one is hired.
Refer to Table 22-14. What would the results of a Borda Count vote be?
a.Adams and Brown tie.
b.Adams wins.
c.Brown wins.
d.Campbell wins.
7) This table describes the police protection demands for three equal sized groups of
people in Safetyville. The second, third, and fourth columns show the number of
person-hours of police protection per day that a group will demand for a given price
(the first column).
If the marginal cost of police protection is constant at $72 per person-hour, what is the
efficient level of police protection to provide?
a.9 person-hours
b.18 person-hours
c.39 person-hours
d.66 person-hours
8) Wally owns a dog whose barking annoys Wally’s neighbor, Corrine. Suppose that the
benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500
from the barking. Assuming Wally has the legal right to keep the dog, a possible private
solution to this problem is that
a.Wally pays Corrine $600 for her inconvenience.
b.Corrine pays Wally $400 to give the dog to his parents who live on an isolated farm.
c.Corrine pays Wally $550 to give the dog to his parents who live on an isolated farm.
d.The current situation is efficient.
9) Arrow’s impossibility theorem is “disturbing” in the sense that it proves that
a.no voting system is perfect.
b.only a dictator can produce a desirable social outcome.
c.the preferences of the wealthy should be given more weight than the preferences of
the poor.
d.the centuries-old Condorcet paradox was not a paradox after all.
10) According to evidence provided by the U.S. government, the median black
a.man earns more than the median black woman.
b.woman earns less than the median white woman
c.man earns less than the median white man.
d.All of the above are correct.
11) Table 17-25
There are just two producers of a certain product. Each is considering offering
promotional discounts.
Refer to Table 17-25. At the Nash equilibrium, how much profit will Firm A earn?
a. $120,000
b. $90,000
c. $80,000
d. $70,000
12) Arturo’s Production Possibilities FrontierDina’s Production Possibilities
Frontier