1) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. When this game reaches a Nash equilibrium, the value of trade
flow benefits will be
a.United States $35 b and Farland $285 b.
b.United States $65 b and Farland $75 b.
c.United States $140 b and Farland $5 b.
d.United States $130 b and Farland $275 b.
2) Assume for Guatemala that the domestic price of coffee without international trade is
higher than the world price of coffee. This suggests that
a.Guatemala has a comparative advantage over other countries in the production of
coffee, and Guatemala will export coffee.
b.Guatemala has a comparative advantage over other countries in the production of
coffee, and Guatemala will import coffee.
c.other countries have a comparative advantage over Guatemala in the production of
coffee, and Guatemala will export coffee.
d.other countries have a comparative advantage over Guatemala in the production of
coffee, and Guatemala will import coffee.
3) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
The amount of the tax on each unit of the good is
a. $6.
b.$8.
c.$10.
d.$12.
4) Efficiency wages will raise the quantity of labor supplied to the market.
a.True
b.False
5) The market demand curve
a.is found by vertically adding the individual demand curves.
b.slopes upward.
c.represents the sum of the prices that all the buyers are willing to pay for a given
quantity of the good.
d.represents the sum of the quantities demanded by all the buyers at each price of the
good.
6) Suppose that demand for a good decreases and, at the same time, supply of the good
decreases. What would happen in the market for the good?
a.Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b.Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c.Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d.Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
7) If a firm is able to charge a higher price for its output, all else equal, the value of the
marginal product of labor will decrease to offset the higher price.
a.True
b.False
8) The principle that trade can make everyone better off applies to interactions and trade
between
a.families.
b.states within the United States.
c.nations.
d.All of the above are correct.
9) All remedies for externalities share the goal of
a.moving the allocation of resources toward the market equilibrium.
b.moving the allocation of resources toward the socially optimal equilibrium.
c.increasing the allocation of resources.
d.decreasing the allocation of resources.
10) The poverty line in the country of Dismal is $20,000. The distribution of income for
Dismal is as follows:
The poverty rate in Dismal is
a.16.7 percent.
b.33.3 percent.
c.50 percent.
d.83.3 percent.
11) Figure 7-9
If the price of the good is $9.50, then producer surplus is
a. $3.00.
b. $6.50.
c. $10.50.
d. $8.50.
12) Points A, B, and D represent feasible outcomes for this
economy.
a.True
b.False
13) The primary purpose of antitrust legislation is to
a.protect small businesses.
b.protect the competitiveness of U.S. markets.
c.protect the prices of American-made products.
d.ensure firms earn only a fair profit.
14) At the consumer’s optimum
a.the budget constraint will have a slope of MUx/Px.
b.it is still possible for the consumer to increase his consumption of both goods.
c.the indifference curve will intersect the budget constraint at the midpoint of the
budget constraint.
d.the slope of the indifference curve is equal to the slope of the budget constraint.
15) Economists study poverty and income inequality to answer which of the following
questions?
a.What are people’s wages?
b.How does labor-force experience affect wages?
c.How much inequality is there in society?
d.How do people adjust their behavior due to taxation?
16) The assertion that the median voter is “king” refers directly to the result established
by the
a.Arrow impossibility theorem.
b.Condorcet paradox.
c.median voter theorem.
d.Borda mechanism.
17) Firm A produces and sells in a market that is characterized by highly differentiated
consumer goods. Firm B produces and sells industrial products. Firm C produces and
sells an agricultural commodity. Which firm is likely to spend the greatest portion of its
total revenue on advertising?
a.firm A
b.firm B
c.firm C
d.There is no reason to believe that any one of the three firms would spend a greater
portion of its total revenue on advertising than the other two firms.
18) Refer to Figure 9-2. With free trade, this country will
a.import 50 calculators.
b.import 100 calculators.
c.export 50 calculators.
d.export 100 calculators.
19) You wear either shorts or sweatpants every day. You notice that sweatpants have
gone on sale, so your demand for
a.sweatpants will increase.
b.sweatpants will decrease.
c.shorts will increase.
d.shorts will decrease.
20) Table 13-4
Charles’s Math Tutoring
What is the marginal product of the second worker?
a.15 students
b.20 students
c.22.5 students
d.25 students