1) Inflation measures the increase in the quantity of goods and services produced from
each hour of a worker’s time.
a.True
b.False
2) Figure 7-22
At the equilibrium price, consumer surplus is
a. $1,000.
b. $2,000.
c. $3,500.
d. $500.
3) Assume that a consumer faces the following budget constraints.
a.Assuming that income is the same on both occasions, describe the difference in
relative prices between Panel A and Panel B.
b.If income in Panel B is $126, what is the price of good X?
c.If income in Panel A is $84, what is the price of good Y?
d.Assuming that the price of good X is the same on both occasions, describe the
difference in income and price of good Y between Panel A and Panel B.
4) Movements of workers from country to country can cause shifts in the labor supply
curves for both countries.
a.True
b.False
5) When a labor market experiences a surplus of labor, there is downward pressure on
a.the supply of labor.
b.the final product price.
c.wages.
d.the demand for labor.
6) For a competitive market,
a.a seller can always increase her profit by raising the price of her product.
b.if a seller charges more than the going price, buyers will go elsewhere to make their
purchases.
c.a seller often charges less than the going price to increase sales and profit.
d.a single buyer can influence the price of the product but only when purchasing from
several sellers in a short period of time.
7) In many cases selling pollution permits is a better method for reducing pollution than
imposing a corrective tax because
a.it is hard to estimate the market demand curve and thus charge the “right” corrective
tax.
b.selling pollution permits create a net increase in pollution.
c.Corrective taxes distort incentives.
d.Corrective taxes provide greater flexibility to firms that can reduce pollution at a low
cost.
8) A tariff on a product
a.enhances the economic well-being of the domestic economy.
b.increases the domestic quantity supplied.
c.increases the domestic quantity demanded.
d.results in an increase in producer surplus that is greater than the resulting decrease in
consumer surplus.
9) Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping
demand curve. When selling the 100th widget, the firm will always receive
a.less marginal revenue on the 100th widget than it received on the 99th widget.
b.more average revenue on the 100th widget than it received on the 99th widget.
c.more total revenue on the 100 widgets than it received on the first 99 widgets.
d.a lower average cost per unit at 100 units of output than at 99 units of output.
10) Figure 7-23
Refer to Figure 7-23. At equilibrium, producer surplus is represented by the area
a.F.
b.F+G.
c.D+H+F.
d.D+H+F+G+I.
11) Table 22-4
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is
only fair to have the residents vote on what to do with the surplus. The mayor has
narrowed the options down to three possible projects: a playground, a library, or a
swimming pool. The voters fall into three categories and have preferences as illustrated
in the table.
Refer to Table 22-4. If the mayor asks the residents to choose between the playground
and the swimming pool using pairwise voting,
a.the playground wins by 10%.
b.the playground wins by 45%.
c.the swimming pool wins by 10%.
d.the swimming pool wins by 55%.
12) Assume that Brad and Theresa can switch between producing wheat and producing
beef at a constant rate.
At which of the following prices would both Brad and Theresa gain from trade with
each other?
a.12 bushels of wheat for 6 pounds of beef
b.12 bushels of wheat for 8 pounds of beef
c.12 bushels of wheat for 12 pounds of beef
d.Brad and Theresa could not both gain from trade with each other at any price.
13) Figure 9-6
The figure illustrates the market for roses in a country.
When the
tariff is imposed, domestic consumers
a.lose by $200.
b.lose by $450.
c.gain by $200.
d.gain by $450.
14) Information asymmetry refers to
a.the tendency of a person who is imperfectly monitored to engage in dishonest or
otherwise undesirable behavior.
b.the tendency for the mix of unobserved attributes to become undesirable from the
standpoint of an uninformed party.
c.an action taken by an informed party to reveal private information to an uninformed
party.
d.a difference in access to relevant knowledge.
15) Although monopolistically competitive markets offer consumers a wide variety of
differentiated products, there may still be insufficient variety if
a.there are large fixed costs in the market.
b.there are no barriers to entry in the market.
c.the business-stealing externality is present in the market.
d.the government does not impose regulations on the market.
16) When a monopolistically competitive firm is in long-run equilibrium,
a.marginal revenue is equal to marginal cost.
b.average total cost is minimized.
c.marginal revenue is tangent to average total cost.
d.All of the above are correct.
17) Figure 18-2
The figure below shows the production function for a particular firm.
Refer to Figure 18-2. Suppose the firm pays a wage equal to $160 per unit of labor and
sells its output at $10 per unit. What is the value of the marginal product of labor for the
third worker?
a.20 units
b.$200
c.$2,720
d.$3,200
18) The historical rise in living standards of American workers is primarily a result of
a.the influence of labor unions in America.
b.tariff protection imposed by the American government.
c.the enactment of minimum-wage laws in America.
d.the rise in American productivity.
19) A firm has the following cost structure:
If this firm is in a typical monopolistically competitive market, in the long run it will
likely produce
a.8 or fewer units of output.
b.10 units of output.
c.more than 10 units of output.
d.None of the above are necessarily correct because there is not enough information to
tell.
20) Normally, we expect voters’ preferences to exhibit a property called
a.transitivity.
b.transversality.
c.normality.
d.universality.