1) In the long run the primary effect of increasing the quantity of money is higher
prices.
a.True
b.False
2) Studies indicate that the for beer is about 0.9. A government policy aimed at reducing
beer consumption changed the price of a case of beer from $10 to $20. According to the
midpoint method, the government policy should have reduced beer consumption by
a.30%.
b.40%.
c.60%.
d.74%.
3) Figure 10-3
The difference between the social cost curve and the supply curve reflects the
a.profit margin of each concert.
b.cost of spillover effects from the concert (e.g., noise and traffic).
c.value of concerts to society as a whole.
d.amount by which the city should subsidize the concert organizers.
4) Figure 8-3
The vertical distance between points A and C represents a tax in the market.
The loss in producer surplus caused by the tax is measured by the area
a.ABC.
b.P1P3ABC.
c.P1P2BC.
d.P1C0.
5) Alexis is a lawyer. She bills her clients $100 an hour for her services. She can also
mow her lawn in 30 minutes. She can hire someone to mow her lawn who takes an
hour. Of the following prices, which is the highest Alexis would pay someone to mow
her lawn?
a.$99
b.$49
c.$29
d.Alexis would always mow her own lawn because she can do it faster.
6) Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that
produce safe drinking water. Each week Rochelle and Alec work together to decide how
many gallons of water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that Rochelle and Alec can
pump as much water as they want without cost so that the marginal cost of water equals
zero. The weekly town demand schedule and total revenue schedule for water is shown
in the table below:
Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in
the market for water, how much profit will each of them earn?
a. $8,750
b. $9,000
c. $12,000
d. $18,000
7) Suppose that the labor market for life guards is initially in equilibrium. Whistles are
an important safety tool that life guards use as a part of their jobs. A fire destroys the
largest factory that produces whistles. What happens to the equilibrium wage and
quantity of life guards?
a.Both the equilibrium wage and quantity increase.
b.Both the equilibrium wage and quantity decrease.
c.The equilibrium wage increases, and the equilibrium quantity decreases.
d.The equilibrium wage decreases, and the equilibrium quantity increases.
8) A decrease in the price of a good will
a.increase supply.
b.decrease supply.
c.increase quantity supplied.
d.decrease quantity supplied.
9) Which of the following is not one of the ways that antitrust laws promote
competition?
a.Antitrust laws allow the government to prevent mergers.
b.Antitrust laws allow the government to break up companies into smaller ones.
c.Antitrust laws prevent companies from coordinating their activities in ways that make
markets less competitive.
d.Antitrust laws allow the government to shut down any firm the government believes
has monopoly power.
10) A monopolistically competitive firm faces the following demand curve for its
product:
The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The
firm will maximize profit with the production of
a.4 units of output.
b.10 units of output.
c.16 units of output.
d.22 units of output.
11) Table 12-13
The table below provides information on the 4 households that make up a small
economy and how much they would pay in taxes under 3 types of taxes.
In this economy Tax B exhibits
a.horizontal and vertical equity.
b.horizontal equity but not vertical equity.
c.vertical equity but not horizontal equity.
d.neither horizontal nor vertical equity.
12) Using the midpoint method, if the price falls from $100 to $50, the absolute value
of the is
a. 0.31
b. 0.46
c. 1.25
d. 2.17
13) In economics, the term capital refers to
a.money.
b.stocks and bonds.
c.equipment and structures used in production.
d.All of the above are correct.