1) A manufacturer of light bulbs sells its products to retail stores and requires the stores
to sell the bulbs to customers for $2 per bulb. This practice is known as tying.
a.True
b.False
2) Table 17-26
Two prescription drug manufacturers (Firm A and Firm B) are faced with lawsuits from
states to recover the healthcare related expenses associated with side-effects from its
drugs. Each drug manufacturer has evidence that indicates that taking its prescription
drug causes liver failure. State prosecutors do not have access to the same data used by
drug manufacturers and thus will have difficulty recovering full costs without the help
of at least one of the drug manufacturer’s studies. Each firm has been presented with an
opportunity to lower its liability in the suit if it cooperates with attorneys representing
the states.
Refer to Table 17-26. When this game reaches a Nash equilibrium, profits for Firm A
and Firm B will be
a.$-12 and $-100, respectively.
b.$-24 and $-24, respectively.
c.$-60 and $-40, respectively.
d.$-100 and $-12, respectively.
3) According to the superstar phenomenon, the most talented person in which of the
following occupations is most likely to earn extremely high wages?
a.an electrician
b.a hair stylist
c.a journalist
d.an engineer
4) Scenario 20-4
Suppose the government implemented a negative income tax and used the following
formula to compute a family’s tax liability:
Taxes owed = (1/5 of income) – $15,000
Refer to Scenario 20-4. Below what level of income would families start to receive a
subsidy from this negative income tax?
a.$5,000
b.$15,000
c.$50,000
d.$75,000
5) Tradable pollution permits
a.are widely viewed as a cost-effective way to reduce pollution.
b.have helped reduce carbon emissions.
c.have helped reduce sulfur dioxide emissions.
d.All of the above are correct.
6) Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
We could use the information in the table to draw a production possibilities frontier for
England and a second production possibilities frontier for Spain. If we were to do this,
measuring cheese along the horizontal axis, then
a.the slope of England’s production possibilities frontier would be 0.67 and the slope of
Spain’s production possibilities frontier would be -0.5.
b.the slope of England’s production possibilities frontier would be 1.5 and the slope of
Spain’s production possibilities frontier would be -2.
c.the slope of England’s production possibilities frontier would be .75 and the slope of
Spain’s production possibilities frontier would be -1.
d.the slope of England’s production possibilities frontier would be 2 and the slope of
Spain’s production possibilities frontier would be -.5.
7) Economists Edward Glaeser and Matthew Kahn studied carbon emissions in
different parts of the United States.
On the basis of what they found, they concluded that environmentalists should be in
favor of
a.lower taxes on carbon-based fuels such as gasoline.
b.more and taller skyscrapers.
c.policies that encourage people to move from large cities to suburban areas.
d.policies that encourage people to move from suburban areas to rural areas.
8) Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the
demand curve for their product. Each firm has the same constant marginal cost of $8
and zero fixed cost.
Refer to Table 17-11. If ABC and XYZ operate to jointly maximize profits, then what
is the price?
a. $14
b. $16
c. $18
d. $20
9) Figure 17-1
Refer to Figure 17-1. Suppose this market is served by a duopoly in which each firm
faces the marginal cost curve shown in the diagram. The marginal revenue curve that a
monopolist would face in this market is also shown. Which of the following statements
is true?
a.The total output in this market will likely be 2 units when the market is served by a
duopoly.
b.The price in this market will likely be $6 when the market is served by a duopoly.
c.The total revenue to each firm will likely be more than $16 when the market is served
by a duopoly.
d.The total output in this market will likely be less than 4 units when the market is
served by a duopoly.
10) A brand of wine is priced at only $5 per bottle, far below the market price of most
high quality wines. Before any reputation exists for the wine, consumers buy very little
of this inexpensive wine because they interpret the low price to mean that the wine is of
poor quality. The company decides to change the label on the wine to show that it has
won awards for quality. This label change is an example of
a.signaling.
b.screening.
c.selecting.
d.All of the above are correct.
11) Which of the following best defines the situation where one firm’s research yields
knowledge that is used by society as a whole?
a.social cost
b.opportunity cost of technology
c.internalization of an externality
d.technology spillover
12) Rob was the last worker hired by a firm that is competitive in the labor market. The
labor market always is in equilibrium. Rob’s wage is $30 per hour. When Rob was
hired, the firm’s output increased by 4 units per hour as a result. For what price does the
firm sell its output?
13) What are the arguments in favor of trade restrictions, and what are the
counterarguments? According to most economists, do any of these arguments really
justify trade restrictions? Explain.
14) Maria and Jose installed a “nannycamera” in their home so that they can view how
the nanny is interacting with their children while they are at work. What type of
problem are they trying to combat?
15) The following table shows the number of cases of water each seller is willing to sell
at the prices listed.
If all four suppliers operate in this market, what is the market quantity supplied when
the price is $6.00 per case?
16) When a good does not have aattached to it, private markets fail to ensure that the
good is produced and consumed in the proper amounts.
17) The gains from specialization and trade are based on advantage.
18)
Using the midpoint method, what is the price elasticity of supply between $25 and $35?
19) Figure 18-12. The figure shows the relationship between the number of mechanics
hired and the number of car repairs performed per day at a car-repair shop.
Refer to Figure 18-12. Suppose the shop pays each of its mechanics $210 per day.
Over what interval of prices (that is, charges per car repair, P) would the shop maximize
its profit by hiring exactly 3 mechanics? (Determine P1 and P2 such that P1 < P < P2.)
20) Figure 18-12. The figure shows the relationship between the number of mechanics
hired and the number of car repairs performed per day at a car-repair shop.
Refer to Figure 18-12. The relationship depicted on the graph is called a _______
function.
21) A consumer’s indifference curves are straight lines when, for the consumer, the
goods in question are__________________________.