1) If a country allows free trade and its domestic price for a given good is lower than
the world price, then it will import that good.
a.True
b.False
2) The idea that people in equal conditions should pay equal taxes is referred to as
a.horizontal equity.
b.vertical equity.
c.the ability-to-pay principle.
d.the marriage tax.
3) In a cost-benefit analysis, the value of a human life is sometimes calculated on the
basis of
a.the risks that a person voluntarily exposes herself to in her job and/or recreational
choices.
b.the value of each individual’s assets.
c.the belief that human life is priceless.
d.the amount of resources required to adequately sustain life.
4) Which of the following statements is not correct?
a.Monopolistic competition is similar to monopoly because in each market structure the
firm can charge a price above marginal costs.
b.Monopolistic competition is similar to perfect competition because both market
structures are characterized by free entry.
c.Monopolistic competition is similar to oligopoly because both market structures are
characterized by barriers to entry.
d.Monopolistic competition is similar to perfect competition because both market
structures are characterized by many sellers.
5) The assessment by George Stigler concerning the tradeoffs between “market failure”
and “political failure” in the American economy provides support for which of the
following solutions to the problems of monopolies?
a.public ownership of monopolies
b.government regulation of monopolies
c.government incentives to promote competition in monopolized industries
d.doing nothing at all
6) At present, the maximum legal price for a human kidney is $0. The price of $0
maximizes
a.consumer surplus but not producer surplus.
b.producer surplus but not consumer surplus.
c.both consumer and producer surplus.
d.neither consumer nor producer surplus.
7) When all market participants are price takers who have no influence over prices, the
markets have
a.only a few buyers and sellers.
b.numerous sellers but only a few buyers.
c.numerous buyers but only a few sellers.
d.numerous buyers and sellers.
8) A simultaneous decrease in both the demand for MP3 players and the supply of MP3
players would imply that
a.both the value of MP3 players to consumers and the cost of producing MP3 players
has increased.
b.both the value of MP3 players to consumers and the cost of producing MP3 players
has decreased.
c.the value of MP3 players to consumers has decreased, and the cost of producing MP3
players has increased.
d.the value of MP3 players to consumers has increased, and the cost of producing MP3
players has decreased.
9) Assume Leo buys coffee beans in a competitive market. It follows that
a.Leo has a limited number of sellers from which to buy coffee beans.
b.Leo will negotiate with sellers whenever he buys coffee beans.
c.Leo cannot influence the price of coffee beans even if he buys a large quantity of
them.
d.None of the above is correct.
10) An optimizing consumer will select a consumption bundle in which
a.income is maximized, and prices are minimized.
b.utility is maximized, and prices are minimized.
c.utility is maximized, subject to budget constraints.
d.utility is maximized, and indifference curves are linear.
11) The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain
trade to
a.sue for up to two times the damages they incurred.
b.sue for up to three times the damages they incurred.
c.sue for up to four times the damages they incurred.
d.sue for damages, but only for the actual amount of damages they incurred.
12) Figure 8-12
Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss
resulting from this tax is
a. $7.50.
b. $15.00.
c. $22.50.
d. $45.00.
13) Which of the following statements is correct regarding the imposition of a tax on
gasoline?
a.The incidence of the tax depends upon whether the buyers or the sellers are required
to remit tax payments to the government.
b.The incidence of the tax depends upon the price elasticities of demand and supply.
c.The amount of tax revenue raised by the tax depends upon whether the buyers or the
sellers are required to remit tax payments to the government.
d.The amount of tax revenue raised by the tax does not depend upon the amount of the
tax per unit.
14) Refer to Figure 9-16. The deadweight loss created by the tariff is represented by
the area
a.B.
b.D + F.
c.D + E + F.
d.B + D + E + F.
15) If the demand for donuts is elastic, then a decrease in the price of donuts will
a.increase total revenue of donut sellers.
b.decrease total revenue of donut sellers.
c.not change total revenue of donut sellers.
d.There is not enough information to answer this question.
16) Suppose that good X is a luxury and that good Y is a necessity. Which good would
you expect to have more price elastic demand?
17) Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a
market. Assume that the world price in this market is $1 per unit.
Suppose the country imposes a $1 per unit tariff. If the country allows trade with a
tariff, how many units will be imported?
18) Suppose the prices of agricultural products such as corn and soybeans increase.
What is the effect of these price increases on the marginal product of the 1,000th farm
worker? What is the effect on the value of the marginal product of the 1,000th farm
worker?
19) If goods X and Y are both normal goods for Brenda, then an increase in Brenda’s
income will lead her to__________.
20) According to research by Bertrand and Mullainathan, which job applicants, those
with “white” names or those with “black” names, received more calls from interested
employers? What percent more?
21) News reports from the western United States occasionally report incidents of cattle
ranchers slaughtering a large number of newborn calves and burying them in mass
graves rather than transporting them to markets. Assuming that this is rational behavior
by profit-maximizing “firms,” explain what economic factors may influence such
behavior.