1) The nation of Spritzland used to prohibit international trade, but now trade is
allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade
situation, total surplus in the market for wristwatches in Spritzland has increased.
a.True
b.False
2) Suppose Firm X and Firm Y are the only two sellers in the market. If the market
price increases from $12 to $15, quantity supplied will
a.decrease by 6 units.
b.decrease by 12 units.
c.increase by 6 units.
d.increase by 12 units.
3) By definition, there is discrimination when the marketplace offers different
opportunities to similar individuals who differ only by
a.race, ethnic group, sex, age, or other personal characteristics.
b.qualifications, experience, or job preferences.
c.levels of human capital.
d.All of the above are correct.
4) By comparing the marginal revenue and marginal cost from each unit produced, a
firm in a competitive market can determine the profit-maximizing level of production.
a.True
b.False
5) Figure 9-11
Producer surplus in this market before trade is
a.C.
b.B + C.
c.A + B + D.
d.B + C + D.
6) The Economic Report of the President
a.discusses recent developments in the economy and presents analysis of current policy
issues.
b.is written by the Council of Economic Advisers.
c.is the responsibility of the economists at the Office of Management and Budget.
d.Both a and b are correct.
7) Table 15-12
The following table provides information on the price, quantity, and average total cost
for a monopoly.
If the firm produces the profit-maximizing level of output, it will earn profits of
a. $24.
b.$18.
c.$15.
d.$12.
8) Ashley eats two bananas during a particular day. The marginal benefit she enjoys
from eating the second banana
a.can be thought of as the total benefit Ashley enjoys by eating two bananas minus the
total benefit she would have enjoyed by eating just the first banana.
b.determines Ashley’s marginal cost of the first and second bananas.
c.does not depend on how many bananas Ashley has already eaten.
d.cannot be determined unless we know how much she paid for the bananas.
9) Total surplus in a market can be measured as the area below the supply curve plus
the area above the demand curve, up to the point of equilibrium.
a.True
b.False
10) In 2011, the average American earned about $48,000 while the average Nigerian
earned about $1,200. Which of the following statements is likely?
a.The average American purchases more televisions than the average Nigerian.
b.The average American has better nutrition and healthcare than the average Nigerian.
c.The average American has a longer life expectancy than the average Nigerian.
d.All of the above are correct.
11) Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
One effect of the tax is to
a.reduce consumer surplus from $180 to $72.
b.reduce producer surplus from $96 to $24.
c.create a deadweight loss of $72.
d.All of the above are correct.
12) Figure 17-3. Hector and Bart are roommates. On a particular day, their apartment
needs to be cleaned. Each person has to decide whether to take part in cleaning. At the
end of the day, either the apartment will be completely clean (if one or both roommates
take part in cleaning), or it will remain dirty (if neither roommate cleans). With
happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible
outcomes are as follows:
Refer to Figure 17-3. The possible outcome in which both Hector and Bart clean is
analogous to which of the following outcomes of the duopoly game?
a.The duopolists collude to achieve the monopoly outcome.
b.The duopolists collude to achieve the monopolistically-competitive outcome.
c.The outcome is the one that is most preferable for consumers of the duopolists’
product.
d.The outcome is the one that is least preferable for both the duopolists and for the
consumers of their product.
13) Very often, the reason that players can solve the prisoners’ dilemma and reach the
most profitable outcome is that
a.each player tries to capture a large portion of the market share.
b.the players play the game not once but many times.
c.the game becomes more competitive.
d.self interest results in the Nash equilibrium which is the best outcome for the players.
14) Labor markets are different from most other markets because labor demand is
a.unresponsive to changes in wages.
b.unresponsive to changes in the final prices of the products produced by the labor.
c.a derived demand.
d.very responsive to labor supply.
15) Which of the following formulas is most representative of a negative income tax
proposal?
a.Taxes Owed = (1/4 of Income) x $2
b.Taxes Owed = (1/2 of Income) x 3/4
c.Taxes Owed = (1/2 of Income) + $10,000
d.Taxes Owed = (1/3 of Income) – $10,000
16) Table 22-18
The following table shows the preferences of four types of voters over four possible
alternatives as well as the percentage of the electorate with the given preferences.
Refer to Table 22-18. If the vote is conducted using a Borda count where each person’s
first choice receives 4 points, each person’s second choice 3 points, each person’s third
choice 2 points, and each person’s fourth choice 1 point, which alternative would win?
a.W
b.X
c.Y
d.Z
17)
Figure 9-11
Consumer surplus in this market after trade is
a.A.
b.C + B.
c.A + B + D.
d.B + C + D.
18) The poverty rate is
a.a measure of income inequality across families.
b.the percentage of the population whose family income falls below a specified level.
c.an absolute level of income set by the federal government for each family size.
d.measured by the number of in-kind transfers that a family receives.
19) Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Which of the following combinations of meat and potatoes could the rancher not
produce in 24 hours?
a.5 pounds of meat and 1 pounds of potatoes.
b.2 pounds of meat and 2 pounds of potatoes.
c.1 pounds of meat and 3 pounds of potatoes.
d.4 pounds of meat and 1 pound of potatoes.
20)
Suppose Phil and Miss Kay are the only consumers in the market. If the price is $12,
then the market quantity demanded is
a.0 units.
b.2 units.
c.4 units.
d.6 units.
21) Figure 16-12
If this firm profit-maximizes, what price will it charge?
22) Outline the purpose of antitrust laws. What do they accomplish?
23) Are public goods excludable? Are they rival in consumption?
24) A system in which anyone collecting antipoverty program benefits must accept a
government-provided job is called .
25) What effect does the number of firms in an oligopoly have on the characteristics of
the market?
26) What are the two reasons for the government to intervene in a market?
27) Figure 9-27
The following diagram shows the domestic demand and supply curves in a market.
Assume that the world price in this market is $20 per unit.
Suppose the country imposes a $5 per unit tariff. If the country allows trade with a
tariff, how much is the deadweight loss caused by the tariff?
28) “Given that most people like to get ‘free stuff,’ it follows that goods that are
available free of charge are produced and consumed in the proper amounts in a market
economy.” What is wrong with this statement?
29) Table 22-25
Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an
intersection at which they can turn left, turn right, or continue going straight. Their
preferences are summarized in the table.
Refer to Table 22-25. The travelers decide to conduct pairwise voting with the majority
determining the outcome of each vote to decide their next move. Sophie is very
confident that the travelers need to go left but she is having a difficult time convincing
her friends. If she wants to ensure that the result of the voting is “left,” how should she
organize the voting?