1) When two variables have a negative correlation,
a.when the x-variable decreases, the y-variable decreases.
b.when the x-variable decreases, the y-variable increases.
c.when the x-variable increases, the y-variable increases.
d.More than one of the above is correct.
2) A monopolist maximizes profits by
a.producing an output level where marginal revenue equals marginal cost.
b.charging a price that is greater than marginal revenue.
c.earning a profit of (P – MC) x Q.
d.Both a and b are correct.
3) Figure 13-9
The figure below depicts average total cost functions for a firm that produces
automobiles.
Which of the curves is most likely to characterize the short-run average total cost curve
of the smallest factory?
a.ATCA
b.ATCB
c.ATCC
d.ATCD
4) Economists use basic psychological insights in the field of study called
a.psychological economics.
b.transitional economics.
c.behavioral economics.
d.social economics.
5) The two basic approaches that a country can take as a means to achieve free trade are
the
a.unilateral approach and the multilateral approach.
b.short-run approach and the long-run approach.
c.continental approach and the global approach.
d.industry approach and the security approach.
6) Economic experiments show that people care more about winning a game than about
its intrinsic fairness.
a.True
b.False
7) When a country allows trade and becomes an exporter of bicycles,
a.domestic producers of bicycles are worse off, domestic consumers of bicycles are
better off, and the economic well-being of the country rises.
b.domestic producers of bicycles are worse off, domestic consumers of bicycles are
better off, and the economic well-being of the country falls.
c.domestic producers of bicycles are better off, domestic consumers of bicycles are
worse off, and the economic well-being of the country rises.
d.domestic producers of bicycles are better off, domestic consumers of bicycles are
worse off, and the economic well-being of the country falls.
8) The fundamental cause of monopoly is
a.incompetent management in competitive firms.
b.the zero-profit feature of long-run equilibrium in competitive markets.
c.advertising.
d.barriers to entry.
9) Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in
the long run. If an increase in the demand for minivans causes the price of minivans to
increase by 5%, then the quantity supplied of minivans will increase by about
a.1.5% in the short run and 6% in the long run.
b.6% in the short run and 1.5% in the long run.
c.16.7% in the short run and 4.2% in the long run.
d.4.2% in the short run and 16.7% in the long run.
10) The marginal tax rate on labor income for many workers in the United States is
almost
a.30 percent.
b.40 percent.
c.50 percent.
d.65 percent.
11) Table 13-6
Wooden Chair Factory
The Wooden Chair Factory experiences diminishing marginal product of labor with the
addition of which worker?
a.the third worker
b.the fourth worker
c.the fifth worker
d.the sixth worker
12) Table 14-5
The table represents a demand curve faced by a firm in a competitive market.
For this firm, the price of the product is
a. $9.
b.$11.
c.$13.
d.$15.
13) Consider Frank’s decision to go to college. If he goes to college, he will spend
$21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go
to college, he will earn $16,000 working in a store and spend $7,200 on room and
board. Frank’s cost of going to college is
a.$33,800.
b.$42,600.
c.$49,800.
d.$57,000.
14) The state of Massachusetts requires all citizens to purchase medical insurance or
face a monetary penalty when filing their taxes. The penalty is significantly less than
the average annual insurance premium. Moreover, the state requires insurance
companies to issue policies to anyone who applies, regardless of their health at the time
of application. Which of the following examples describes the inherent adverse
selection problem?
a.Tricia purchases an insurance policy through her employer and visits her doctor for
annual check-ups.
b.Sue purchases insurance only after learning that she has cancer.
c.Mike pays the penalty rather than purchasing insurance because it is cheaper for him
than paying insurance premiums and he is generally in good health.
d.Both b and c are correct.
15) When a corporation decides to include its own corporate stock as part of the
compensation for its employees, it is trying to solve the
a.adverse selection problem.
b.principal-agent problem.
c.lemons problem.
d.signaling problem.
16) Billie spends all of her income on soccer balls and jeans, and the price of a pair of
jeans is three times the price of soccer balls. In order to maximize total utility, Billie
should
a.buy three times as many soccer balls as pairs of jeans.
b.buy three times as many pairs of jeans as soccer balls.
c.buy both items until the marginal utility of soccer balls is three times the marginal
utility of a pair of jeans.
d.buy both items until the marginal utility of a pair of jeans is three times the marginal
utility of soccer balls.