1) According to the Coase theorem, in the presence of externalities
a.private parties can bargain to reach an efficient outcome.
b.government assistance is necessary to reach an efficient outcome.
c.the assignment of legal rights can prevent externalities.
d.the initial distribution of property rights will determine the efficient outcome.
2) The Mansfield Public Library has a large number of books that anyone with a library
card may borrow. Anyone can obtain a card for free. Because the number of copies of
each book is limited, not everyone can have the same book at the same time. What type
of good would the library books be classified as in this case?
a.private goods
b.club goods
c.common resources
d.public goods
3) Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is
publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it
is difficult to find parking, and the trash cans overflow with food wrappers on summer
afternoons. Otherwise, it is a great place. The park is a common resource because
a.people can be prevented from using it.
b.access is limited due to driving distances.
c.if too many people use it, one person’s use diminishes other peoples’ use.
d.anyone can use it without affecting anyone else.
4) If men’s preferences for work change such that more men want to be stayathome
fathers, the wages paid to men who remain in the workplace would rise, all else equal.
a.True
b.False
5) Figure 14-7
Let Q represent the quantity of output and suppose the price of the good is $125. Then
marginal revenue is $125 at
a.Q = 270.
b.Q = 322.
c.Q = 515.
d. All of the above are correct.
6) For an individual firm operating in a competitive market, marginal revenue equals
a.average revenue and the price for all levels of output.
b.average revenue, which is greater than the price for all levels of output.
c.average revenue, the price, and marginal cost for all levels of output.
d.marginal cost, which is greater than average revenue for all levels of output.
7) Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:
Firms will be earn losses in the short run but will remain in business if the market price
a.exceeds P3.
b.is less than P1.
c.is greater than P1 but less than P3.
d.exceeds P2.
8) The demand for soap is more elastic than the demand for Dove soap.
a.True
b.False
9) Suppose that a country that has a high average wage level agrees to trade with a
country that has a low average wage level. Which country can benefit?
a.only the one with a low level of output per person.
b.only the one with a high level of output per person.
c.both
d.neither
10) One of the basic principles of economics is that markets are usually a good way to
organize economic activity. This principle is explained by the study of
a.factor markets.
b.energy markets.
c.welfare economics.
d.labor economics.
11) To maximize its profit, a monopolistically competitive firm chooses its level of
output by looking for the level of output at which
a.price equals marginal cost.
b.marginal revenue equals marginal cost.
c.average total cost is minimized.
d.All of the above are correct.
12) In-kind transfers are politically popular because
a.they provide high quality food and shelter.
b.they provide cash.
c.allow resale of food stamps for cash, if needed.
d.the public believes that the aid is not going to support alcohol and drug addiction.
13) If a firm uses labor to produce output, the firm’s production function depicts the
relationship between
a.the number of workers and the quantity of output.
b.marginal product and marginal cost.
c.the maximum quantity that the firm can produce as it adds more capital to a fixed
quantity of labor.
d.fixed inputs and variable inputs in the short run.