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1) Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
When price falls from P3 to P1, the firm finds that it
a.decreases its fixed costs.
b.should produce Q1 units of output.
c.should produce Q3 units of output.
d.should shut down immediately.
2) Scenario 13-6
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional
organizing consultant. As a consultant, Ziva helps people organize their houses. Due to
the popularity of her home-organization services, Farmer Ziva has more clients
requesting her services than she has time to help if she maintains her farming business.
Farmer Ziva charges $25 an hour for her home-organization services. One spring day,
Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She
expects that the seeds she planted will yield $300 worth of lettuce.
An economist would calculate Ziva's total cost of farming to equal a. $130.
b. $250.
c. $300.
d. $380.
3) If the market consists of Michelle and Laura only and the price falls by $1, the
quantity demanded in the market increases by
a.2 units.
b.3 units.
c.4 units.
d.5 units.
4) When the government reduces my income tax by $0.30 for every $1.00 that I
contribute to a charity, the government is effectively
a.alleviating the negative externalities that are associated with charitable giving.
b.imposing a negative externality on those who do not pay income taxes.
c.encouraging a private solution to a positive-externality problem.
d.encouraging a private solution to a negative-externality problem.
5) When new firms have an incentive to enter a competitive market, their entry will
a.increase the price of the product.
b.drive down profits of existing firms in the market.
c.shift the market supply curve to the left.
d.increase demand for the product.
6) Which of the following combinations of meat and potatoes could the farmer produce
in 40 hours?
a.1 pound of meat and 7 pounds of potatoes.
b.2 pounds of meat and 5 pounds of potatoes.
c.3 pounds of meat and 3 pounds of potatoes.
d.4 pounds of meat and 2 pounds of potatoes.
7) Table 15-3
Consider the following demand and cost information for a monopoly.
The maximum profit this monopolist can earn is
a. $5.
b.$15.
c.$16.
d.$28.
8) Which of the following is an example of price discrimination?
a.Nabisco provides cents-off coupons for its products.
b.Amtrak offers a lower price for weekend travel compared to weekday rates on the
same routes.
c.Hotel rates for AAA members are lower than for nonmembers.
d.All of the above are correct.
9) If education produces positive externalities and the government does not intervene in
the market, we would expect
a.the equilibrium price to be higher than the optimal price.
b.the equilibrium quantity to be lower than the optimal level.
c.the equilibrium quantity to be higher than the optimal level.
d.both a and b are correct
10) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The total surplus with the tax is
a. $2,000.
b. $3,000.
c. $15,000.
d. $20,000.
11) Figure 10-4
If all external costs were internalized, then the market€s equilibrium output would be
a.Q1.
b.Q2.
c.Q3.
d.Q4.
12) In a monopolistically competitive market, the number of firms adjusts until
economic profits are driven to zero.
a.True
b.False
13) The movement from Db to Da in the
market for potato chips could be caused by a(n)
a.decrease in the price of potato chips.
b.decrease in income, assuming that potato chips are a normal good.
c.announcement by the FDA that potato chips lower cholesterol.
d.increase in the price of a pretzels.
14) Refer to Figure 7-15. Area A represents
a.producer surplus to new producers entering the market as the result of an increase in
price from P1 to P2.
b.the increase in consumer surplus that results from an upward-sloping supply curve.
c.the increase in total surplus when sellers are willing and able to increase supply from
Q1 to Q2.
d.the increase in producer surplus to those producers already in the market when the
price increases from P1 to P2.
15) A profit-maximizing firm in a competitive market will increase production when
average revenue exceeds marginal cost.
a.True
b.False
16) Consider the labor market for heath care workers. Because of the aging population
in the United States, the output price for health care services has increased. Holding all
else equal, in the labor market for health care employees the equilibrium wage
a.increases, and the equilibrium quantity of labor increases.
b.increases, and the equilibrium quantity of labor decreases.
c.decreases, and the equilibrium quantity of labor increases.
d.decreases, and the equilibrium quantity of labor decreases.
17) Scenario 22-3
At issue in a particular city vote is how much to spend, per person, on road repair next
year. Among the 10,000 voters, 2,900 prefer to spend $500 per person, but no more;
2,200 prefer to spend $600 per person, but no more; 1,900 prefer to spend $800 per
person, but no more; 1,600 prefer to spend $1,200 but no more, and 1,400 prefer to
spend $1,400 per person, but no more.
Refer to Scenario 22-3. The median voter is one who prefers to spend
a.$500.
b.$600.
c.$800.
d.None of the above are correct.
18) Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information.
Assume that Tommy's is able to engage in perfect price discrimination.
If the monopolist can engage in perfect price discrimination, what is the quantity that
maximizes economic profit?
a.5 ties
b.6 ties
c.7 ties
d.8 ties
19)
Figure 10-1
This graph represents the tobacco industry. The industry creates
a.positive externalities.
b.negative externalities.
c.no externalities.
d.no equilibrium in the market.
20) The distribution of income for Dismal is as follows:
If the poverty rate in Dismal is about 17 percent, what is the poverty line in Dismal?
a.$10,000.
b.$20,000.
c.$30,000.
d.$40,000.
21) Suppose goods A and B are substitutes. If the price of good A increases, will the
demand for good B increase or decrease?
22) Table 13-18
What is the shape of the average-variable-cost curve?
23) The Coase theorem suggests that efficient solutions to externalities can be
determined through bargaining. Under what circumstances will private bargaining fail
to produce a solution?
24) What is Russia's opportunity cost of one radio?
25) The market structure in which each firm has a monopoly over the product it makes,
but many other firms make similar products that compete for the same customers is
called
26) Table 13-18
What is the average variable cost of producing 500 units of output?
27) Why are the actions of firms interdependent in an oligopoly market but not in a
monopolistically competitive market?
28) Jermaine believes that it is important to maximize the well-being of the worst-off
person in society. He believes in the principle called the .
29) Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-14. In 2010, how many more percentage points of total income did
the top fifth of the population earn compared to if the income distribution were
completely equal?
30) If the between two goods is negative, what is the relationship between the two
goods?
