(Table: Market for Fried Twinkies) Look at the table Market for Fried Twinkies.
Suppose the government decides to reduce fried Twinkie consumption as part of a war
on obesity. After careful study, the government decides to impose a quota of 5,000 on
production of fried Twinkies this year. What price will producers charge if they obey
the quota law?
A) $1.20
B) $1.30
C) $1.50
D) The answer cannot be determined with this information.
(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes
Sergei’s total costs for his perfectly competitive all-natural ice cream firm. If the market
price of a tub of ice cream is $67.50, how much is Sergei’s profit at the
profit-maximizing output?
A) $680.00
B) $270.00
C) $102.50
D) $100.00
Resources are being used efficiently when:
A) scarcity is no longer an issue.
B) they are also used equitably.
C) every opportunity to make people better off without making others worse off has
been seized.
D) gains from trade are still available.
Which of the following is a solution to externalities?
A) The city government imposes rent control. The externality is that housing’s quantity
demanded exceeds the quantity supplied at the current price.
B) The federal government imposes a minimum wage. The externality is that firms pay
too little to their workers.
C) The government offers free childhood immunizations. The externality is that an
immunized child cannot transmit disease to others.
D) The federal government provides national defense. The externality is that people
can’t be excluded from national defense even if they don’t pay for it.
Buying vegetables at a farmers’ market benefits the community because:
A) it is best to be self-sufficient when it comes to growing food.
B) this will eliminate the opportunity cost of buying food.
C) buying locally will increase human capital in the community.
D) one person’s local spending will increase another local person’s income.
Consumption of a common resource is inefficiently too _____ because the marginal
social cost of the resource is _____ than the private marginal cost.
A) low; higher
B) low; less
C) high; higher
D) high; less
Figure: The Market for Roses
(Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that
PA is the autarky price and PW is the world price. Producer surplus with international
trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
Figure: The Shrimp Market
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is:
A) $17.50.
B) $10.
C) $7.50.
D) $0.
Figure: The Production Possibility Frontiers for Jackson and Tahoe
(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson
produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. _____ has a(n)
_____ advantage in the production of _____.
A) Jackson; comparative; cattle
B) Tahoe; comparative; wheat
C) Jackson; comparative; wheat
D) Jackson; absolute; cattle
Figure: Monopoly Profits in Duopoly
(Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly shows
how an industry consisting of two firms that face identical demand curves (D1) can
collude to increase profits. The market demand curve is D2. If the firms collude to share
the market demand equally, then each firm will act as if its demand curve is given by:
A) D1.
B) D2.
C) MR1.
D) 2 × D1.
When farmers raise hogs, there are a number of external costs. In particular, hogs
generate methane gas. Without government regulation, the equilibrium price and
quantity of pigs raised means that:
A) too few hogs will be raised.
B) the price will be less than the marginal social cost.
C) the price will be less than the marginal benefit.
D) the price will be less than the marginal cost to hog farmers.
(Table: Production Possibilities for the United States and Canada) Look at the table
Production Possibilities for the United States and Canada. _____ has (have) an absolute
advantage in producing lumber.
A) Both the United States and Canada
B) Neither the United States nor Canada
C) The United States
D) Canada
Suppose the local real estate market is in equilibrium. A recession causes local
household incomes to decline. At the same time, construction of a large subdivision of
new homes has just been completed. Given these two changes and assuming that real
estate is a normal good, we can predict that the price of real estate will _____ and the
quantity of real estate bought and sold will _____.
A) fall; fall
B) fall; rise
C) fall; rise or fall
D) rise; fall or rise
Figure: Monopoly Profits in Duopoly
(Figure: Monopoly Profits in Duopoly) The efficient solution in the figure Monopoly
Profits in Duopoly is found where price is _____ and quantity is _____.
A) P1; Q4
B) P2; Q2
C) P2; Q1
D) P3; Q1
A decrease in the price of eggs will result in an increase in the:
A) demand for eggs.
B) supply of eggs.
C) quantity of eggs supplied.
D) quantity of eggs demanded.
(Table: Spring Water) The table Spring Water shows the demand and cost data for a
firm in a monopolistically competitive industry producing drinking water from
underground springs. At the profit-maximizing output, profit per unit is:
A) $1.17.
B) $8.83.
C) $10.00.
D) $11.75.
A high-school graduate who gets a college degree is adding to the economy’s stock of:
A) labor.
B) capital.
C) human capital.
D) financial capital.
In which of the following areas does the United States significantly limit imports?
A) computers
B) aircraft
C) agriculture
D) oil
Which of the following countries gives all of its citizens a choice between private
doctors and hospitals and care in a system run directly by the government?
A) United States
B) Canada
C) France
D) Great Britain
One person’s spending is another person’s:
A) loss.
B) income.
C) physical capital.
D) opportunity cost.
Scenario: Alexander and Vanessa
Alexander and Vanessa benefit from scientific research. Alexander’s marginal private
benefit from such research is given by the equation P = 200 ” Q, where Q refers to the
amount of research undertaken and P is the price Alexander is willing to pay for such
research. Vanessa’s marginal private benefit from such research is given by the equation
P = 100 ” Q. The marginal social cost of engaging in such research is constant at $100.
(Scenario: Alexander and Vanessa) Given the information in the scenario Alexander and
Vanessa, what is the socially optimal amount of scientific research for this economy?
A) 60
B) 300
C) 100
D) 200
A tax of $15 on an income of $200, $10 on an income of $300, and $8 on an income of
$400 is:
A) constant-rate.
B) proportional.
C) progressive.
D) regressive.
A price floor or a price ceiling is an example of:
A) a quantity control.
B) a price control.
C) market equilibrium price.
D) a quota.
Public goods differ from common resources in that both are _____, but public goods are
_____, while common resources are _____.
A) nonrival in consumption; excludable; nonexcludable
B) excludable; nonrival in consumption; rival in consumption
C) nonexcludable; are nonrival in consumption; rival in consumption
D) rival in consumption; nonexcludable; excludable
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $20. If the cable company is a monopoly, what price will it
charge?
A) $20
B) $40
C) $60
D) $100
Mark and Julie are going to sell brownies and cookies for their third annual fundraiser
bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15
brownies or 15 cookies. What is Mark’s opportunity cost to produce one brownie?
A) 1 cookie
B) 1 brownie
C) 0.5 cookie
D) 0.5 brownie
(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that
the crude oil industry is a duopoly and the marginal cost of producing crude oil equals
zero. Suppose that the two firms are maximizing industry profit and splitting the profit
evenly. If the industry is operating in perfect competition, the industry output will be
_____ barrels, and the price of crude oil will be _____.
A) 0; $160
B) 80; $80
C) 100; $60
D) 160; $0
(Table: Cost Data) Look at the table Cost Data. The average variable cost of producing
4 purses is:
A) $190.00.
B) $140.00.
C) $47.50.
D) $35.00.
Which of the following describes a feature shared by monopolistic competition and
perfect competition?
A) few firms in the industry
B) no barriers to entry or exit in the long run
C) absolute market power
D) standardized products
Figure: Consumer Equilibrium III
(Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III. Kurt
consumes at point A. Other things held equal, Kurt would be able to realize more total
utility by choosing point:
A) E.
B) B.
C) C.
D) F.
