1) Figure 20-3
Refer to Figure 20-3. Which of the following best describes the poverty rates by age
from 1965 to 2011?
a.The poverty rates by age have declined for all age groups.
b.The percentage of people living in poverty has consistently been highest for the
elderly aged 65 and over and lowest for adults aged 18 to 64.
c.The percentage of children under age 18 and the percentage of adults aged 18 to 64
have maintained a similar trend while the percentage of elderly aged 65 and over has
decreased significantly.
d.The poverty rates by age have increased for all age groups.
2) Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a
monopolistically competitive firm.
Which of the following statements regarding this monopolistically competitive firm is
correct?
a.New firms will enter this market in the long run since firm profits are greater than
zero.
b.Firms will leave this market in the long run since firm profits are less than zero.
c.This firm is currently in long-run equilibrium.
d.This firm is currently in long-run equilibrium, and the firm is producing its efficient
scale of output.
3) Suppose a monopolist is able to charge each customer a price equal to that customer’s
willingnesstopay for the product. Then the monopolist is engaging in
a.marginal cost pricing.
b.arbitrage pricing.
c.voodoo economics.
d.perfect price discrimination.
4) London drivers who choose to drive in “congestion zones” pay a tax designed to
reduce traffic congestion.
a.True
b.False
5) Total surplus = Value to buyers – Costs to sellers.
a.True
b.False
6) Two firms, A and B, each currently emit 100 tons of chemicals into the air. The
government has decided to reduce the pollution and from now on will require a
pollution permit for each ton of pollution emitted into the air. The government gives
each firm 40 pollution permits, which it can either use or sell to the other firm. It costs
Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,
and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted
into the air. It is likely that
a.Firm A will buy all of Firm B’s pollution permits. Each one will cost between $100
and $200.
b.Firm B will buy all of Firm A’s pollution permits. Each one will cost between $100
and $200.
c.Both firms will use their own pollution permits.
d.Firm A will buy some of Firm B’s pollution permits. Each one will cost less than
$100.
7) Which of the following statements is correct?
a.The demand curve facing a competitive firm is horizontal, as is the demand curve
facing a monopolist.
b.The demand curve facing a competitive firm is downward sloping, whereas the
demand curve facing a monopolist is horizontal.
c.The demand curve facing a competitive firm is horizontal, whereas the demand curve
facing a monopolist is downward sloping.
d.The demand curve facing a competitive firm is downward sloping, as is the demand
curve facing a monopolist.
8) Figure 9-6
The figure illustrates the market for roses in a country.
Without
trade, the equilibrium price of roses is
a.$4 and the equilibrium quantity is 300.
b.$3 and the equilibrium quantity is 200.
c.$3 and the equilibrium quantity is 400.
d.$2 and the equilibrium quantity is 500.
9) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. The area measured by M represents
a.consumer surplus after the tax.
b.consumer surplus before the tax.
c.producer surplus after the tax.
d.producer surplus before the tax.
10) The marginal benefit Kyra gets from eating a second sandwich is
a.the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets
from eating one sandwich.
b.the same as the total benefit she gets from eating two sandwiches.
c.less than the marginal cost of eating the second sandwich since she chose to eat the
second sandwich.
d.the total benefit Kyra gets from eating three sandwiches minus the total benefit she
gets from eating two sandwiches.
11) Figure 9-3. The domestic country is China.
If China were to abandon a no-trade policy in favor of a free-trade policy,
a.Chinese producers of pencil sharpeners would become worse off.
b.Chinese consumers of pencil sharpeners would become better off.
c.total surplus in the Chinese economy would increase.
d.All of the above are correct.
12) The movement from Da to Db 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 cause cancer.
d.increase in the price of a pretzels.
13) If, as some economists believe, changes in technology over recent decades have
brought about changes in labor markets, then those changes likely have resulted in
a.reduced emphasis on compensating differentials as an explanation for wage
differences.
b.a reduced emphasis on human-capital differences among workers as an explanation
for wage differences.
c.a narrowing of the earnings gap between high-skilled workers and low-skilled
workers.
d.a widening of the earnings gap between high-skilled workers and low-skilled workers.
14) Samantha is maximizing total utility while consuming food and clothing. Her
marginal utility from food is 50, and her marginal utility from clothing is 25. If clothing
is priced at $10 per unit, the price of food per unit must be
a.$2.
b. $2.50.
c.$5.
d.$20.
15) Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports
channel in its market area. Let’s assume that Mega Media pays $100,000 a year for the
exclusive marketing rights to the sports channel. Since Mega Media has already
installed cable to all of the homes in its market area, the marginal cost of delivering the
sports channel to subscribers is zero. The manager of Mega Media needs to know what
price to charge for the sports channel service to maximize her profit. Before setting
price, she hires an economist to estimate demand for the sports channel. The economist
discovers that there are two types of subscribers who value premium sporting channels.
First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new
channel. Second, the premium sports channel will appeal to 20,000 occasional sports
viewers who will pay as much as $25 a year for a subscription to it.
If Mega Media Cable TV is unable to price discriminate, what price will it choose to
maximize its profit, and what is the amount of the profit?
a.price = $25; profit = $575,000
b.price = $25; profit = $475,000
c.price = $150; profit = $450,000
d.price = $150; profit = $350,000
16) An increase in a product’s price will shift the labor demand curve for workers who
produce that product to the left.
a.True
b.False
17) The classic tradeoff between guns and butter states that when a society spends more
on national defense, it has less to spend on consumer goods to raise the standard of
living.
a.True
b.False
18) A tax on a good
a.raises the price that buyers effectively pay and raises the price that sellers effectively
receive.
b.raises the price that buyers effectively pay and lowers the price that sellers effectively
receive.
c.lowers the price that buyers effectively pay and raises the price that sellers effectively
receive.
d.lowers the price that buyers effectively pay and lowers the price that sellers
effectively receive.
19) The slope of a line is the ratio of the vertical distance covered to the horizontal
distance covered along the line.
a.True
b.False
20) Consumers’ willingness to pay for a good minus the amount they actually pay for it
equals
a.consumer surplus.
b.consumer benefit.
c.price discriminant.
d.deadweight loss.