1) In a perfectly competitive market, the market supply curve is
a.the marginal cost curve above average total cost for a representative firm.
b.the horizontal sum of all the individual firms‘ supply curves.
c.the vertical sum of all the individual firms‘ supply curves.
d.always a horizontal line.
2) Factory workers who work the day shift earn less per hour than similarly-skilled
factory workers who work the night shift. The difference in pay is attributed to
a.the marginal product of labor.
b.the marginal product of capital.
c.diminishing marginal returns.
d.a compensating differential.
3) Which government entity is charged with investigating and enforcing antitrust laws?
a.the U.S. Justice Department
b.the U.S. Commerce Department
c.the U.S. Treasury Department
d.the Bureau of Alcohol, Tobacco, and Firearms
4) Relationship Between Years of Education and Annual Income
Senator Smith observes the graph and concludes that people who earn higher incomes
attend school for more years. Senator Jones observes the graph and concludes that
people who attend school for more years earn higher incomes. Who is correct?
a.Senator Smith is correct.
b.Senator Jones is correct.
c.It is difficult to say which senator might be correct due to the reverse causality
problem.
d.It is difficult to say which senator might be correct due to omitted variable bias.
5) Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:
Firms will be encouraged to enter this market for all prices that exceed
a.P1.
b.P2.
c.P3.
d.None of the above is correct.
6) A circular-flow model and production possibilities frontier are similar in that
a.neither allows economic analysis to occur.
b.neither can be represented visually on a graph.
c.both make use of assumptions.
d.both make use of complex equations to arrive at solutions.
7) Deadweight loss measures the decrease in total surplus that results from a tariff or
quota.
a.True
b.False
8) Table 10-3
The social value of the 4th unit of output that is produced is
a. $10.
b.$16.
c.$26.
d.$30.
9) If duopolists individually pursue their own self-interest when deciding how much to
produce, the amount they will produce collectively will
a.be less than the monopoly quantity.
b.be equal to the monopoly quantity.
c.be greater than the monopoly quantity.
d.Any of the above are possible.
10) A firm that exits its market has to pay
a.its variable costs but not its fixed costs.
b.its fixed costs but not its variable costs.
c.both its variable costs and its fixed costs.
d.neither its variable costs nor its fixed costs.
11) Which of the following events is consistent with an increase in the deadweight loss
of the gasoline tax from $30 million to $120 million?
a.The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon.
b.The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon.
c.The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon.
d.The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.
12) A consumer’s budget constraint for goods X and Y is determined by how much the
consumer likes good X relative to good Y.
a.True
b.False
13) Refer to Figure 9-21. With free trade, domestic production and domestic
consumption, respectively, are
a. 1,200 and 800.
b. 1,600 and 1,200.
c. 1,600 and 800.
d. 1,200 and 1,200
14) Suppose that an economics professor selects two students, Audrey and Michael, to
participate in a classroom experiment. The professor gives Audrey twenty $1 bills.
Audrey must pick an allocation of the twenty $1 bills to offer to Michael. If Michael
accepts the allocation, each student keeps his or her portion of the money. If Michael
rejects the allocation, the professor keeps the $20, and each student receives nothing.
Audrey selects $19 for herself and $1 for Michael. Based on the studies of human
decision making, which of the following statements is correct?
a.If Michael accepts the offer, he is behaving rationally.
b.If Michael rejects the offer, he may value fairness more than $1.
c.If Michael rejects the offer, Audrey made a bad choice by trying to keep $19 for
herself.
d.Any of the above could be correct.
15) Even though the average income in the United States has continued to grow, the
poverty rate has increased to over 20% since the early 1970s.
a.True
b.False
16) Adverse selection may lead to
a.owners of used cars choosing to keep them rather than sell them at the low price that
skeptical buyers are willing to pay.
b.wages being stuck above the level that balances supply and demand, resulting in
unemployment.
c.buyers with low risk choosing to remain uninsured because the policies they are
offered fail to reflect their true characteristics.
d.All of the above are correct.
17) If the signaling theory of education is correct,
a.workers with more years of formal schooling will earn less than workers with fewer
years of formal schooling.
b.additional years of formal schooling do not increase a worker’s productivity.
c.workers with more years of formal schooling are less likely to be affected by ability,
effort, and chance.
d.men are more likely to earn more than women because men are more likely to have
graduated from college.
18) If the for a good is 1.2, then a 3 percent decrease in price results in a
a.0.4 percent increase in the quantity demanded.
b.2.5 percent increase in the quantity demanded.
c.3.6 percent increase in the quantity demanded.
d.6 percent increase in the quantity demanded.
19) Total surplus in a market is equal to
a.value to buyers – amount paid by buyers.
b.amount received by sellers – costs of sellers.
c.value to buyers – costs of sellers.
d.amount received by sellers – amount paid by buyers.
20)
In this market for watermelons, a severe drought occurs which affects the watermelon
crop. The equilibrium price
a.increases and the equilibrium quantity decreases.
b.decreases and the equilibrium quantity is ambiguous.
c.and quantity both increase.
d.and quantity both decrease.