1) “Trade raises the economic wellbeing of a nation in the sense that the gains of the
winners exceed the losses of the losers.” This statement is correct for a nation that
exports manufactured goods, but it is not correct for a nation that imports manufactured
goods.
a.True
b.False
2) Which shape refers to the markets for
goods and services?
a.oval A
b.oval B
c.rectangle 1
d.rectangle 2
3) Differences in scientific judgement between economists are similar to all of the
following except
a.astronomers debating whether the sun or earth was at the center of the solar system.
b.meteorologists debating the existence of global warming.
c.two politicians arguing about the fairness of the tax code.
d.explorers debating whether or not the earth was flat before the time of Christopher
Columbus.
4) In view of the possible need for government action in markets where asymmetric
information is a problem, which of the following is a valid concern?
a.The government rarely has more information than the private parties.
b.Private markets can sometimes deal with information asymmetries on their own.
c.The government is itself an imperfect institution.
d.All of the above are valid concerns.
5) The theory that the wealthy should contribute more to police protection than the poor
because they have more to protect is based on
a.the ability-to-pay principle.
b.a consumption tax plan.
c.the benefits principle.
d.property tax assessments.
6)
Which of the following would cause the supply curve to shift from Supply B to Supply
A in the market for butter?
a.a decrease in the price of butter
b.an increase in the price of margarine
c.an increase in the price of milk
d.an improvement in technology that allows firms to use less labor in the production of
butter
7) With respect to how economists study the economy, which of the following
statements is most accurate?
a.Economists study the past, but they do not try to predict the future.
b.Economists use rules of thumb to predict the future.
c.Economists devise theories, collect data, and analyze the data to test the theories.
d.Economists use controlled experiments in much the same way that biologists and
physicists do.
8) Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity
demanded are
a.P1 and Q1.
b.P1 and Q4.
c.P2 and Q2.
d.P2 and Q3.
9) Average revenue for a monopoly is the total revenue divided by the quantity
produced.
a.True
b.False
10) When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that
country become worse off and sellers of shoes in that country become better off.
a.True
b.False
11) Consumer surplus equals the
a.value to buyers minus the amount paid by buyers.
b.value to buyers minus the cost to sellers.
c.amount received by sellers minus the cost to sellers.
d.amount received by sellers minus the amount paid by buyers.
12) A monopolistically competitive firm is currently producing 20 units of output. At
this level of output the firm is charging a price equal to $20, has marginal revenue equal
to $12, has marginal cost equal to $12, and has average total cost equal to $18. From
this information we can infer that
a.the firm is currently maximizing its profit.
b.the profits of the firm are negative.
c.firms are likely to leave this market in the long run.
d.All of the above are correct.
13) Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output.
At Q = 1,000, the firm‘s marginal cost equals $15 and its average total cost equals $11.
The firm sells its output for $12 per unit.
At Q = 999, the firm‘s profits equal
a. $993.
b. $997.
c. $1,003.
d. $1,007.
14) Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P
represents the price of crude oil.
When the country for which the figure is drawn allows international trade in crude oil,
a.consumer surplus changes from the area A + B + D to the area A.
b.producer surplus changes from the area C to the area B + C + D.
c.total surplus decreases by the area D.
d.All of the above are correct.
15) As the price elasticity of supply approaches infinity, very small changes in price
lead to
a.very large changes in quantity supplied.
b.very small changes in quantity supplied.
c.no change in quantity supplied.
d.None of the above is correct.
16) Assume that England and Spain can switch between producing cheese and
producing bread at a constant rate.
The opportunity cost of 1 unit of cheese for Spain is
a.1/2 unit of bread.
b.2 hours of labor.
c.2 units of bread.
d.4 hours of labor.
17) Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Juanita’s opportunity cost of testing one cellular phone is programming
a.0.133 cellular phones and Shantala’s opportunity cost of testing one cellular phone is
programming 2.5 cellular phones.
b.0.133 cellular phones and Shantala’s opportunity cost of testing one cellular phone is
programming 0.4 cellular phones.
c.7.5 cellular phones and Shantala’s opportunity cost of testing one cellular phone is
programming 2.5 cellular phones.
d.7.5 cellular phones and Shantala’s opportunity cost of testing one cellular phone is
programming 0.4 cellular phones.
18) Beverly owns a rabbit and receives a $600 benefit from owning it. Sometimes
Beverly’s rabbit makes its way onto the lawn of her neighbor, Charles, and eats the
vegetables in Charles’ garden. This intrusion by the rabbit costs Charles $400. Can both
individuals become better off if Charles pays Beverly some amount of money to get rid
of the rabbit? Explain.
19) How does the study of economics depend upon the phenomenon of scarcity?
20) Artie and Angelina attended the same university, graduated with the same degree
and grade point average, and are equally productive in their identical new jobs. Still,
Angelina’s salary is 10% lower than Artie’s salary. One can conclude that Angelina
likely suffers from
21) Mary’s Production Possibilities Frontier Kate’s Production Possibilities
Frontier
If Mary and Kate trade foods with each other, who will trade away muffins in exchange
for cookies?
22) Cheryl is a professor at a local university. She hired a student from the university to
babysit for her children and paid the student a wage higher than the typical wage paid to
babysitters in her area to ensure the babysitter’s reliability and that attention is paid to
her children. What is the name for this above-equilibrium wage?
23) Briefly describe why taxes create deadweight loss.
24) Explain how a firm values the contribution of workers to its profitability. Would a
profit-maximizing competitive firm ever stop increasing employment as long as
marginal product is rising? Explain your answer.
25) Arturo’s Production Possibilities FrontierDina’s Production Possibilities
Frontier