1) Table 18-11
Consider the following daily production data for MadeFromScratch, Inc.
MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per
day.
Refer to Table 18-11. What is the marginal profit of the sixth worker?
a.$100
b.-$50
c.-$75
d.-$125
2) Suppose that smoking creates a negative externality. If the government imposes a
per-cigarette tax equal to the per-cigarette externality, then
a.the after-tax equilibrium quantity of cigarettes smoked will be less than the socially
optimal quantity of cigarettes smoked.
b.the after-tax equilibrium quantity of cigarettes smoked will be greater than the
socially optimal quantity of cigarettes smoked.
c.the after-tax equilibrium quantity of cigarettes smoked will equal the socially optimal
quantity of cigarettes smoked.
d.There is not enough information to answer the question.
3) You and your college roommate eat three packages of Ramen noodles each week.
After graduation last month, both of you were hired at several times your college
income. Your roommate still enjoys Ramen noodles very much and buys even more, but
you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking
at income elasticity of demand for Ramen noodles, yours would
a.be negative and your roommate’s would be positive.
b.be positive and your roommate’s would be negative.
c.be zero and your roommate’s would approach infinity.
d.approach infinity and your roommate’s would be zero.
4) Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway
needs to be shoveled. Each person has to decide whether to take part in shoveling the
driveway. At the end of the day, either the driveway will be shoveled (if one or both
roommates take part in shoveling), or it will remain unshoveled (if neither roommate
shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy),
the possible outcomes are as follows:
Refer to Figure 17-4. If this game is played only once, then which of the following
outcomes is the most likely one?
a.Aaron and Ed both shovel.
b.Aaron shovels and Ed does not shovel.
c.Ed shovels and Aaron does not shovel.
d.All of the above outcomes are equally likely.
5) A monopolist will choose to increase output when
a.market price increases.
b.at all levels of output, marginal cost increases.
c.at the present level of output, marginal revenue exceeds marginal cost.
d.the demand curve shifts to the left.
6) Table 13-6
Wooden Chair Factory
Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal
product of labor when the factory adds a 6th worker?
a.5 chairs per hour
b.15 chairs per hour
c.25 chairs per hour
d.70 chairs per hour
7) Figure 15-1
The shape of the average total cost curve reveals information about the nature of the
barrier to entry that might exist in a monopoly market. Which of the following
monopoly types best coincides with the figure?
a.ownership of a key resource by a single firm
b.natural monopoly
c.government-created monopoly
d.a patent or copyright monopoly
8) At what price would there be an excess demand
of 200 units of the good?
a.$15
b.$20
c.$30
d.$35
9) Ashley bakes bread that she sells at the local farmer’s market. If she purchases a new
convection oven that reduces the costs of baking bread, the
a.supply curve for Ashley’s bread will increase.
b.supply curve for Ashley’s bread will decrease.
c.demand curve for Ashley’s bread will increase.
d.demand curve for Ashley’s bread will decrease.
10) ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ
Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following
price increases would cause both companies to experience an increase in producer
surplus?
a.The price of a dozen eggs increases from 40 cents to 55 cents.
b.The price of a dozen eggs increases from 55 cents to 70 cents.
c.The price of a dozen eggs increases from 55 cents to 75 cents.
d.All of these price increases would cause both companies to experience a loss in
producer surplus.
11) In the prisoners’ dilemma game with Bonnie and Clyde as the players, the likely
outcome is one
a.in which neither Bonnie nor Clyde confesses.
b.in which both Bonnie and Clyde confess.
c.that involves neither Bonnie nor Clyde pursuing a dominant strategy.
d.that is ideal in terms of Bonnie’s selfinterest and in terms of Clyde’s selfinterest.
12) Figure 9-12
Producer surplus after trade is
a. $28,000.
b. $30,000.
c. $35,200.
d. $38,400.
13) A $2 tax per gallon of paint placed on the buyers of paint will shift the demand
curve
a.downward by exactly $2.
b.downward by less than $2.
c.upward by exactly $2.
d.upward by less than $2.
14) Each of the following is a determinant of demand except
a.tastes.
b.production technology.
c.expectations.
d.the prices of related goods.
15) Which of the following is not an example of efficiency wages?
a.More productive workers are paid more to reflect their higher output.
b.Higher wages induce higher output from workers.
c.Better quality applicants apply for jobs that pay above-equilibrium wages.
d.Workers are less likely to leave jobs that pay above-equilibrium wages.
16) Comparing marginal revenue to marginal cost
(i)reveals the contribution of the last unit of production to total profit.
(ii)is helpful in making profit-maximizing production decisions.
(iii)tells a firm whether its fixed costs are too high.
a.(i) only
b.(i) and (ii) only
c.(ii) and (iii) only
d.(i) and (iii) only
17) Greg’s Production Possibilities
Catherine’s Production Possibilities
Is it possible for Greg and Catherine to gain from trade? Defend your answer.
18)
19) If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and
if the price of a pizza is $9, then what is the price of a pint of Pepsi?
20) The life-cycle pattern of income variation causes inequality in the distribution of
annual income, but it does not necessarily represent .
21) Suppose XYZ Corporation is currently renting 300 units of capital at a rental price
of $500 units per unit. The value of the marginal product of the 300th unit of capital is
$400. How can the corporation increase its profit?
22) Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual
flavors of organic, homemade ice cream so he has a monopoly over his own ice cream,
though he competes with many other firms selling ice cream in Fairfield for the same
customers. Peter’s demand and cost values for sales per day are given in the table below.
(Everyone who purchases Peter’s ice cream buys a double scoop cone because it’s so
delicious.)
When Peter maximizes his profits, how much revenue does he earn per day?
23) Suppose that the market for product X is characterized by a typical,
downward-sloping, linear demand curve and a typical, upward-sloping, linear supply
curve. Suppose the price elasticity of supply is 0.7. Will the deadweight loss from a $3
tax per unit be smaller if the absolute value of the price elasticity of demand is 0.6 or if
the absolute value of the price elasticity of demand is 1.5?