1) One advantage market economies have over centrally-planned economies is that
market economies
a.provide an equal distribution of goods and services to households.
b.establish a significant role for government in the allocation of resources.
c.solve the problem of scarcity.
d.are more efficient.
2) Deadweight losses occur in markets in which
a.firms decide to downsize.
b.the government imposes a tax.
c.profits fall because of low consumer demand.
d.equilibrium prices fall.
3) The field of behavioral economics applies the methods of economics to study how
government works.
a.True
b.False
4) The willingness of citizens to pay for vaccinations does not include the benefit
society receives from having vaccinated citizens who cannot transmit an illness to
others. This extra benefit society gets from vaccinating its citizens is known as
a.productivity.
b.an externality.
c.market power.
d.property rights.
5) Frequently, in the short run, the quantity supplied of a good is
a.impossible, or nearly impossible, to measure.
b.not very responsive to price changes.
c.determined by the quantity demanded of the good.
d.determined by psychological forces and other non-economic forces.
6) Table 12-7
The following table shows the marginal tax rates for unmarried individuals for two
years.
For an individual who earned $80,000 in both years, which of the following statements
is true
regarding the individual’s marginal tax rate?
a.The marginal tax rate is higher in 2010 than in 2009.
b.The marginal tax rate is the same in 2010 as it was in 2009.
c.The marginal tax rate is lower in 2010 than in 2009.
d.With a proportional tax, as in 2010, it is not possible to determine the individual’s
marginal tax rate so it is not possible to compare the marginal tax rates in the two years.
7) The two types of imperfectly competitive markets are
a.monopoly and monopolistic competition.
b.monopoly and oligopoly.
c.monopolistic competition and oligopoly.
d.monopolistic competition and cartels.
8) Which of the following statements is correct?
a.Cigarettes are likely to be produced in a monopolistically competitive industry.
b.Novels are likely to be produced in a monopoly industry.
c.Movies are likely to be produced in a monopolistically competitive industry.
d.Milk is likely to be produced in an oligopoly industry.
9) Figure 14-7
In the long run, the firm will exit the market if the price of the good is
a. $75.
b.$85.
c.$95.
d.All of the above are correct.
10) A key characteristic of a competitive market is that
a.government antitrust laws regulate competition.
b.producers sell nearly identical products.
c.firms minimize total costs.
d.firms have price setting power.
11) If we can conclude that human life has a finite value, cost-benefit analysis can lead
to solutions in which human life is worth less than the cost of a potential project.
a.True
b.False
12) Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
In order to maximize profits, the firm should stop producing after it makes the
a.first unit.
b.second unit.
c.fourth unit.
d.fifth unit.
13) You own an ice cream store and are concerned that an employee may be giving
generous scoops to friends and relatives and smaller scoops to some other customers.
This may be reducing sales. If you want your employee to stop giving larger scoops to
friends and relatives, which of the following is not a good approach?
a.Make visits to the store at the same time each day.
b.Pay employees an above equilibrium wage.
c.Give your employees a monthly bonus based on profits.
d.None of the above are good approaches.
14) Taxes create deadweight loss when they
a.distort behavior.
b.cause the price of the product to increase.
c.don’t raise sufficient government revenue.
d.cannot be computed easily.