1) Which of the following statements is true of the tax on gasoline?
a.The cost of collecting a gasoline tax outweighs the revenues raised by the tax.
b.It is preferred to tolls as the best solution to road congestion.
c.It discourages driving on noncongested roads, even though there is no congestion
externality for these roads.
d.Both b and c are correct.
2) Figure 16-13
Which of the following areas represents the profit for this profit maximizing
monopolistically competitive firm?
a.BCHG
b.BCIJ
c.GHIJ
d.0BCL
3) The value of the marginal product of any input is equal to the marginal product of
that input multiplied by the
a.wage.
b.marginal cost of the output.
c.change in total profit.
d.market price of the output.
4) Figure 8-10
Suppose the government imposes a tax that reduces the quantity sold in the market after
the tax to Q2. The tax revenue is
a.(P0-P2) x Q2.
b.(P2-P8) x Q2.
c.(P2-P5) x Q5.
d.(P5-P8) x Q5.
5) Table 13-4
Charles’s Math Tutoring
Suppose that Charles’s math tutoring company has a fixed cost of $50 per month for his
cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70
students, Charles’s total cost curve
a.increases but gets flatter.
b.increases and gets steeper.
c.decreases and gets flatter.
d.decreases but gets steeper.
6) Suppose a profit-maximizing monopolist faces a constant marginal cost of $10,
produces an output level of 100 units, and charges a price of $50. The socially efficient
level of output is 200 units. Assume that the demand curve and marginal revenue curve
are the typical downward-sloping straight lines. The monopoly deadweight loss equals
$2,000.
a.True
b.False
7) Suppose the government imposes a tax of P’ – P”’. Total surplus before the tax is
measured by the area
a.I+Y.
b.J+K+L+M.
c.L+M+Y.
d.I+J+K+L+M+Y.
8) Figure 7-25
Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this
market. If the buyers with the highest willingness to pay purchase the good, then total
surplus will be
a. $256.
b. $768.
c. $1,024.
d. $1,280.
9) Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
The market quantity of oranges demanded per day is exactly 7 if the price of an orange,
P, satisfies
a. $0.60 < P < $0.75.
b. $0.60 < P < $2.00.
c. $0.25 < P < $0.75.
d. $0.25 < P < $0.60.
10) Figure 16-7
Suppose a firm is operating in the situation depicted in panel a. Which of the following
statements is correct?
a.The firm is earning a positive short-run profit.
b.The firm is earning a negative short-run profit.
c.The firm is earning zero short-run profit.
d.We cannot determine profit because we do not know the firm’s average total cost.
11) On a graph, consumer surplus is represented by the area
a.between the demand and supply curves.
b.below the demand curve and above price.
c.below the price and above the supply curve.
d.below the demand curve and to the right of equilibrium price.
12) If Firm X is a competitive firm in the market for labor, it has little influence over
the wage it pays its employees.
a.True
b.False
13) Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces
and sells envelopes. The time frame is one week.
Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for
$6. The firm would not be interested in hiring a third worker unless the wage fell from
its current level of $600 to what level?
a.$564
b.$557
c.$554
d.$551
14) Deadweight losses arise because a tax causes some individuals to change their
behavior.
a.True
b.False
15)
Using the midpoint method, the between point A and point B is
a. 0.33
b.0.5
c.2.0
d.3.0
16) Table 17-4
The table shows the town of Mauston’s demand schedule for gasoline. For simplicity,
assume the town’s gasoline seller(s) incur no costs in selling gasoline.
Refer to Table 17-4. If there are exactly four sellers of gasoline in Mauston and if they
collude, then which of the following outcomes is most likely?
a.Each seller will sell 62.5 gallons and charge a price of $1.25.
b.Each seller will sell 62.5 gallons and charge a price of $5.
c.Each seller will sell 100 gallons and charge a price of $2.
d.Each seller will sell 250 gallons and charge a price of $0.
17) Use the following graph to answer the following questions.
a.How would point J be represented as an ordered pair?
b.What type of curve is this?
c.Does this curve show a positive or negative correlation between price and quantity?
d.ComputetheslopeofD
1
betweenpointsJandL.
e.What is the slope of D1between points L and N? Why would you not have to calculate
this answer?
f.What is it called if we move from D1 to D2?
g.How do you know that the slope of D2 is the same as the slope of D1?
18) When a country abandons a no-trade policy, adopts a free-trade policy, and becomes
an importer of a particular good,
a.producer surplus increases and total surplus increases in the market for that good.
b.producer surplus increases and total surplus decreases in the market for that good.
c.producer surplus decreases and total surplus increases in the market for that good.
d.producer surplus decreases and total surplus decreases in the market for that good.
19) Abby bakes brownies and Liam grows flowers. In which of the following cases is it
impossible for both Abby and Liam to benefit from trade?
a.Abby does not like flowers and Liam does not like brownies.
b.Abby is better than Liam at baking brownies and Liam is better than Abby at growing
flowers.
c.Liam is better than Abby at baking brownies and at growing flowers.
d.Both Abby and Liam can benefit from trade in all of the above cases.