1) Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of
$7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the
price of a movie ticket increases to $8. What is total consumer surplus after the tax is
imposed?
a.$0
b.$1
c.$2
d.$3
2) Constant returns to scale occur when a firm’s
a.marginal costs are constant as output increases.
b.long-run average total costs are decreasing as output increases.
c.long-run average total costs are increasing as output increases.
d.long-run average total costs do not vary as output increases.
3) Figure 7-18
If total surplus is $240 and consumer surplus is
a.$100, then the price of the good is $130.
b.$130, then the price of the good is $120.
c.$160, then the price of the good is $100.
d.$120, then the price of the good is $90.
4) With pollution permits, the supply curve for pollution rights is
a.perfectly elastic.
b.perfectly inelastic.
c.upward sloping.
d.downward sloping.
5) When a firm is experiencing economies of scale, long-run
a.average total cost is minimized.
b.average total cost is greater than long-run marginal cost.
c.average total cost is less than long-run marginal cost.
d.marginal cost is minimized.
6) A tax provision that works much like a negative income tax is the
a.Earned Income Tax Credit (EITC).
b.Temporary Assistance for Needy Families (TANF).
c.deduction for charitable contributions.
d.mortgage interest rate deduction.
7) Which of the following would most likely serve as an example of a monopoly?
a.a restaurant in a large city
b.a dry cleaners in a large city
c.a local gas station
d.a local electrical company
8) The benefit that government receives from a tax is measured by
a.the change in the equilibrium quantity of the good.
b.the change in the equilibrium price of the good.
c.tax revenue.
d.total surplus.
9) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
The opportunity cost of 1 cup for Bintu is
a.1/8 bowl.
b.1/4 bowl.
c.4 bowls.
d.8 bowls.
10) Discrimination may persist even in competitive markets when the source of the
discrimination is
a.employer prejudice.
b.customer prejudice.
c.wage prejudice.
d.employee prejudice.
11) Figure 21-1
The downwardsloping line on the figure represents a consumer’s budget constraint.
Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at
which point(s) on the figure?
a.A only
b.E only
c.B, C, or D only
d.A, B, C, or D only
12) Commuter Rail Passengers by Frequency of Service
A policymaker observes this graph and concludes that increasing the frequency of
commuter rail service is a certain way to get more commuters to choose the commuter
rail instead of driving their own cars. You warn the policymaker about making a reverse
causality mistake with which of the following statements?
a.Higher gas prices are causing more people to choose the commuter rail over driving.
b.The service frequency was increased in response to an increase in the number of
passengers per hour.
c.There is a positive relationship between frequency of stops and number of passengers.
d.None of the above is correct.
13) If suppliers expect the price of their product to fall in the future, then they will
a.decrease supply now.
b.increase supply now.
c.decrease supply in the future but not now.
d.increase supply in the future but not now.
14) Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
Which of the four prices corresponds to a firm earning zero economic profits in the
short run?
a.Pa
b.Pb
c.Pc
d.Pd
15) Horizontal equity refers to a tax system in which individuals with similar incomes
pay similar taxes.
a.True
b.False
16) A survey of 1,500 frequent restaurant patrons revealed that, Chang Cheng, a local
Chinese restaurant, offers high- quality food at low prices. Based on one dining
experience, a restaurant critic gave Chang Cheng a poor review, saying the food was
not very good. As a result, you decide not to dine at Chang Cheng. This decision is an
example of which of the following systematic mistakes that people make when making
decisions?
a.People are overconfident.
b.People give too much weight to a small number of vivid observations.
c.People are reluctant to change their minds.
d.All of the above are correct.
17) Table 20-6
Refer to Table 20-6. In both 2011 and 2012, approximately 25% of the population
earned less than
a.$15,000.
b.$25,000.
c.$50,000.
d.$100,000.
18) Figure 8-1
Suppose the government imposes a tax of P’ – P”’. The area measured by J+K+I
represents
a.consumer surplus after the tax.
b.consumer surplus before the tax.
c.producer surplus after the tax.
d.producer surplus before the tax.