1) Table 17-9
The table shows the demand schedule for a particular product.
Refer to Table 17-9. Suppose the market for this product is served by two firms that
have formed a cartel. If the marginal cost of production is $0 and there is no fixed cost,
the combined profit of the cartel will be
a.$16
b.$24
c.$30
d.$32
2) Market failure can be caused by
a.too much competition.
b.externalities.
c.low consumer demand.
d.scarcity.
3) In the absence of externalities, the “invisible hand” leads a market to maximize
a.producer profit from that market.
b.total benefit to society from that market.
c.both equality and efficiency in that market.
d.output of goods or services in that market.
4) Table 12-10
If Si has $100,000 in taxable income, his marginal tax rate is
a. 25%.
b.28%.
c.33%.
d.35%.
5) The idea that tax cuts would increase the quantity of labor supplied, thus increasing
tax revenue, became known as supply-side economics.
a.True
b.False
6) Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Assume that Zimbabwe and Portugal each has 60 machine minutes available.
Originally, each country divided its time equally between the production of
toothbrushes and hairbrushes. Now, each country spends all its time producing the good
in which it has a comparative advantage. As a result, the total output increased by
a.4 toothbrushes and 2 hairbrushes.
b.10 toothbrushes and 5 hairbrushes.
c.16 toothbrushes and 8 hairbrushes.
d.20 toothbrushes and 10 hairbrushes.
7) The return to investment in human capital is observed
a.only when workers are assigned identical tasks.
b.in the wage differential between workers.
c.in the high school dropout rate in inner-city urban school districts.
d.in the low wages of educated factory workers.
8) Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Chile should specialize in the production of
a.coffee and import soybeans.
b.soybeans and import coffee.
c.both goods and import neither good.
d.neither good and import both goods.
9) Figure 10-19
Each additional unit of the good that is produced yields an external benefit of
a. $15.
b.$23.
c.$36.
d.$89.
10) Which of the following is not correct?
a.In a labor market, the wage adjusts to balance the supply and demand for labor.
b.A profit-maximizing firm hires workers so long as the wage rate exceeds the value of
the marginal product of labor.
c.Any event that changes the supply or demand for labor must change the equilibrium
wage.
d.Any event that changes the supply or demand for labor must change the value of the
marginal product.
11) Suppose the government imposes a tax of 10 percent on the first $40,000 of income
and 20 percent on all income above $40,000. What are the tax liability and the marginal
tax rate for a person whose income is $30,000?
a.both are 10 percent
b.10 percent and $2,000, respectively
c.$3,000 and 10 percent, respectively
d.$3,000 and 20 percent, respectively
12) What is another word for marginal?
13) Which country has a comparative advantage in producing compasses?
14) Table 17-31
Imagine a small town in a remote area where only two residents, Maria and Miguel,
own dairies that produce milk that is safe to drink. Each week Maria and Miguel work
together to decide how many gallons of milk to produce. They bring milk to town and
sell it at whatever price the market will bear. To keep things simple, suppose that Maria
and Miguel can produce as much milk as they want without cost so that the marginal
cost is zero. The weekly town demand schedule and total revenue schedule for milk is
shown in the table below:
Refer to Table 17-31. Discuss the difference between the monopoly outcome and the
Nash equilibrium.
15) The accumulation of investments in people is called
16) Zack quits his job at a consulting firm, which pays $40,000 a year, to enroll in a
two-year graduate program. His annual school expenses are $30,000 for tuition, $2,000
for books, and $600 for food. What is his opportunity cost of attending the two-year
graduate program?
17) Describe how an accounting firm could experience economies of scale.