1) The value of the for a good will be relatively large when
a.there are no good substitutes available for the good.
b.the time period in question is relatively short.
c.the good is a luxury rather than a necessity.
d.All of the above are correct.
2) Figure 16-3
This figure depicts a situation in a monopolistically competitive market.
Refer to Figure 16-3. This firm is operating
a.in the short run and earning a positive economic profit.
b.in the short run and breaking even.
c.in the long run and earning a positive economic profit.
d.in the long run and incurring and economic loss.
3) Table 7-7
You have four essentially identical extra tickets to the Midwest Regional Sweet 16
game in the men’s NCAA basketball tournament. The table shows the willingness to
pay of the four potential buyers in the market for a ticket to the game. You offer to sell
the tickets for $325. How many tickets do you sell, and what is the total consumer
surplus in the market?
a.one ticket; $175
b.two tickets; $225
c.three tickets; $225
d.three tickets; $275
4) Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit.
Relative to the free-trade outcome, the imposition of the tariff
a.decreases imports of the good by 300 units and increases domestic production of the
good by 300 units.
b.decreases imports of the good by 300 units and increases domestic production of the
good by 600 units.
c.decreases imports of the good by 600 units and increases domestic production of the
good by 300 units.
d.decreases imports of the good by 600 units and increases domestic production of the
good by 600 units.
5) Which of the following statements is not valid when supply is perfectly elastic?
a.The elasticity of supply approaches infinity.
b.The supply curve is horizontal.
c.Very small changes in price lead to very large changes in quantity supplied.
d.The time period under consideration is more likely a short period rather than a long
period.
6) Capital is paid according to the value of its marginal product
a.only if earnings from capital are paid to households in the form of dividends.
b.only if earnings from capital are kept within firms as retained earnings.
c.regardless of whether earnings from capital are paid to households in the form of
dividends or whether those earnings are kept within firms as retained earnings.
d.None of the above is correct; unlike labor, capital is a factor of production for which
earnings are unrelated to the value of marginal product.
7) Figure 18-7
Refer to Figure 18-7. When the relevant labor supply curve is S1, and the labor market
is in equilibrium, the
a.wage is W1.
b.opportunity cost of leisure to workers is W1.
c.value of the marginal product of labor to firms is W1.
d.All of the above are correct.
8) Scenario 18-1
Harry owns a snow-removal business. He hires workers to shovel driveways for him
during the winter. The first worker he hires can shovel twelve driveways in one day.
When Harry hires two workers, they can shovel a total of 22 driveways in one day.
When Harry hires a third worker, he shovels an additional eight driveways in one day.
Refer to Scenario 18-1. Suppose that Harry pays each worker $80 per day and that he
charges each customer $20 to have his driveway shoveled. What is the value of the
marginal product of labor for the second worker?
a.$200
b.$240
c.$800
d.$960
9) When robots are used to replace workers on a factory production line, the wage gap
between skilled and unskilled workers
a.will increase only if the company can increase the price of its product.
b.is likely to increase.
c.is likely to decrease.
d.will not change.
10) Which of the following policies is not an example of a command-and-control
policy?
a.subsidies
b.Pigovian taxes
c.tradable pollution permits
d.None of the above is an example of a command-and-control policy.
11) Which of the following is a disadvantage of government provision of a public
good?
a.The government lacks information about what people are willing to pay for the good.
b.The government does not provide enough of any public good.
c.The private sector can provide all public goods at a lower cost.
d.None of the above is a disadvantage.
12) The distribution of income for Abbyville is as follows:
If the poverty rate in Abbyville is 12 percent, what is the poverty line in Abbyville?
a.$15,000.
b.$20,000.
c.$25,000.
d.$30,000.
13) The smaller the , the
a.more likely the product is a luxury.
b.smaller the responsiveness of quantity demanded to a change in price.
c.more substitutes the product has.
d.greater the responsiveness of quantity demanded to a change in price.
14) Which of the following is not a way for the government to solve the problem of
excessive use of common resources?
a.regulation
b.taxes
c.turning the common resource into a public good
d.turning the common resource into a private good
15) The free-rider problem arises when the number of beneficiaries is large and
exclusion of any of them is impossible.
a.True
b.False
16) If a competitive firm is selling 900 units of its product at a price of $10 per unit and
earning a positive profit, then
a.its total cost is more than $9,000.
b.its marginal revenue is less than $10.
c.its average total cost is less than $10.
d.the firm cannot be a competitive firm because competitive firms cannot earn positive
profits.
17) Consider monopoly, monopolistic competition, and perfect competition. In which of
these three market structures does a profit-maximizing firm charge a price that exceeds
marginal cost?
a.monopoly only
b.monopoly and monopolistic competition only
c.monopoly, monopolistic competition, and perfect competition
d.The answer cannot be determined without knowing whether the market is in the long
run or short run.
18) Peter was recently hired as a salesman for a national consulting firm. His job
involves spending a significant portion of his time out of the office visiting prospects
and attending conferences. Which of the following is a strategy the consulting firm may
employ to discourage Peter from shirking his responsibilities?
a.Tell Peter that the shareholders want to earn a large profit this year.
b.Stop paying Peter bonuses based on how much he’s sold.
c.Allow Peter to set his own schedule and work from home frequently.
d.Pay Peter an above-equilibrium wage.
19) Suppose good X has a negative income elasticity of demand. This implies that good
X is
a.a normal good.
b.a necessity.
c.an inferior good.
d.a luxury.
20) Taxes on labor tend to encourage second earners to stay at home rather than work in
the labor force.
a.True
b.False