1) Which of the following events would cause the price of oranges to fall?
a.There is a shortage of oranges.
b.The FDA announces that bananas cause strokes, and oranges and bananas are
substitutes.
c.The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nation’s oranges.
d.All of the above are correct.
2) Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With
trade and a tariff, consumer surplus is
a.$625 and producer surplus is $25.
b.$625 and producer surplus is $225.
c.$1,225 and producer surplus is $25.
d.$1,225 and producer surplus is $225.
3) A tax on gasoline often reduces road congestion because gasoline
a.and driving are complements.
b.and driving are substitutes.
c.is a normal good, while driving is an inferior good.
d.is an inferior good, while driving is a normal good.
4) Which of the following is the primary cause of inflation?
a.an increase in the quantity of money
b.an increase in government spending
c.an increase in unemployment
d.an increase in productivity
5) If we observe that a consumer’s budget constraint has shifted outward, we can
assume that the consumer will buy
a.fewer normal goods and more inferior goods.
b.more normal goods and fewer inferior goods.
c.more normal goods and more inferior goods.
d.fewer normal goods and fewer inferior goods.
6)
Using the midpoint method, between prices of $20 and $30, is about
a. 0.33
b. 0.4
c. 1.33
d. 3
7) Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not
plant wheat on 10 percent of their land, then
a.consumers of wheat would buy more wheat.
b.wheat farmers would suffer a reduction in their total revenue.
c.wheat farmers would experience an increase in their total revenue.
d.the demand for wheat would decrease.
8) The textile industry is composed of a large number of small firms. In recent years,
these firms have suffered economic losses, and many sellers have left the industry.
Economic theory suggests that these conditions will
a.shift the demand curve outward so that price will rise to the level of production cost.
b.cause the remaining firms to collude so that they can produce more efficiently.
c.cause the market supply to decline and the price of textiles to rise.
d.cause firms in the textile industry to suffer long-run economic losses.
9) Figure 21-16
Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer’s
income is $40. Which point represents the consumer’s optimal choice?
a.A
b.B
c.C
d.D
10) Suppose a market is initially perfectly competitive with many firms selling an
identical product. Over time, however, suppose the merging of firms results in the
market being served by only three or four firms selling this same product. As a result,
we would expect
a.an increase in market output and an increase in the price of the product.
b.an increase in market output and an decrease in the price of the product.
c.a decrease in market output and an increase in the price of the product.
d.a decrease in market output and a decrease in the price of the product.
11) Figure 7-16
Suppose the market starts out in equilibrium with demand curve D and supply curve S.
Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at
every price. What is the change in producer surplus as a result of this demand shift?
a.$80
b.$160
c.$240
d.$320
12) Which of the following scenarios is consistent with the Laffer curve?
a.The tax rate is 1 percent, and tax revenue is very low.
b.The tax rate is 1 percent, and tax revenue is very high.
c.The tax rate is 99 percent, and tax revenue is very high.
d.The tax rate is moderate (between very high and very low), and tax revenue is very
low.
13) How would a production function that exhibits decreasing marginal product affect
the shape of the total cost curve?
Explain or draw a graph.
14) Table 17-30
Imagine a small town in which only two residents, Abby and Brad, own wells that
produce safe drinking water. Each week Abby and Brad work together to decide how
many gallons of water to pump. They bring water to town and sell it at whatever price
the market will bear. To keep things simple, suppose that Abby and Brad can pump as
much water as they want without cost so that the marginal cost is zero. The weekly
town demand schedule and total revenue schedule for water is shown in the table
below:
Refer to Table 17-30. Discuss the difference between the monopoly outcome and the
Nash equilibrium.
15) The difference in wages that results from nonmonetary characteristics of different
jobs is called the
16) Economics is the study of ______.
17) List five arguments given to support trade restrictions.
18) Comparing firms in perfectly competitive markets to monopoly firms, which
charges a price equal to marginal cost?
19) It costs a company $30,000 to produce 600 heart rate monitors. The company’s cost
will be $30,070 if it produces an additional heart rate monitor. The company is currently
producing 600 heart rate monitors.
A customer is willing to pay $60 for the 601stheart rate monitor. Should the company
produce and sell it? Explain.
20)
In this market for tablet computers, more suppliers enter the market and the price of
laptops, a substitute good, increases, while all other factors remain constant. Which
curve(s) shift(s) and in which direction?