1) Your professor loves her work, teaching economics. She has been offered other
positions in the corporate world that would increase her income by 25 percent, but she
has decided to continue working as a professor. Her decision would not change unless
the marginal
a.cost of teaching increased.
b.benefit of teaching increased.
c.cost of a corporate job increased.
d.benefit of a corporate job decreased.
2) In the work-leisure model, suppose consumption and leisure are both normal goods.
The income effect of a wage increase results in the worker choosing to
a.work less than before.
b.work more than before.
c.possibly work more or less than before.
d.work more with a higher level of consumption.
3) For a certain firm, the 100th unit of output that the firm produces has a marginal
revenue of $11 and a marginal cost of $10. It follows that the
a.production of the 100th unit of output increases the firm‘s profit by $1.
b.production of the 100th unit of output increases the firm‘s average total cost by $1.
c.firm‘s profit-maximizing level of output is less than 100 units.
d.production of the 101st unit of output must increase the firm‘s profit by more than $1.
4) Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual
flavors of organic, homemade ice cream so he has a monopoly over his own ice cream,
though he competes with many other firms selling ice cream in Fairfield for the same
customers. Peter’s demand and cost values for sales per day are given in the table below.
(Everyone who purchases Peter’s ice cream buys a double scoop cone because it’s so
delicious.)
How much profit will Peter earn each day if he chooses the price and quantity that
maximize his profit?
a.$176
b.$208
c.$225
d.$352
5) Figure 10-10
The socially optimal quantity of output is
a.120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by
the seller of the 120th unit.
b.120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by
society of the 120th unit.
c.160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by
the seller of the 160th unit.
d.160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by
society of the 160th unit.
6) Figure 8-3
The vertical distance between points A and C represents a tax in the market.
The loss in consumer surplus caused by the tax is measured by the area
a.P1P3AC.
b.P3ABP2.
c.P1P3ABC.
d.ABC.
7) Table 12-17
The following table shows the marginal tax rates for unmarried individuals for two
years.
20092010
Suppose one goal of the tax system was to achieve vertical equity. While people may
disagree about what is “equitable,” based on the marginal tax rates given for the two
years, which of the following statements is true?
a.Vertical equity is possible in both years.
b.Vertical equity is possible in 2009 but not in 2010.
c.Vertical equity is not possible in 2009 but is possible in 2010.
d.Vertical equity is not possible in either year.
8) Figure 21-6
Refer to Figure 21-6. Suppose a consumer has $200 in income, the price of popcorn is
$1, and the price of Mt. Dew is $2. What is the value of A?
a. 200
b.100
c.50
d.25
9) When a profit-maximizing competitive firm finds itself minimizing losses because it
is unable to earn a positive profit, this task is accomplished by producing the quantity at
which price is equal to
a.sunk cost.
b.average fixed cost.
c.average variable cost.
d.marginal cost.
10) If the government regulates the price a natural monopolist can charge to be equal to
the firm’s marginal cost, the government will likely need to subsidize the firm.
a.True
b.False
11) Table 7-17
Both the demand curve and the supply curve are straight lines. If the price is $4 but
only 6 units are bought and sold, producer surplus will be
a.$16.
b.$18.
c.$24.
d.$26.
12)
If the price increases in the region of the demand curve between points B and C, we can
expect total revenue to
a.increase.
b.stay the same.
c.decrease.
d.first decrease, then increase until total revenue is maximized.
13) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
When the tax is imposed in this market, the price buyers effectively pay is a. $4.
b.$6.
c.$10.
d.$16.
14) Figure 21-18
Refer to Figure 21-18. Bundle D represents a point where
a.MRSxy > Py/Px.
b.MRSxy = Px/Py.
c.MRSxy < Px/Py.
d.MRSxy < Py/Px.
15) Figure 10-18. The graph represents a corrective tax to reduce pollution. On the
axes, Q denotes the quantity of pollution and P represents the price of pollution.
What is the appropriate label for
the downward-sloping line on the graph?
a.”Demand for clean air”
b.”Demand for pollution rights”
c.”Supply of pollution permits”
d.”Tax paid to government”
16) Suppose that a firm’s longrun average total costs of producing handcrafted chairs is
$300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this
range of output, the firm is likely experiencing
a.economies of scale.
b.constant returns to scale.
c.specialization.
d.coordination problems.