1) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. Pursuing its own best interests, Farland will impose trade
sanctions against U.S. firms
a.only if the U.S. does not renew MFN status with Farland.
b.only if the U.S. renews MFN status with Farland.
c.regardless of whether the U.S. renews MFN status with Farland.
d.None of the above is correct. In pursuing its own best interests, Farland will in no
case impose trade sanctions against U.S. firms.
2) Figure 19-7
Refer to Figure 19-7. The figure shows labor demand and labor supply in a
non-unionized labor market. If the current labor demand is D1 and the current labor
supply is S1, when a union is established in this market and succeeds in raising the
wage to $18 per hour, what is the change in the number of workers employed?
3) A home has been on the market for an extended amount of time without much
interest from buyers. The sellers decide to purchase and include a home warranty
insuring against major defects with the home. The warranty is an example of a(n)
a.signal.
b.screen.
c.moral hazard.
d.adverse selection.
4) Table 16-3
The following table shows the output produced by each of the top eight firms in four
industries as well as the total industry output for those industries.
What is the concentration ratio for Industry C?
a.approximately 44%
b.approximately 48%
c.approximately 53%
d.approximately 56%
5)
The maximum value of total revenue corresponds to a price of
a. $20.
b.$50.
c.$70
d. $100.
6) Production is
a.possible at points J, K, L, and M, but efficient only at points J, L, and M.
b.possible at points J, K, L, and M, but efficient only at point K.
c.possible at points J, L, M, and N, but efficient only at points J, L, and M.
d.possible at points J, L, M, and N, but efficient only at point N.
7) Opportunity cost measures the trade-off between two goods that each producer faces.
a.True
b.False
8) A total-cost curve shows the relationship between the
a.quantity of an input used and the total cost of production.
b.quantity of output produced and the total cost of production.
c.total cost of production and profit.
d.total cost of production and total revenue.
9) The government raises revenue through taxation to pay for the services it provides.
a.True
b.False
10) Most businesses advertise their products and services. Some business use SPAM
emails to advertise because the cost of a mass e-mail is close to zero. Other business
spend millions of dollars to advertise in a 30-second spot during the Super Bowl.
Having observed this real world data, economists argue that the amount of money that a
business spends on advertising is a proxy for a good or service’s
a.size.
b.quality.
c.newness.
d.cost of production.
11) A recent news report lamented the plight of corn farmers in Wisconsin due to a
severe drought. Which of the following best describes the effect on corn farmers in
Minnesota, where sufficient rainfall occurred?
a.Their revenue increases because price increases and demand is elastic.
b.Their revenue increases because price increases and demand is inelastic.
c.Their revenue decreases because price decreases and demand is inelastic.
d.Their revenue decreases because price increases and demand is elastic.
12) Market failure can be caused by
a.low consumer demand.
b.equilibrium prices.
c.externalities and market power.
d.high prices and foreign competition.
13) Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat
cake and eat corn. In which of the following cases is it impossible for both Olivia and
Andrew to benefit from trade?
a.Olivia cannot grow corn and Andrew cannot bake cakes.
b.Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at
growing corn.
c.Olivia is better than Andrew at baking cakes and at growing corn.
d.Both Olivia and Andrew can benefit from trade in all of the above cases.
14) Like competitive firms, monopolies choose to produce a quantity in which marginal
revenue equals marginal cost.
a.True
b.False
15) The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in
almonds, the price of a pound of almonds there was $3.00. Once Uruguay began
allowing trade in almonds with other countries, Uruguay began
a.exporting almonds and the price per pound in Uruguay remained at $3.00.
b.exporting almonds and the price per pound in Uruguay increased to $4.50.
c.importing almonds and the price per pound in Uruguay remained at $3.00.
d.importing almonds and the price per pound in Uruguay increased to $4.50.
16) Evidence from experiments in which real people play the ultimatum game supports
the idea that people
a.are rational wealth-maximizers.
b.tend to be driven by fairness, without regard for their own self-interest.
c.are driven by both fairness and self-interest.
d.have trouble calculating their own levels of wealth.
17) Figure 7-34
Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in
this market. With the price floor, how much is total producer surplus assuming those
producers with the lowest cost are the ones who supply the market?
18) Suppose after graduating from college you get a job working at a bank earning
$30,000 per year. After two years of working at the bank earning the same salary, you
have an opportunity to enroll in a one-year graduate program that would require you to
quit your job at the bank. Which of the following should not be included in a
calculation of your opportunity cost?
a.the cost of tuition and books to attend the graduate program
b.the $30,000 salary that you could have earned if you retained your job at the bank
c.the $45,000 salary that you will be able to earn after having completed your graduate
program
d.the value of insurance coverage and other employee benefits you would have received
if you retained your job at the bank
19) An individual deciding how to allocate her limited time is dealing with both scarcity
and trade-offs.
a.True
b.False