1) Some companies merge in order to lower costs through efficient joint production.
a.True
b.False
2) Suppose that the country of Xenophobia chose to isolate itself from the rest of the
world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would
not engage in foreign trade. From an economic perspective, this idea would
a.make sense if Xenophobia had an absolute advantage in all goods.
b.make sense if Xenophobia had no absolute advantages in any good.
c.not make sense as long as Xenophobia had a comparative advantage in some good.
d.not make sense as long as Xenophobia had an absolute advantage in at least half the
goods that could be traded.
3) Which of the following is an example of a compensating differential?
a.Two workers with different levels of on-the-job training earn different salaries.
b.Two workers whose jobs entail different working conditions earn different salaries.
c.Two workers whose jobs require different levels of technical expertise earn different
salaries.
d.Two workers with different levels of natural ability earn different salaries.
4) Suppose a firm is considering producing zero units of output. We call this exiting an
industry in the short run and shutting down in the long run.
a.True
b.False
5) Table 13-20
Listed in the table are the long-run total costs for three different firms.
Refer to Table 13-20. Firm B is experiencing constant returns to scale.
a.True
b.False
6) Figure 9-13
With trade, producer surplus is
a. $900.
b. $1,100.
c. $1,500.
d. $2,000.
7) For a profit-maximizing monopolistically competitive firm, price exceeds marginal
cost in
a.the short run but not in the long run.
b.the long run but not in the short run.
c.both the short run and the long run.
d.neither the short run nor the long run.
8)
Refer to Figure 7-22.
At the equilibrium price, producer surplus is
a. $5,000.
b. $2,500.
c. $3,500.
d. $1,750.
9) Figure 18-2
The figure below shows the production function for a particular firm.
Refer to Figure 18-2. Suppose the firm pays a wage equal to $160 per unit of labor and
sells its output at $10 per unit. What is the value of the marginal product of labor for the
fourth worker?
a.10 units
b.$100
c.$1,000
d.$1,600
10) The graph below represents the various combinations of ham and cheese (in
pounds) that the nation of Bonovia could produce in a given month.
If the production possibilities frontier shown is for 240 hours of production, then how
long does it take Bonovia to make one pound of cheese?
a.3/5 hour
b.3/4 hour
c.4/3 hours
d.5/3 hours
11) Consider the market for 2-packs of light bulbs below.
Suppose there is an improvement in technology in this market and the price of lamps, a
complementary good, increases. What changes do you predict in the equilibrium price
and quantity?
12) Figure 18-12. The figure shows the relationship between the number of mechanics
hired and the number of car repairs performed per day at a car-repair shop.
Refer to Figure 18-12. Suppose the shop charges $125 per repair. Over what interval of
wages, W, would the shop maximize its profit by hiring exactly 4 mechanics?
(Determine W1 and W2 such that W1 < W < W2.)
13) Table 12-24
The tax system is an example of atax.
14) A recent flood in the Midwest has destroyed much of the farmland that lies in fertile
regions near the rivers. Describe the effect of the flood on the marginal productivity of
land, labor, and capital. How would the flood affect the price of inputs? Provide some
examples.
15) Government regulators might suspect a firm of engaging in predatory pricing if it
charges prices that seem to be too
__________.
16) Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire
extinguishers slopes upward. The production of the 500th fire extinguisher entails the
following:
♦ a private cost of $10;
♦ an external cost of $0;
♦ a private value of $9;
♦ an external benefit of $3.
In order to reach the social optimum, should fire extinguishers be taxed or subsidized?
What is the appropriate amount of the tax or subsidy on each fire extinguisher?
17) Suppose that good X has few close substitutes and that good Y has many close
substitutes. Which good would you expect to have more price inelastic demand?
18) Suppose a Pigovian tax is imposed on a market that is characterized by one or more
externalities. Is this a command- and-control policy or is it a market-based policy?
19) Assume that Jamaica and Norway can switch between producing coolers and
producing radios at a constant rate. The following table shows the number of coolers or
number of radios each country can produce in one day.
20) d.