1) The federal government is concerned about the negative effects of cigarette smoking
in the United States. Suppose Congress is considering two plans. One plan would limit
the production of cigarettes. The other would require manufacturers to include graphic
photos on cigarette packages of people suffering cancer’s effects. Which of the
following statements is true?
a.Both programs would increase the price of cigarettes.
b.Both programs would reduce the quantity of cigarettes sold.
c.Both programs would decrease revenues for cigarette manufacturers.
d.All of the above are correct.
2) A consumer consumes two normal goods, coffee and chocolate. The price of coffee
rises. The income effect, by itself, suggests that the consumer will consume
a.more coffee and more chocolate.
b.less coffee and less chocolate.
c.more coffee and less chocolate.
d.less coffee and more chocolate.
3) Table 10-2
The following table shows the private value, private cost, and social value for a market
with a positive externality.
What is the socially-optimal level of output in this market?
a.3 units
b.4 units
c.5 units
d.6 units
4) In markets characterized by oligopoly,
a.the oligopolists earn the highest profit when they cooperate and behave like a
monopolist.
b.collusive agreements will always prevail.
c.collective profits are always lower with cartel arrangements than they are without
cartel arrangements.
d.pursuit of self-interest by profit-maximizing firms always maximizes collective
profits in the market.
5) Table 17-33
Suppose that Robert and Howard own the only two movie studios in California. Each
producer must choose between a low budget and a high budget strategy for his next
film. The economic profit from each strategy is indicated in the table below:
Refer to Table 17-33. Does Howard have a dominant strategy? If so, describe it.
6) Figure 10-9
Gallons Supplied
11) If these are the only four sellers in the market for ice cream, then the market
quantity supplied at a price of $4 is
a.4 gallons.
b.5 gallons.
c.20 gallons.
d.80 gallons.
12) If price in this market is currently $14, then
there would be a(n)
a.surplus of 20 units. The law of supply and demand predicts that the price will rise
from $14 to a higher price.
b.excess supply of 20 units. The law of supply and demand predicts that the price will
fall from $14 to a lower price.
c.surplus of 40 units. The law of supply and demand predicts that the price will rise
from $14 to a higher price.
d.excess supply of 40 units. The law of supply and demand predicts that the price will
fall from $14 to a lower price.