1) Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot
summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Karen
has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend
on ice cream and paperback novels. Who can afford to purchase 5 gallons of ice cream
and 8 paperback novels?
a.Karen, Tara, and Chelsea
b.Karen only
c.Tara and Chelsea but not Karen
d.none of the women
2) Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents
the price of cars.
The price corresponding to the
horizontal dotted line on the graph represents the price of cars
a.after trade is allowed.
b.before trade is allowed.
c.that maximizes total surplus when trade is allowed.
d.that minimizes the well-being of domestic car producers when trade is allowed.
3) National Public Radio would be considered a club good.
a.True
b.False
4) Figure 16-1
Which of the graphs illustrates the demand curve most likely faced by a firm in a
monopolistically competitive market?
a.Panel A
b.Panel B
c.Panel C
d.Panel D
5) Which of the following would be most likely to have monopoly power?
a.a national florist
b.an online bookstore
c.a local restaurant
d.a local electrical cooperative
6)
The movement from point A to point B on the graph is called
a.a decrease in supply.
b.an increase in supply.
c.an increase in the quantity supplied.
d.a decrease in the quantity supplied.
7) An important difference between the situation faced by a profit-maximizing
monopolistically competitive firm in the short run and the situation faced by that same
firm in the long run is that in the short run,
a.price may exceed marginal revenue, but in the long run, price equals marginal
revenue.
b.price may exceed marginal cost, but in the long run, price equals marginal cost.
c.price may exceed average total cost, but in the long run, price equals average total
cost.
d.there are many firms in the market, but in the long run, there are only a few firms in
the market.
8) Thousands of people develop lung cancer from second-hand exposure to cigarette
smoke. This is an example of
a.a market failure caused by an externality.
b.a market failure caused by market power.
c.a market failure caused by equality.
d.There is no market failure in this case.
9) The indifference curves for nickels and dimes are straight lines.
a.True
b.False
10) Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
The opportunity cost of 1 toaster for Maya is
a.0.625 mixers.
b.1.6 hours of labor.
c.1.6 mixers.
d.8 hours of labor.
11) The output effect describes the situation when a monopolist sells more output and,
all else equal, total revenue
a.increases.
b.decreases.
c.is unchanged.
d.is maximized.
12) Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each
company decides whether to charge a high price or a low price. In the figure, the dollar
amounts are payoffs and they represent annual profits for the two companies.
Refer to Figure 17-5. In what sense is the game involving ABC and QRS similar to the
prisoners’ dilemma game involving Bonnie and Clyde?
a.In both games, if the players pursue their own interests, then the outcome is the best
possible outcome for each player.
b.In both games, a dominant strategy can be identified for each player.
c.In both games, cooperation between the players is easy to maintain.
d.All of the above are correct.
13) In economics, capital refers to
a.the finances necessary for firms to produce their products.
b.buildings and machines used in the production process.
c.the money households use to purchase firms’ output.
d.stocks and bonds.
14) Table 10-6
The following table shows the total costs for each of four firms (A, B, C, and D) to
eliminate units of pollution from their production processes. For example, for Firm A to
eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units
of pollution, it would cost a total of $103.
Suppose there is presently no pollution fee, and the government wishes to eliminate
exactly 8 units of pollution. Which of the following fees per unit of pollution would
achieve that goal?
a.$65
b.$75
c.$80
d.$88
15) Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
In order to maximize its profit, the firm will choose to produce
a.less than 100 units of output.
b.100 units of output.
c.between 100 and 133.33 units of output.
d.more than 133.33 units of output.
16) For cartels, as the number of firms (members of the cartel) increases,
a.the monopoly outcome becomes more likely.
b.the magnitude of the price effect decreases.
c.the more concerned each seller is about its own impact on the market price.
d.the easier it becomes to observe members violating their agreements.
17)
Consider the production possibilities frontier for an economy that produces only sofas
and cars. The opportunity cost of each car is
a.the slope of the production possibilities frontier.
b.3/2 sofas.
c.2/3 of a sofa.
d.Both a and b are correct.
18) Which of the following statements is correct?
a.In the long run, both perfectly competitive firms and monopolistically competitive
firms operate with excess capacity.
b.A firm operates with excess capacity when, in the long run, its level of output is
below the efficient scale.
c.For any firm, efficient scale is the level of output at which the average-total-cost curve
is tangent to the demand curve.
d.All of the above are correct.
19) Figure 13-1
Suppose the production function shifts from TP1 to TP2. Such a shift in the total
product curve is most likely due to an increase in the firm’s
a.costs of production.
b.productivity.
c.product price.
d.market share.
20) Which of the following is not correct?
a.Many measures of inequality are based on income, which may not reflect a person’s
standard of living.
b.Because many of the poorest families receive in-kind transfers, more families have
lower standards of living when compared to poverty rates based on income.
c.Because people can borrow and save to smooth out life cycle changes in income,
equality measures based only on income may not reflect a person’s standard of living.
d.A person’s standard of living depends more on her permanent income than her
transitory income, so inequality measures based on current income may be misleading.