1) Figure 10-11
Which of the following statements is correct?
a.The private value of the 420th unit of output is $15.
b.The social value of the 420th unit of output is $42.
c.The external benefit of the 420th unit of output is $27.
d.All of the above are correct.
2) In the long run,
a.competitive firms‘ profits are zero.
b.competitive firms‘ variable costs are zero.
c.competitive firms‘ ATC curves shift upward or downward to ensure that all demand is
satisfied.
d.the number of firms in the market is fixed.
3) If a surplus exists in a market, then we know that the actual price is
a.above the equilibrium price, and quantity supplied is greater than quantity demanded.
b.above the equilibrium price, and quantity demanded is greater than quantity supplied.
c.below the equilibrium price, and quantity demanded is greater than quantity supplied.
d.below the equilibrium price, and quantity supplied is greater than quantity demanded.
4) When firms have an incentive to exit a competitive market, their exit will
a.lower the market price.
b.necessarily raise the costs for the firms that remain in the market.
c.raise the profits of the firms that remain in the market.
d.shift the demand for the product to the left.
5) Figure 17-1
Refer to Figure 17-1. Suppose this market is served by two firms who each face the
marginal cost curve shown in the diagram and have zero fixed cost. The marginal
revenue curve that a monopolist would face in this market is also shown. If the firms
are able to collude successfully, each firm should earn a profit equal to
a.$1.
b.$2.
c.$4.
d.$6.
6) A competitive market may be consistent with a discriminatory wage differential if
a.firms’ customers have discriminatory preferences.
b.the wage differential is explained by a compensating differential.
c.the wage differential is explained by differences in human capital.
d.All of the above are correct.
7) Table 12-2
Suppose that the government imposes a $2 tax on delights, causing the price to increase
from $4.00 to $6.00. Total consumer surplus will fall from
a.$6 to $3.
b.$7 to $4.
c.$6 to $2.
d.$5 to $3.
8) Spain allows trade with the rest of the world. We know that Spain has a comparative
advantage in producing olive oil if we know that
a.Spain imports olive oil.
b.the world price of olive oil is higher than the price of olive oil that would prevail in
Spain if trade with other countries were not allowed.
c.consumer surplus in Spain would exceed producer surplus in Spain if trade with other
countries were not allowed.
d.All of the above are correct.
9) Which of the following is not correct?
a.Earnings from capital may be paid to households in the form of dividends.
b.Earnings from capital may be retained by firms to purchase additional capital.
c.Firms may not pay out all of their earnings to households.
d.Firms earn the highest profits when the owners of capital receive a value above the
marginal product.
10) Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of
$7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
Suppose the government levies a tax of $1 on a movie ticket and that, as a result, the
price of a movie ticket increases to $6. If Bob and Lisa both purchase a movie ticket,
what is the deadweight loss from the tax?
a.$0
b.$1
c.$2
d.$3
11) Table 13-1
What is total output when 1 worker is hired?
a.10
b.30
c.45
d.75
12) Figure 13-3
Assuming that the firm depicted produces cookies, which of the statements below is
most consistent with the shape of the total cost curve?
a.Producing an additional cookie is always more costly than producing the previous
cookie.
b.Total production of cookies decreases with additional units of input.
c.Producing additional cookies is equally costly, regardless of how many cookies are
already being produced.
d.Producing additional cookies becomes increasingly costly only when the number of
cookies already being produced is large.
13) Table 13-18
What is the marginal product of the third worker?
14) If the members of an oligopoly could agree on a total quantity to produce and a
price to charge, what quantity and price would they choose? Will this choice represent a
Nash equilibrium?
15) The following table shows the supply and demand schedules in a market.
At a price of $2, will there be a surplus or shortage of units in this market?
16) Scenario 7-1
Suppose market demand is given by the equation
Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much
additional consumer surplus do consumers initially in the market at the $10 price
receive?
17) On average professors of finance earn more than professors of economics. Other
things the same, what does this imply about the supply of each type of professor?