1) Goods with close substitutes tend to have more elastic demands than do goods
without close substitutes.
a.True
b.False
2) Economists say that a market where goods are not consumed by those valuing the
goods most highly is
a.laissez-faire..
b.unequal.
c.inefficient.
d.rational.
3) Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that
produce safe drinking water. Each week Rochelle and Alec work together to decide how
many gallons of water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that Rochelle and Alec can
pump as much water as they want without cost so that the marginal cost of water equals
zero. The weekly town demand schedule and total revenue schedule for water is shown
in the table below:
Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in
the market for water, how many gallons of water will be produced and sold?
a.0
b.500
c.600
d. 1,200
4) Product differentiation in monopolistically competitive markets ensures that, for
profit-maximizing firms,
a.marginal revenue will equal average total cost.
b.price will exceed marginal cost.
c.marginal cost will exceed average revenue.
d.average variable cost will be declining.
5) If all existing firms and all potential firms have the same cost curves, there are no
inputs in limited quantities, and the market is characterized by free entry and exit, then
the long-run market supply curve
a.is horizontal and equal to the minimum of long-run marginal cost for each firm.
b.must slope downward.
c.must slope upward.
d.is horizontal and equal to the minimum of long-run average cost for each firm.
6) A demand schedule is a table that shows the relationship between
a.quantity demanded and quantity supplied.
b.income and quantity demanded.
c.price and quantity demanded.
d.price and income.
7) If the demand curve for Good X shifts from
Db to Da, then
a.firms would be willing to supply more of Good X than before at each possible price.
b.people are willing to buy less of Good X than before at each possible price.
c.people’s incomes must have increased.
d.the price of Good X has increased.
8) When a supply curve is relatively flat, the
a.sellers are not at all responsive to a change in price.
b.equilibrium price changes substantially when the demand for the good changes.
c.supply is relatively elastic.
d.supply is relatively inelastic.
9) If the demand for bananas is elastic, then an increase in the price of bananas will
a.increase total revenue of banana sellers.
b.decrease total revenue of banana sellers.
c.not change total revenue of banana sellers.
d.There is not enough information to answer this question.
10) Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks.
Which of the following is not possible?
a.Jim has an absolute advantage in the production of baseball bats and in the production
of hockey sticks.
b.Jim has an absolute advantage in the production of baseball bats and a comparative
advantage in the production of hockey sticks.
c.Jim has an absolute advantage in the production of hockey sticks and a comparative
advantage in the production of baseball bats.
d.Jim has a comparative advantage in the production of baseball bats and in the
production of hockey sticks.
11) In a long-run equilibrium, the marginal firm has
a.price equal to minimum marginal cost.
b.total revenue equal to total cost.
c.accounting profit equal to zero.
d.All of the above are correct.
12) In comparison to perfect competition, monopolistic competition is characterized by
a.efficient scale.
b.pricing at marginal cost.
c.excess capacity.
d.All of the above are correct.
13) When economists are trying to help improve the world, they are
a.in the realm of positive economics rather than normative economics.
b.in the realm of macroeconomics rather than microeconomics.
c.scientists.
d.policy advisers.
14) The socially efficient quantity is found where the demand curve intersects the
marginal cost curve.
a.True
b.False