1) Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Chi
le and Colombia would not be able to gain from trade if Colombia’s opportunity cost of
one pound of soybeans changed to
a.1/2 pound of coffee.
b.3/4 pound of coffee.
c.4/3 pounds of coffee.
d.2 pounds of coffee.
2) In class action lawsuits interested parties to the lawsuit are not required to pay
attorney fees directly. This is an example of an attempt to
a.maximize attorney fees.
b.reduce the incentive of attorneys to file class action lawsuits.
c.reduce the transaction costs of finding a private solution to an externality.
d.regulate attorney fees.
3) Demand for a good is said to be inelastic if the quantity demanded increases slightly
when the price falls by a large amount.
a.True
b.False
4)
Which arrow represents the flow of income payments?
a.A
b.B
c.C
d.D
5) Which of the following arguments for trade restrictions is often advanced?
a.Trade restrictions make all Americans better off.
b.Trade restrictions increase economic efficiency.
c.Trade restrictions are necessary for economic growth.
d.Trade restrictions are sometimes necessary for national security.
6) A firm‘s marginal cost has a minimum value of $80, its average variable cost has a
minimum value of $90, and its average total cost has a minimum value of $100. Then
the firm will shut down in the short run once the price of its product falls below
a. $100.
b.$90.
c.$80.
d.$40.
7) William and Jamal live in the country of Dumexia. As a result of Dumexia’s
legalization of international trade in bananas, William becomes better off and Jamal
becomes worse off. It follows that William is a seller, and Jamal is a buyer, of bananas.
a.True
b.False
8) Figure 8-6
The vertical distance between points A and B represents a tax in the market.
When the tax is placed on this good, the quantity sold
a.is 600, and buyers effectively pay $10.
b.is 300, and buyers effectively pay $10.
c.is 600, and buyers effectively pay $16.
d.is 300, and buyers effectively pay $16.
9) Table 10-3
The socially optimal quantity of output is
a.3 units.
b.4 units.
c.5 units.
d.6 units.
10) Which of the following represents the firm‘s short-run condition for shutting down?
a.shut down if TR < TC
b.shut down if TR < FC
c.shut down if P < ATC
d.shut down if TR < VC
11) The slope of a line that passes through the points (20, 30) and (40, 14) is
a.-5/4.
b.-4/5.
c.4/5.
d.5/4.
12) Binding minimum-wage laws
a.are costly for the government to impose.
b.force a market imbalance between the supply and demand for labor.
c.have the potential to provide benefits to all poor people, whereas a negative tax can
only benefit some poor people.
d.do not affect segments of the population who are not poor.
13) Scenario 7-2
Suppose market demand and market supply are given by the equations:
Refer to Scenario 7-2. How much is total surplus at the equilibrium price in this
market?
14) At a price of
a.$8, there is a surplus of 6 units.
b.$5, there is neither a shortage nor a surplus.
c.$2, there is a shortage of 6 units.
d.All of the above are correct.
15) If government spending exceeds government receipts, the government has a
a.budget surplus. Other things the same, the surplus rises if taxes rise.
b.budget surplus. Other things the same the surplus rises if taxes fall.
c.budget deficit. Other things the same, the deficit rises if taxes rise.
d.budget deficit. Other things the same, the deficit rises if taxes fall.
16) Goods that are rival in consumption and excludable would be considered
a.club goods.
b.common resources.
c.public goods.
d.private goods.
17) Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
For this firm, the average revenue is
a. $39.
b.$26.
c.$13.
d.$0.
18) Table 17-27
Each year the United States considers renewal of Most Favored Nation (MFN) trading
status with Farland (a mythical nation). Historically, legislators have made threats of
not renewing MFN status because of human rights abuses in Farland. The non-renewal
of MFN trading status is likely to involve some retaliatory measures by Farland. The
payoff table below shows the potential economic gains associated with a game in which
Farland may impose trade sanctions against U.S. firms and the United States may not
renew MFN status with Farland. The table contains the dollar value of all trade-flow
benefits to the United States and Farland.
Refer to Table 17-27. If both countries follow a dominant strategy, the value of trade
flow benefits for the United States will be
a.$35 b.
b.$65 b.
c.$130 b.
d.$140 b.
19) It is commonly argued that national defense is a public good. Nevertheless, the
weapons used by the U.S. military are produced by private firms. We can conclude that
a.resources would be used more efficiently if the government produced the weapons.
b.resources would be used more efficiently if private firms provided national defense.
c.weapons are rival in consumption and excludable, but national defense is not rival in
consumption and not excludable.
d.national defense is rival in consumption and excludable, but weapons are not rival in
consumption and not excludable.
20) Figure 18-4
The graph below illustrates the market for nurses who work in doctors’ offices.
Refer to Figure 18-4. Each August many high school and college students visit a
doctor’s office to have a sports physical. If the price of sports physicals falls, what
happens in the market for nurses?
a.Demand increases from D1 to D2.
b.Demand decreases from D2 to D1.
c.Supply increases from S1 to S2.
d.Supply decreases from S2 to S1.
21) Define collusion.
22) Suppose John’s cost for performing some carpentry work is $120. If John is paid
$200 for the carpentry work, what is his producer surplus?
23) Over time, carpenters become aware of more attractive employment opportunities
outside of carpentry. Does this development affect the demand for carpenters, or does it
affect the supply of carpenters?
24) 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 elastic demand?
25) Scenario 22-6
Shana owns a boutique that sells highend women’s clothing and accessories. Katie
works part-time at the boutique and frequently is the only employee in this small store.
Shana pays Katie a wage that is higher than the market wage for this type of job. When
the store is not full of customers, Katie diligently works on displays and cleans to keep
the store looking its best. Belinda is a customer in the store who asks Katie’s opinion on
the quality of some jeans she is considering purchasing. Katie tells her the quality is
great even though she’s had several other customers return them due to flaws. Magda is
another customer who is returning a necklace without volunteering that a gem is
missing.
Refer to Scenario 22-6. What is the term for the type of wage Shana pays Katie?
26) Explain what is meant by “in-kind transfer” programs. Briefly outline the
advantages and disadvantages of an in-kind transfer program.
27) Figure 19-6
Refer to Figure 19-6. Given demand, D1, and supply, S1, if wages adjust to balance
labor supply and labor demand, what are the wage and quantity of labor?
28) Christine works for a firm that makes tires for cars. How is Christine’s wage
affected if the demand for cars increases?
29) Figure 7-33
Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12
fewer units at every price.
How much is total consumer surplus in this market at the new equilibrium price?