1) The Laffer curve illustrates that
a.deadweight loss rises by the square of the increase in a tax.
b.deadweight loss rises exponentially as a tax increases.
c.tax revenue first rises, then falls as a tax increases.
d.Both a) and b) are correct.
2) Which of the following statements is correct?
a.The theory of consumer choice provides a more complete understanding of supply,
just as the theory of the competitive firm provides a more complete understanding of
demand.
b.The theory of consumer choice provides a more complete understanding of demand,
just as the theory of the competitive firm provides a more complete understanding of
supply.
c.Monetary theory provides a more complete understanding of demand, just as the
theory of the competitive firm provides a more complete understanding of supply.
d.The theory of public choice provides a more complete understanding of supply, just as
the theory of the competitive firm provides a more complete understanding of demand.
3) In the short run, if a firm produces nothing, total costs are zero.
a.True
b.False
4) Total surplus in a market will increase when the government
a.imposes a tax on that market.
b.imposes a binding price floor on that market.
c.removes a binding price ceiling from that market.
d.None of the above is correct.
5) Regulations to reduce pollution
a.cause pollution levels to drop below the regulated amount.
b.are a more costly solution to society than a corrective tax.
c.allow firms with the lowest cost to reduce pollution by more than those with highest
costs.
d.are a better solution for the environment than a corrective tax.
6) 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 the government wanted to reduce pollution from 16 units to exactly 6 units.
Which one of the following fees per unit of pollution would achieve that goal?
a.$65
b.$70
c.$75
d.$95
7) The political philosophy that views the redistribution of income as a form of social
insurance is
a.utilitarianism
b.liberalism
c.libertarianism
d.welfarism
8) Informational asymmetry may apply to a hidden action or hidden characteristic
where the informed party may be reluctant to reveal relevant information.
a.True
b.False
9) Figure 7-30
Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much
is the change in total consumer surplus in the market?
10) Table 16-2
The following table shows the total output produced by the top six firms as well as the
total industry output for each industry.
Which industry is the most competitive?
a.Industry J
b.Industry K
c.Industry L
d.Industry M
11) Table 18-8
Harold and Maude own a dance studio where they and their employees teach ballroom
dancing. Their company is a competitive, profit-maximizing firm. Harold and Maude’s
production function is detailed in the table below.
Refer to Table 18-8. If Harold and Maude offer a special sale for one day where dance
lessons are $5 each, and if they pay their workers $200 per day for that day, what is the
maximum number of workers that they will hire for that day?
a.1
b.2
c.3
d.4
12) Labor-augmenting technology causes which of the following?
(i)The marginal productivity of labor increases.
(ii)The marginal productivity of labor decreases.
(iii)Labor demand shifts to the right.
(iv)Labor demand shifts to the left.
a.(i) only
b.(ii) only
c.(i) and (iii) only
d.(ii) and (iv) only
13) In a competitive market for labor, the equilibrium wage always equals the value of
the marginal product.
a.True
b.False
14) In the language of game theory, a situation in which each person must consider how
others might respond to his or her own actions is called a
a.quantifiable situation.
b.cooperative situation.
c.strategic situation.
d.tactical situation.