The basic cause of deadweight losses from the existence of common resources and
externalities is
A) a lack of clearly defined and enforceable property rights.
B) the self-interested rationality of human beings.
C) the use of a market system to deal with scarcity.
D) the absence of government intervention.
Figure 5-5 Figure 5-5 shows a
market with an externality. The current market equilibrium output of Q1 is not the
economically efficient output. The economically efficient output is Q2.
If, because of an externality, the economically efficient output is Q2 and not the current
equilibrium output of Q1, what does D1 represent?
A) the demand curve reflecting external benefits
B) the demand curve reflecting social benefits
C) the demand curve reflecting private benefits
D) the demand curve reflecting the sum of private and social benefits
Table 4-3
The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that
specializes in producing western wear. If the market price of cowboy hats is $50,
producer surplus is
A) $0.
B) $4.
C) $62.
D) $138.
The present value of $300 received 5 years in the future would be calculated as which
of the following when the interest rate is 5%?
A) 300/(1.5)5
B) 300/(1.05)5
C) 300 1.5 5
D) 5.05/300
Figure 7-2 Figure 7-2 represents the market
for vaccinations. Vaccinations are considered a benefit to society, and the figure shows
both the marginal private benefit and the marginal social benefit from vaccinations.
The market equilibrium quantity is ________ thousand vaccinations.
A) 200
B) 400
C) 600
D) >600
What is a subgame?
A) It is one that begins at any node of the tree, including the game itself.
B) It is one that begins at any decision node of the tree except the first decision node.
C) It is one that starts at the final decision node of the tree.
D) It is a simultaneous game embedded in a sequential game.
A cash withdrawal from the banking system
A) decreases reserves.
B) decreases deposits.
C) decreases excess reserves.
D) All of the above are correct.
Gross domestic product understates the total production of final goods and services
because of the omission of
A) exports.
B) inflation.
C) intermediate goods.
D) household production.
In a competitive market when there is no deadweight loss,
A) consumer surplus is minimized.
B) producer surplus is minimized.
C) consumer surplus plus producer surplus is minimized.
D) consumer surplus plus producer surplus is maximized.
A cooperative equilibrium results when firms
A) choose the best strategy regardless of what other players do.
B) choose the strategy that maximizes the total game payoff.
C) choose the strategy that minimizes the payoff to other players.
D) choose a strategy by random chance.
Many economists criticize protectionism because it causes losses to consumers and
eliminates jobs in domestic industries that use protected products. Why, then, do some
people support protectionism?
A) The criticisms of economists are based on theory. In fact, protectionism increases
consumer and producer surplus as well as employment.
B) Supporters of protectionism in high-income countries believe that wages will fall as
a result of competition with firms from developing countries.
C) Supporters of protectionism believe free trade will cause their countries to lose their
comparative advantage.
D) Supporters of protectionism believe that free trade will lead to inflation.
If the quantity of goods and services produced in the economy decreases,
A) it may be possible for real GDP to increase.
B) real GDP would certainly increase.
C) it may be possible for nominal GDP to increase.
D) nominal GDP would certainly increase.
Figure 4-9 Figure 4-9 shows the market for
cigarettes. The government plans to impose a unit tax in this market.
As a result of the tax, is there a loss in producer surplus?
A) Yes, because producers are not selling as many units now.
B) No, because the consumer pays the tax.
C) No, because the market reaches a new equilibrium
D) No, because producers are able to raise the price to cover their tax burden.
Which of the following is a fixed cost?
A) payment to hire a security worker to guard the gate to the factory around the clock
B) wages to hire assembly line workers
C) payments to an electric utility
D) costs of raw materials
Figure 12-4
Figure 12-4 shows the cost and demand
curves for a profit-maximizing firm in a perfectly competitive market. If the market
price is $30 and the firm is producing output, what is the amount of the firm’s profit or
loss?
A) loss of $1,080
B) profit of $1,440
C) loss of $2,520
D) profit of $1,300
If the price of gasoline increases, what will be the impact in the market for public
transportation?
A) The demand curve for public transportation shifts to the right.
B) The quantity of public transportation demanded increases.
C) The demand curve for public transportation shifts to the left.
D) The quantity of public transportation demanded decreases.
Under the gold standard, the government must have enough gold to back up any
A) increase in money demand.
B) increase in the money supply.
C) change in its currency’s exchange rate.
D) foreign currency deposits in its central bank.
If electric utilities continually reduce their emissions of sulfur dioxide,
A) the utilities will eventually be forced to go out of business.
B) the marginal benefit of additional emissions will rise.
C) the marginal cost of further emissions will rise.
D) the total benefit of sulfur dioxide emissions will fall.
If a straight line passes through the point x = 12 and y = 4 and also through the point x =
4 and y = 8, the slope of this line is
A) negative 8 divided by 4.
B) seven tenths.
C) negative one half.
D) one and one half.
The most profitable price for a monopolist is
A) the highest price a consumer is willing to pay for the monopolist’s product.
B) the price at which demand is unit-elastic.
C) a price that maximizes the quantity sold.
D) the price for which marginal revenue equals marginal cost.