1) The Occupational Safety and Health Administration (OSHA) has determined that the
probability of a worker dying from exposure to a hazardous chemical used in the
production of fertilizer is 0.008. The cost of imposing a regulation that would ban the
chemical is $32 million. If the value of a human life is equal to $10 million, how many
people must the policy affect in order for the benefits to exceed the costs?
a.256
b.401
c.3201
d.4001
2) Which of the following would not result from all countries specializing according to
the principle of comparative advantage?
a.The size of the economic pie would increase.
b.Worldwide production of goods and services would increase.
c.The well-being of citizens in each country would be enhanced.
d.Each country’s production possibilities frontier would shift inward.
3) Social Security is an income support program, designed primarily to maintain the
living standards of the poor.
a.True
b.False
4) Table 17-4
The table shows the town of Mauston’s demand schedule for gasoline. For simplicity,
assume the town’s gasoline seller(s) incur no costs in selling gasoline.
Refer to Table 17-4. If the market for gasoline in Mauston is a monopoly, then the
profit-maximizing monopolist will charge a price of
a.$7 and sell 150 gallons.
b.$5 and sell 250 gallons.
c.$3 and sell 350 gallons.
d.$0 and sell 500 gallons.
5) “Owners of firms in young industries should be willing to incur temporary losses if
they believe that those firms will be profitable in the long run.” This observation helps
to explain why many economists are skeptical about the
a.national-security argument.
b.infant-industry argument.
c.unfair-competition argument.
d.jobs argument.
6) Figure 16-10
The figure is drawn for a monopolistically-competitive firm.
In response to the situation represented by the figure, we would expect
a.some of the firms that are currently in the market to exit.
b.the demand for this firm’s product to increase, assuming this firm does not exit.
c.this firm’s profit to move from its current value toward zero.
d.All of the above are correct.
7) Figure 10-4
This market is characterized by
a.government intervention.
b.a positive externality.
c.a negative externality.
d.None of the above is correct.
8) Figure 9-6
The figure illustrates the market for roses in a country.
The size of
the tariff on roses is
a. $4.
b.$2.
c.$2.
d.$1.
9) The “invisible hand” is
a.used to describe the welfare system in the United States.
b.a concept developed by Adam Smith to describe the virtues of free markets.
c.a concept used by J.M. Keynes to describe the role of government in guiding the
allocation of resources in the economy.
d.a term used by some economists to characterize the role of government in an
economy € inevitable but invisible.
10) Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the
tax is increased to $0.25 per unit, the deadweight loss from the new tax would be
a. $200.
b. $250.
c. $475.
d. $625.
11) The Social Security tax is a labor tax.
a.True
b.False
12) Which of the following statements is correct?
a.Firms in monopolistic competition and monopoly can earn economic profits in both
the short run and the long run.
b.Both perfectly competitive and monopolistically competitive firms are price takers.
c.Both a monopolistically competitive industry and a monopoly are characterized by a
very small number of (or one) firm(s).
d.Firms can easily enter a perfectly competitive or monopolistically competitive
industry.
13) Scenario 7-2
Suppose market demand and market supply are given by the equations:
Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply
curve to
How much total consumer surplus goes to new consumers who enter the market after
the supply curve shifts?
14) Table 14-15-a
What is the lowest price at which this firm would operate in the short run?
a. $5.
b.$6.
c.$7.
d.$8.
15) There are very few, if any, good substitutes for automotive tires. Therefore, the
demand for automotive tires would tend to be
a.elastic.
b.unit elastic.
c.inelastic.
d.highly responsive to changes in income as well as changes in prices.
16) Figure 7-30
Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much
is the increase in consumer surplus to the consumers who were initially in the market at
the $120 price?
17) Most markets in the economy are highly competitive.
a.True
b.False
18) Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative
to the no-trade situation, international trade in cardboard produces which of the
following results for Boxland?
a.It increases consumer surplus, decreases producer surplus, and increases total surplus.
b.It increases consumer surplus, increases producer surplus, and increases total surplus.
c.It increases consumer surplus, decreases producer surplus, and decreases total surplus.
d.It decreases consumer surplus, increases producer surplus, and increases total surplus.
19) Assume that England and Spain can switch between producing cheese and
producing bread at a constant rate.
Which of the following combinations of cheese and bread could England not produce in
24 hours?
a.5 units of cheese and 3 units of bread.
b.6 units of cheese and 4 units of bread.
c.8 units of cheese and 3 units of bread.
d.7 units of cheese and 2 units of bread.
20) In the early 1980s, which of the following countries had a marginal tax rate of about
80 percent?
a.United States
b.Canada
c.Japan
d.Sweden
21) Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a
market.
Suppose the world price in this market is
$7. If the country allows free trade, how much are consumer surplus, producer surplus,
and total surplus with trade?
22) Suppose a shift of the labor-demand curve results in an increase of $5 in the
equilibrium wage. How does this shift affect the value of the marginal product of labor?
23) Table 17-35
Suppose that two coal mining companies – Allied and Barclay – own adjacent land
suitable for excavating coal mines. The profits that each firm earns depends on both the
number of mines it excavates and the number of mines excavated by the other firm. The
table below lists each firm’s individual profits:
Refer to Table 17-35. Is there a Nash equilibrium? If so, describe it.
24) Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply
curve for restored historic buildings slopes upward. The production of the 50th restored
historic building entails the following:
♦ private cost of $800,000;
♦ private value of $650,000;
♦ social value of $800,000.
Is the market equilibrium quantity of restored historic buildings less than, equal to, or
greater than 50?
25) Figure 16-12
When this firm profitmaximizes, what is the amount of the firm’s profit or loss?
26) Many studies of wage discrimination have been conducted on professional sports
teams. This industry is easier to study than others because the professional teams have
many objective measures of