1) A family’s income tax liability is
a.a standard percentage of all income earned.
b.determined by wage income rather than dividend and interest income.
c.based on total income.
d.constant from year to year.
2) When total revenue is less than variable costs, a firm in a competitive market will
a.continue to operate as long as average revenue exceeds marginal cost.
b.continue to operate as long as average revenue exceeds average fixed cost.
c.shut down.
d.raise its price.
3) When a state levies a sales tax, the tax
a.is paid only by the state’s residents.
b.occasionally excludes items that are deemed to be necessities.
c.is commonly levied on labor services.
d.applies to wholesale purchases but not retail purchases.
4) Figure 15-19
If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to
a. $0.
b. $1,562.50.
c. $3,125.
d. $6,250.
5) Laura is a gourmet chef who runs a small catering business in a competitive industry.
Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month.
Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is
$300. In order to maximize profits, Laura should
a.make more than 20 wedding cakes per month.
b.make fewer than 20 wedding cakes per month.
c.continue to make 20 wedding cakes per month.
d.We do not have enough information to answer the question.
6) Table 7-17
The equilibrium price is
a. $10.00.
b. $8.00.
c. $6.00.
d. $4.00.
7) Government policies designed to equalize the distribution of economic well-being
include
(i)the welfare system
(ii)unemployment insurance
(iii)progressive income tax
a.(i) only
b.(ii) only
c.(i) and (ii) only
d.(i), (ii), and (iii)
8) A special kind of imperfectly competitive market that has only two firms is called
a.a two-tier competitive structure.
b.an incidental monopoly.
c.a doublet.
d.a duopoly.
9) Budweiser typically purchases several 30 second advertising spots during the Super
Bowl at a very high cost. Miller Brewing Co. typically does not advertise during the
Super Bowl. Which of the following is correct?
a.Budweiser chooses to signal during the Super Bowl, while Miller Brewing Co. does
not.
b.Budweiser chooses to screen during the Super Bowl, while Miller Brewing Co. does
not.
c.Miller does not advertise during the Super Bowl because it has a superior product and
the audience already knows that.
d.Budweiser’s advertisements during the Super Bowl are entertaining but convey no
information about the quality of its products.
10) Table 14-1
Over which range of output is average revenue equal to price?
a.1 to 5 units
b.3 to 7 units
c.5 to 9 units
d.Average revenue is equal to price over the entire range of output.
11) To say that government intervenes in the economy to promote efficiency is to say
that government is attempting to
a.create a more fair distribution of income.
b.change the way in which the economic pie is divided.
c.enlarge the economic pie.
d.All of the above are correct.
12) When each voter has a most-preferred outcome for the expenditure on a particular
government program, majority rule will produce the outcome
a.preferred by the mean (average) voter.
b.preferred by the median voter.
c.that causes the political party in power to increase its power.
d.defined by Arrow’s Impossibility Theorem.
13) Some studies show the even students who earned high grades in science classes
provide disproven explanations for scientific phenomena. These disproven explanations
had been acquired prior to the science classes. These studies provide some support for
which of the following systematic mistakes that people make?
a.people are overconfident
b.people give too much weight to a small number of vivid observations
c.people are reluctant to change their minds
d.All of the above are correct.
14) Because a firm’s demand for a factor of production is derived from its decision to
supply a good in the market, it is called a
a.marginal product of demand.
b.secondary demand.
c.derived demand.
d.compensatory demand.
15) Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space
in their dorm room, but neither enjoys cleaning. The roommates must each make a
decision to either clean or not clean the dorm room’s common space. The payoff table
for this situation is provided below, where the higher a player’s payoff number, the
better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff
for Maddie).
Refer to Table 17-20. If Maddie chooses not to clean, then Nadia will
a.clean, and Nadia’s payoff will be 50.
b.not clean, and Nadia’s payoff will be 10.
c.clean, and Nadia’s payoff will be 7.
d.not clean, and Nadia’s payoff will be 30.
16) Surpluses drive price up, while shortages drive price down.
a.True
b.False
17) Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
If the market price of an orange is $0.65, then consumer surplus amounts to a. $3.90.
b. $6.75.
c. $3.60.
d. $7.50.
18) Table 14-13
Diana’s Dress Emporium
What is the marginal cost of the 8th unit?
a.$0
b.$100
c.$120
d.$140