1) Which of the following events always would increase the size of the deadweight loss
that arises from the tax on gasoline?
a.The demand for gasoline becomes more inelastic.
b.The slope of the supply curve for gasoline becomes steeper.
c.The amount of the tax per gallon of gasoline increases.
d.All of the above are correct.
2) There are four homes along Belmont Circle, which surrounds a small plot of land.
The land currently has no trees, and the 4 homeowners — Adams, Benitez, Chen, and
Davis — are considering the idea of contributing to a pool of money that will be used to
plant up to 4 trees. The table represents their willingness to pay, that is, the maximum
amount that each homeowner is willing to contribute toward each tree.
Suppose the cost to plant each tree is $90. How many trees should be planted to
maximize the total surplus of the four homeowners?
a.1
b.2
c.3
d.4
3) Table 17-29
Suppose that two firms, Wild Willy’s Wonderdrink (Firm W) and Hyper Hank’s
Hydration (Firm H), comprise the market for energy drinks. Each firm determines that
it could lower its costs and increase its profits if both firms reduced their advertising
budgets. But for the plan to work, each firm must agree to refrain from advertising.
Each firm believes that advertising works by increasing the demand for the firm’s
energy drinks, but each firm also believes that if neither firm advertises, the cost
savings will outweigh the lost sales. The table below lists each firm’s individual profits:
Firm W
Breaks agreement Maintains agreement
and advertises and does not advertise
Refer to Table 17-29. Which of the following statements does not correctly
characterize the outcome of this game?
a.There is a Nash equilibrium.
b.Only one firm has a dominant strategy.
c.The game is an example of the Prisoners’ Dilemma.
d.Both firms collectively would earn the highest joint profits by maintaining the
agreement not to advertise.
4) A competitive firm has been selling its output for $10 per unit and has been
maximizing its profit. Then, the price rises to $14, and the firm makes whatever
adjustments are necessary to maximize its profit at the now-higher price.Once the firm
has adjusted, its
a.marginal revenue is lower than it was previously.
b.marginal cost is lower than it was previously.
c.quantity of output is higher than it was previously.
d.All of the above are correct.
5) Which of the following movements
would illustrate the effect in the market for bullet-proof vests of an increase in the price
of Kevlar?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
6) The dictionary defines equilibrium as a situation in which forces
a.are in balance.
b.are the same.
c.clash.
d.remain constant.
7) Competitive firms decide how much output to sell by producing output until the
price of the good equals
a.marginal product.
b.the value of marginal product.
c.marginal cost.
d.marginal profit.
8) If firms in a monopolistically competitive market are earning economic profits,
which of the following scenarios would best describe the change existing firms would
face as the market adjusts to the long-run equilibrium?
a.an increase in demand for each firm
b.a decrease in demand for each firm
c.a downward shift in the marginal cost curve for each firm
d.an upward shift in the marginal cost curve for each firm
9) Table 12-7
The following table shows the marginal tax rates for unmarried individuals for two
years.
For an individual who earned $35,000 in taxable income in both years, which of the
following
describes the change in the individual’s marginal tax rate between the two years?
a.The marginal tax rate increased from 2009 to 2010.
b.The marginal tax rate decreased from 2009 to 2010.
c.The marginal tax rate remained constant from 2009 to 2010.
d.The change in the marginal tax rate cannot be determined for the two tax schedules
shown.
10) A tax on the wages that a firm pays its workers is called
a.an income tax.
b.an excise tax.
c.a consumption tax.
d.a payroll tax.
11) In the circular-flow diagram, which of the following items flows from households
to firms through the markets for goods and services?
a.goods and services
b.dollars paid to land, labor, and capital
c.dollars spent on goods and services
d.wages, rent, and profit
12) The demand schedule below pertains to sandwiches demanded per week.
Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose
the following:
€¢ x = 2.
€¢The current price of a sandwich is $3.00.
€¢The market quantity supplied of sandwiches is 5
€¢The slope of the supply curve is 1
Then there is currently a
a.shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00
and $5.00.
b.shortage of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
c.surplus of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00
and $5.00.
d.surplus of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
13) Differences in opportunity cost allow for gains from trade.
a.True
b.False
14) When individuals are damaged by an illegal arrangement to restrain trade, which
law allows them to pursue civil action and recover up to three times the damages
sustained?
a.Trade Damage Act
b.Clayton Act
c.Sherman Act
d.No law allows individuals to pursue civil action and recover up to three times the
damages sustained.
15) Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
The price that buyers effectively pay after
the tax is imposed is
a.P1.
b.P2.
c.P3.
d.P4.