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1) When, in our analysis of the gains and losses from international trade, we assume
that a country is small, we are in effect assuming that the country
a.cannot experience significant gains or losses by trading with other countries.
b.cannot have a significant comparative advantage over other countries.
c.cannot affect world prices by trading with other countries.
d.All of the above are correct.
2) Consider the following demand schedule.
Using the midpoint method, in which range is demand most elastic?
a.$0 to $3
b.$3 to $6
c.$9 to 12
d.$12 to $15
3) In the early 1980s, U.S. economic policy was directed toward reducing inflation.
What would you have expected to observe during this short period of time?
a.Inflation fell and unemployment fell.
b.Inflation and unemployment were both unaffected.
c.Inflation fell and unemployment increased.
d.Inflation fell and unemployment was unchanged.
4) As the number of sellers in an oligopoly becomes very large,
a.the quantity of output approaches the socially efficient quantity.
b.the price approaches marginal cost.
c.the price effect is diminished.
d.All of the above are correct.
5) Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that
produce safe drinking water. Each week Rochelle and Alec work together to decide how
many gallons of water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that Rochelle and Alec can
pump as much water as they want without cost so that the marginal cost of water equals
zero. The weekly town demand schedule and total revenue schedule for water is shown
in the table below:
Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle
and Alec from operating as a monopoly. What will be the price of water once Rochelle
and Alec reach a Nash equilibrium?
a.$15
b.$20
c.$25
d.$30
6) The income tax requires that taxpayers pay 10percent on the first $40,000 of income
and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her
marginal and average tax rates?
a.20 percent and 12 percent, respectively
b.20 percent and 15 percent, respectively
c.10 percent and 12 percent respectively
d.10 percent and 15 percent respectively
7) Sometimes wages are set above the equilibrium level when firms pay
a.workers with more seniority higher wages than newly-hired workers.
b.efficiency wages to reduce turnover.
c.compensating differentials to workers who work the night shift.
d.more attractive salespeople higher wages than less attractive salespeople.
8) Figure 10-9
a.10
b. 5
c. 1
d. 1/5
20) Figure 15-22
Which is more efficient, single price profit maximization or perfect price
discrimination?
21) What are the two basic types of economies?
22) Because people are more willing to trade away goods that they have in abundance
and less willing to trade away goods of which they have little, indifference curves are
___________.
23) Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of
wheat. Would he prefer a market in which conditions are favorable and most farmers
harvest large crops or a market in which conditions are unfavorable and many farmers
harvest small crops? Why?
24) What are the characteristic(s) of an efficient tax system?
25) Suppose the demand schedule in a market can be represented by the equation
QD=500-10P, where QD is the quantity demanded and is the price. Also, suppose the
supply schedule can be
represented by the equation QS=200+10P, where QS is the quantity supplied.
Suppose the supply curve shifts to QS=300+10P. What is the new equilibrium price and
quantity in this market?
26) The three main factors of production, or categories of inputs, used by firms to
produce goods and services are
