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1) We must be knowledgeable of how people behave in strategic situations if we are to
understand
a.perfectly competitive markets.
b.monopolistically competitive markets.
c.oligopolistic markets.
d.All of the above are correct.
2) Trade can make everybody better off because it
a.increases cooperation among nations.
b.allows people to specialize according to comparative advantage.
c.requires some workers in an economy to be retrained.
d.reduces competition among domestic companies.
3) In which of these instances is demand said to be perfectly inelastic?
a.An increase in price of 2% causes a decrease in quantity demanded of 2%.
b.A decrease in price of 2% causes an increase in quantity demanded of 0%.
c.A decrease in price of 2% causes a decrease in total revenue of 0%.
d.An increase in price of 2% causes a decrease in quantity demanded of 1/2%.
4) In determining whether and how much of a public good to provide, cost-benefits
analysts use the same type of price signals for public goods as are readily available for
private goods.
a.True
b.False
5) Arturo's Production Possibilities FrontierDina's Production Possibilities
Frontier
a.1/2 burrito.
b.3/4 burrito.
c.4/3 burritos.
d.2 burritos.
6) If a social planner were running a monopoly, that planner could achieve an efficient
outcome by charging the price that is determined by the
a.minimum point on the average total cost curve.
b.intersection of the average total cost curve and the demand curve.
c.intersection of the marginal cost curve and the demand curve.
d.intersection of the marginal cost curve and the marginal revenue curve.
7) Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various
levels of taxable income.
For this tax schedule, what is the marginal tax rate for an individual with taxable
income of $49,000?
a.0%
b.10%
c.25%
d.35%
8) In some parts of the United States, sugar beets are grown and harvested. The process
of producing usable sugar from the beets generates foul-smelling smoke. A government
policy that limits the emission of smoke by sugar- beet-processing firms is an example
of
a.a market-based policy.
b.a command-and-control policy.
c.tradable pollution permits.
d.transaction costs.
9) Table 15-19
A monopolist faces the following demand curve:
If a monopolist faces a constant marginal cost of $9, how much output should the firm
produce?
a.2 units
b.3 units
c.4 units
d.5 units
10) Relative to a situation in which domestic firms do not compete with foreign firms,
firms in countries that engage in free trade
a.can realize economies of scale more fully.
b.have greater market power.
c.experience larger producer surplus.
d.All of the above are correct.
11) Chile's Production Possibilities Frontier Colombia's Production Possibilities
Frontier
Chi
le would incur an opportunity cost of 36 pounds of coffee if it increased its production
of soybeans by
a.12 pounds.
b.27 pounds.
c.30 pounds.
d.48 pounds.
12) According to one theory, advertising sends a signal to consumers about the quality
of the product being offered. An implication of this theory is that
a.the actual quality of the product is irrelevant.
b.the content of the advertisement is irrelevant.
c.advertising is not in the best interest of society.
d.it is irrational for firms to pay famous people large amounts of money to appear in
their advertisements.
13) When correcting for an externality, command-and-control policies are always
preferable to market-based policies.
a.True
b.False
14) A student might describe information about the costs of production as
a.dry and technical.
b.boring.
c.crucial to understanding firms and market structures.
d.All of the above could be correct.
15) Which of the three supply curves represents the least elastic supply?
a.supply curve A
b.supply curve B
c.supply curve C
d.There is no difference in the elasticity of the three supply curves.
16) A movement upward and to the left along a demand curve is called a(n)
a.increase in demand.
b.decrease in demand.
c.decrease in quantity demanded.
d.increase in quantity demanded.
17)
If this economy devotes all of its resources to the production of engines, then it will
produce
a.0 engines and 40 tvs.
b.10 engines and 35 tvs.
c.40 engines and 0 tvs.
d.40 engines and 40 tvs.
18) Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
If the firm produces 3 units of output,
a.marginal cost is $4.
b.total revenue is greater than variable cost.
c.marginal revenue is less than marginal cost.
d.the firm is maximizing profit.
19) Cameron lives in an apartment building and gets a $700 benefit from playing his
stereo. Renee, who lives next door to Cameron and often loses sleep due to the music
coming from Cameron€s stereo, bears a $1,000 cost from the noise. At which of the
following offers from Renee could both Renee and Cameron benefit from the silencing
of Cameron€s stereo?
a.$250
b.$550
c.$750
d.$1,020
