1) Figure 18-9
Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will
a.increase, and more apple pickers will be hired.
b.decrease, and more apple pickers will be hired.
c.increase, and fewer apple pickers will be hired.
d.decrease, and fewer apple pickers will be hired.
2) A marginal change is a
a.change that involves little, if anything, that is important.
b.large, significant adjustment.
c.change for the worse, and so it is usually a short-term change.
d.small, incremental adjustment.
3) When the price of candy bars is $1.00, the quantity demanded is 500 per day. When
the price falls to $0.80, the quantity demanded increases to 600. Given this information
and using the midpoint method, we know that the demand for candy bars is
a.inelastic.
b.elastic.
c.unit elastic.
d.perfectly inelastic.
4) Figure 15-21
Which of the following areas describes the profit of this natural monopolist under
socially optimal pricing?
a.ABCE
b.0HIL
c.0FGK
d.None of the above is correct.
5) As the number of firms in an oligopoly increases,
a.each seller becomes more concerned about its impact on the market price.
b.the output effect decreases.
c.the total quantity of output produced by firms in the market gets closer to the socially
efficient quantity.
d.the oligopoly has more market power and firms earn a greater profit.
6) A competitive firm would benefit from charging a price below the market price
because the firm would achieve
(i)higher average revenue.
(ii)higher profits.
(iii)lower total costs.
a.(i) only
b.(ii) and (iii) only
c.(i), (ii), and (iii)
d.None of the above is correct.
7) Suppose the market consists of Barb and Carl only. If the price falls by $2, the
quantity demanded in the market increases by
a.4 units.
b.6 units.
c.8 units.
d.10 units.
8) The two loops in the circular-flow diagram represent
a.the flow of goods and the flow of services.
b.the flow of dollars and the flow of financial assets.
c.the flow of inputs into production processes and the flow of outputs from production
processes.
d.the flows of inputs and outputs and the flow of dollars.
9) Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy
that allows international trade.
If the world price of peaches is $3, then the policy change results in a
a.$15.00 decrease in producer surplus.
b.$45.00 increase in consumer surplus.
c.$20.00 increase in total surplus.
d.$12.50 increase in total surplus.
10) Barb and Jim run a business that sets up and tests computers. Assume that Barb and
Jim can switch between setting up and testing computers at a constant rate. The
following table applies.
Barb’s opportunity cost of setting up one computer is testing
a.4/5 computer and Jim’s opportunity cost of setting up one computer is testing 3/4
computer.
b.4/5 computer and Jim’s opportunity cost of setting up one computer is testing 4/3
computers.
c.5/4 computers and Jim’s opportunity cost of setting up one computer is testing 3/4
computer.
d.5/4 computers and Jim’s opportunity cost of setting up one computer is testing 4/3
computers.
11) When Ryan has an income of $2,000, he consumes 30 units of good A and 50 units
of good B. After Ryan’s income decreases to $1,500, he consumes 23 units of good A
and 55 units of good B. Which of the following statements is correct?
a.Both goods A and B are normal goods.
b.Both goods A and B are inferior goods.
c.Good A is a normal good, and good B is an inferior good.
d.Good A is an inferior good, and good B is a normal good.
12) Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 – Q. For this
market demand curve, marginal revenue is MR = 20 – 2Q.
If the marginal cost of producing this good is 4, what price would a profit-maximizing
monopolist charge for the product?
a.P = 4
b.P = 10
c.P = 12
d.P = 20
13) Figure 8-11
Suppose Q1= 4; Q2 = 7; P1= $6; P2= $8; and P3= $10. Then, when the tax is imposed,
a.consumer surplus decreases by $11.
b.producer surplus decreases by $11.
c.the deadweight loss amounts to $6.
d.All of the above are correct.
14) If a 40% change in price results in a 25% change in quantity supplied, then the price
elasticity of supply is about
a.0.63, and supply is elastic.
b.0.63, and supply is inelastic.
c.1.60, and supply is elastic.
d.1.60, and supply is inelastic.
15) What you must give up to get something else is called the
16) Which philosopher claimed that the government should aim to maximize the
well-being of the worst-off person in society?
17) You have the afternoon free. You have a choice between going to the movies with a
friend or studying economics for three hours. If you go to the movies, you will spend
$8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three
hours, you will raise your exam grade by 10 points.
What is your opportunity cost of studying economics?
18) Country A and country B both produce shirts and shorts. Country B has an absolute
advantage producing both shirts and shorts. Is there any condition under which the two
countries could gain from trade?
19) About what proportion of the variation of wages across workers is explained by
factors that can be measured? What are the other factors that explain wage differences
but are difficult to measure?
20) Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand
name products even though generic versions are available at lower prices. His friend
John says he was irrational to spend more for a nearly identical product. His friend
Martina agreed with Dean’s decision to spend more for the brand name products.
If Dean bought the brand name because of advertising he saw for the product, a
defender of advertising would say
21) What has been the relationship over the past century between the U.S. economy’s
income and the percentage of that income that the government collects in revenues?