1) Which of the following is true of markets characterized by positive externalities?
a.Social value exceeds private value, and market quantity exceeds the socially optimal
quantity.
b.Social value is less than private value, and market quantity exceeds the socially
optimal quantity.
c.Social value exceeds private value, and market quantity is less than the socially
optimal quantity.
d.Social value seldom exceeds private value; therefore, social quantity is less than
private quantity.
2) Table 12-5
What is the marginal tax rate for a person who makes $60,000?
a. 20%
b.23%
c.40%
d.45%
3) Which of the following statements is not correct?
a.Both monopolistically competitive and perfectly competitive firms can earn economic
profits in the short run.
b.Both monopolies and monopolistically competitive firms can earn economic profits in
the long run.
c.Firms in perfect competition, monopolistic competition, and monopoly maximize
profits by producing where marginal revenue equals marginal cost.
d.Only competitive firms produce the welfare-maximizing level of output.
4) Table 18-11
Consider the following daily production data for MadeFromScratch, Inc.
MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per
day.
Refer to Table 18-11. What is the value of the marginal product of the first worker?
a.$200
b.$400
c.$500
d.$700
5) The George Stigler quote, “…the degree of ‘market failure’ for the American economy
is much smaller than the ‘political failure’ arising from the imperfections of economic
policies …” illustrates the advantage of which type of public policy toward monopolies?
a.antitrust laws
b.regulation
c.public ownership
d.”do nothing”
6) In a competitive market, each seller has limited control over the price of his product
because
a.other sellers are offering similar products.
b.buyers exert more control over the price than do sellers.
c.these markets are highly regulated by the government.
d.sellers usually agree to set a common price that will allow each seller to earn a
comfortable profit.
7) The French expression used by free-market advocates, which literally translates as
“allow them to do,” is
a.laissez-faire.
b.je ne sais pas.
c.si’l vous plait.
d.tête-à-tête
8) Which of the following statements is not correct?
a.Consumers will likely benefit in the form of lower prices from buying a product made
by a natural monopoly than if the market were served by several firms.
b.Monopolists typically charge higher prices than competitive firms.
c.Monopolists typically produce larger quantities of output than competitive firms.
d.Consumers may benefit from monopolies if the firms invest their higher profits into
something that benefits society such as medical research.
9) Which of the following conditions distinguishes monopolistic competition from
perfect competition?
a.the number of sellers in the market
b.the freedom of entry and exit by firms in the market
c.the size of firms in the market
d.product differentiation
10) In the long run a company that produces and sells candy bars incurs total costs of
$1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars.
The candy bar company exhibits
a.diseconomies of scale because total cost is rising as output rises.
b.diseconomies of scale because average total cost is rising as output rises.
c.economies of scale because total cost is rising as output rises.
d.economies of scale because average total cost is falling as output rises.
11) A compensating differential is a difference in wages due to higher levels of
education or other forms of human capital.
a.True
b.False
12) Arturo’s Production Possibilities FrontierDina’s Production Possibilities
Frontier