1) In the field of study called political economy, economists make use of insights from
the field of psychology.
a.True
b.False
2)
An increase in price from $15 to $20 would
a.increase total revenue by $500
b.decrease total revenue by $500.
c.increase total revenue by $1,000.
d.decrease total revenue by $1,000.
3) Figure 19-1
Refer to Figure 19-1. What is the change in employment of having the minimum wage
at $8 instead of $7?
a.2 million jobs are gained
b.no jobs are gained or lost
c.1 million jobs are lost
d.3 million jobs are lost
4) Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the
demand curve for their product. Each firm has the same constant marginal cost of $8
and zero fixed cost.
Refer to Table 17-11. ABC and XYZ agree to jointly maximize profits. If ABC and
XYZ each break the agreement and each produce 5 more than agreed upon, how much
less profit does each make?
a.$5
b.$20
c.$60
d.$90
5) The effect of the Black Death in 14th-century Europe was to
a.decrease wages.
b.increase land rents.
c.reduce income inequality between peasants and the landed classes.
d.Both a) and b) are correct.
6) Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
At which quantity of output is marginal revenue equal to marginal cost?
a.3 units
b.5 units
c.7 units
d.9 units
7) A shortage will occur at any price below equilibrium price and a surplus will occur at
any price above equilibrium price.
a.True
b.False
8) Table 15-18
A monopolist faces the following demand curve:
Suppose marginal cost is constant at $8 per unit.
The monopolist’s marginal revenue from selling the second unit of output is
a.$8.
b.$14.
c.$16.
d.$24.
9) Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities
Frontier
b.they can’t agree on a definition of the term “discrimination.”
c.they believe compensating differentials account for all wage differences.
d.different people may have different wages for reasons unrelated to discrimination.
13) Both monopolistic competition and oligopoly are market structures
a.that fail to achieve the total surplus achieved by perfect competition.
b.that feature only a few firms in each market.
c.to which the concept of Nash equilibrium is frequently applied by economists.
d.in which firms earn zero economic profit in the long run.
14) Table 17-31
Imagine a small town in a remote area where only two residents, Maria and Miguel,
own dairies that produce milk that is safe to drink. Each week Maria and Miguel work
together to decide how many gallons of milk to produce. They bring milk to town and
sell it at whatever price the market will bear. To keep things simple, suppose that Maria
and Miguel can produce as much milk as they want without cost so that the marginal
cost is zero. The weekly town demand schedule and total revenue schedule for milk is
shown in the table below:
Refer to Table 17-31. Briefly explain why each duopolist earns a lower profit at the
Nash equilibrium than if they cooperated to produce the monopoly output.
15) Explain how a firm in a competitive market identifies the profit-maximizing level
of production. When should the firm raise production, and when should the firm lower
production?
16) Suppose the government levies a corrective tax on firms that pollute in order to
limit the quantity of pollution. Under this policy, does the demand curve for pollution
rights determine the quantity of pollution, or does it determine the price of pollution?
17) Figure 19-6
Refer to Figure 19-6. Given demand, D1, and supply, S2, how many workers are
unemployed if a minimum wage of $8 per hour is imposed on this market?
18) Suppose that two oil companies – BP and Exxon – own adjacent natural gas fields.
The profits that each firm earns depends on both the number of wells it drills and the
number of wells drilled by the other firm. The table below lists each firm’s individual
profits:
Refer to Table 17-34. Is there a Nash equilibrium? If so, describe it.