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1) If nations such as Germany, Japan, and the United States prohibited international
trade in automobiles, a likely effect would be that
a.the price effect would become a more significant consideration for each firm that
makes automobiles.
b.the excess of price over marginal cost would become less pronounced in the
automobile market.
c.all countries would become better off.
d.automobile producers in the U.S. would collude to produce a large number of cars.
2) In the short run, which of the following rates of growth in the money supply is likely
to lead to the lowest level of unemployment in the economy?
a.3 percent per year
b.5 percent per year
c.7 percent per year
d.9 percent per year
3) Tim earns income of $60,000 per year and pays $21,000 per year in taxes. Tim paid
20 percent in taxes on the first $30,000 he earned. What was the marginal tax rate on
the second $30,000 he earned?
a.20 percent
b.30 percent
c.50 percent
d.70 percent
4) A difference in wages between a highly-educated worker and a less-educated worker
a.may be due to a difference in the amounts of human capital between the workers.
b.may be a signal that the market is indifferent to a worker's level of human capital.
c.is considered unfair by economists.
d.is considered unfair by everyone.
5) Under which of the following market structures would consumers likely receive the
most product variety?
a.perfect competition
b.monopolistic competition
c.oligopoly
d.monopoly
6) Which of the following could reduce economic efficiency?
a.laws that encourage lawsuits
b.policies that redistribute income
c.policies that impose significant restrictions on international trade
d.All of the above are correct
7) Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The
world price of peaches is
$52 per bushel. The U.S. is a price-taker in the market for peaches.
If trade in peaches is allowed, the United States
a.will become an importer of peaches.
b.will become an exporter of peaches.
c.may become either an importer or an exporter of peaches, but this cannot be
determined.
d.will experience increases in both consumer surplus and producer surplus.
8) When two variables have a negative correlation and the x-variable decreases,
a.the y-variable increases.
b.the y-variable decreases.
c.the y-variable stays the same.
d.the x-variable can never be positive.
9) Violations of the law of demand are assumed to occur
a.regularly.
b.only when goods are Giffen goods.
c.only when the substitution effect dominates the income effect.
d.All of the above are correct.
10) Table 14-14
The following table presents cost and revenue information for Bob's bakery production
and sales.
What is Bob's total fixed cost?
a.$0
b.$3
c.$5
d.$9
11) The supply curve for motor oil is the typical upward-sloping straight line, and the
demand curve for motor oil is the typical downward-sloping straight line. When motor
oil is taxed, the area on the relevant supply-and-demand graph that represents the
deadweight loss is
a.larger than the area that represents consumer surplus in the absence of the tax.
b.larger than the area that represents government's tax revenue.
c.a triangle.
d.All of the above are correct.
12) By selling hardcover books to die-hard fans and paperback books to less
enthusiastic readers, the publisher is able to price discriminate and raise its profits.
a.True
b.False
13) Table 18-9
The following table shows the production function for a particular business. The
numbers represent the various labor and output combinations the firm may choose for
its output on a daily basis.
Refer to Table 18-9. What is the marginal product of the fourth unit of labor?
a.40 units
b.50 units
c.60 units
d.180 units
14) The practice of selling the same goods to different customers at different prices, but
with the same marginal cost, is known as
a.price segregation.
b.price discrimination.
c.arbitrage.
d.monopoly pricing.
15)
A shift of the economy's production possibilities frontier from Panel (a) to Panel (b)
could be caused by
a.unemployment.
b.an improvement in donut production technology.
c.an improvement in coffee production technology.
d.an improvement in both donut and coffee production technology.
16) Table 10-2
The following table shows the private value, private cost, and social value for a market
with a positive externality.
How large would a subsidy need to be in this market to move the market from the
equilibrium level of output to the socially-optimal level of output?
a.$3
b.$5
c.$7
d.$9
17) Which of the following statements about economic models is correct?
a.Economic models are built to mirror reality exactly.
b.Economic models are useful, but they should not be used for the purpose of
improving public policies.
c.Because economic models omit many details, they allow us to see what is truly
important.
d.Economic models seldom incorporate equations or diagrams.
18) A profit-maximizing firm in a competitive market is able to sell its product for $7.
At its current level of output, the firm's average total cost is $10. The firm's marginal
cost curve crosses its marginal revenue curve at an output level of 9 units. The firm
experiences a
a.profit of more than $27.
b.profit of exactly $27.
c.loss of more than $27.
d.loss of exactly $27.
19) Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce
a good quality product or a poor quality product. In the figure, the dollar amounts are
payoffs and they represent annual profits for the two companies.
Refer to Figure 17-2. Which of the following statements is correct?
a.Acme can potentially earn its highest possible profit if it produces a good quality
product, and for that reason it is a dominant strategy for Acme to produce a good
quality product.
b.The highest possible combined profit for the two firms occurs when both produce a
poor quality product, and for that reason producing a poor quality product is a dominant
strategy for both firms.
c.Regardless of the strategy pursued by Acme, Pinnacle's best strategy is to produce a
good quality product,
and for that reason producing a good quality product is a dominant strategy for
Pinnacle.
d.Our knowledge of game theory suggests that the most likely outcome of the game, if
it is played only once, is for one firm to produce a poor quality product and for the other
firm to produce a good quality product.
20) Last year, Tess bought 5 handbags when her income was $54,000. This year, her
income is $60,000, and she
purchased 7 handbags. Holding other factors constant, it follows that Tess's income
elasticity of demand is about
a.0.32, and Tess regards handbags as inferior goods.
b.0.32, and Tess regards handbags as normal goods.
c.3.17, and Tess regards handbags as inferior goods.
d.3.17, and Tess regards handbags as normal goods.
