1) For a profit-maximizing monopolistically competitive firm, marginal revenue equals
marginal cost in
a.the short run but not in the long run.
b.the long run but not in the short run.
c.both the short run and the long run.
d.neither the short run nor the long run.
2) Labor-market discrimination based solely on age is illegal in the United States.
a.True
b.False
3) Which of the following movements
would illustrate the effect in the market for doctor’s visits of an increase in the number
of medical students graduating from medical school and successfully completing their
residency programs?
a.Point A to Point B
b.Point C to Point B
c.Point C to Point D
d.Point A to Point D
4) Price will rise to eliminate a shortage.
a.True
b.False
5) The value of the marginal product of labor is equal to the change in
a.marginal cost caused by the addition of the last worker.
b.total cost caused by the addition of the last worker.
c.total revenue caused by the addition of the last worker.
d.total profit caused by the addition of the last worker.
6) Mrs. Smith operates a business in a competitive market. The current market price is
$7.50. At her profit- maximizing level of production, the average variable cost is $8.00,
and the average total cost is $8.25. Mrs. Smith should
a.shut down her business in the short run but continue to operate in the long run.
b.continue to operate in the short run but shut down in the long run.
c.continue to operate in both the short run and long run.
d.shut down in both the short run and long run.
7) The claim that all citizens should make an “equal sacrifice” to support government
programs is usually associated with
a.the ability-to-pay principle.
b.the benefits principle.
c.efficiency arguments.
d.regressive tax arguments.
8) Figure 21-22
Refer to Figure 21-22. If the consumer were initially at point A in the figure, a
movement from point B to point C as a result of a decrease in the price of potato chips
represents the
a.substitution effect.
b.income effect.
c.budget effect.
d.price effect.
9) If gasoline taxes were significantly increased in the United States, then
a.some of the government regulations that require automakers to produce more
fuel-efficient cars would become unnecessary.
b.other taxes, such as income taxes, could be lowered.
c.it is likely that roads would become safer and the environment would become cleaner.
d.All of the above are correct.
10) When an individual firm in a competitive market decreases its production, it is
likely that the market price will rise.
a.True
b.False
11) Perfect price discrimination describes a situation in which the monopolist
a.knows the exact willingness to pay of each of its customers.
b.charges exactly two different prices to exactly two different groups of customers.
c.maximizes consumer surplus.
d.experiences a zero economic profit.
12) Declining average total cost with increased production is one of the defining
characteristics of a natural monopoly.
a.True
b.False
13)
The opportunity cost of moving from point K to point L is
a.0 cups of coffee.
b.1 donut.
c.2 donuts.
d.4 cups of coffee.
14) Which of the following statements is not correct?
a.Part of the deadweight loss associated with monopoly is measured by the monopolist’s
economic profit.
b.Marginal cost is always less than average total cost in a natural monopoly.
c.Discount coupons available free to the public are a type of price discrimination.
d.Anti-trust laws make it harder for firms to create synergies.
15) Demand refers to the amount buyers wish to buy, whereas the quantity demanded
refers to the position of the demand curve.
a.True
b.False
16) What is the name of the mathematical result showing that no voting system can
simultaneously satisfy the properties of unanimity, transitivity, independence of
irrelevant alternatives, and no dictators?
a.The fundamental theorem of behavioral economics
b.Arrow’s impossibility theorem
c.The fundamental theorem of voting
d.The median voter theorem
17) Figure 8-2
The vertical distance between points A and B represents a tax in the market.
The loss of producer surplus for those sellers of the good who continue to sell it after
the tax is imposed is
a.$0.
b.$1.
c.$2.
d.$3.
18) The President counts among his economic advisors the Congressional Budget
Office.
a.True
b.False
19) Table 17-33
Suppose that Robert and Howard own the only two movie studios in California. Each
producer must choose between a low budget and a high budget strategy for his next
film. The economic profit from each strategy is indicated in the table below:
Refer to Table 17-33. Is there a Nash equilibrium? If so, describe it.
20) Total surplus in a market is equal to
a.consumer surplus + producer surplus.
b.value to buyers – amount paid by buyers.
c.amount received by sellers – costs of sellers.
d.producer surplus – consumer surplus.