1) Refer to Figure 9-17. Without trade, total surplus is
a. $600.
b. $1,200.
c. $1,800.
d. $2,250.
2) Suppose that in 2020 the average citizen’s federal tax bill is $11,888 per person, and
total federal spending is $13,997 per person. In 2020, the federal government will have
a.a per person budget surplus of $2,109.
b.a per person budget deficit of $2,109.
c.horizontal equity.
d.vertical equity.
3) Wheat is the main input in the production of flour. If the price of wheat decreases,
then we would expect the
a.demand for flour to increase.
b.demand for flour to decrease.
c.supply of flour to increase.
d.supply of flour to decrease.
4) The fact that monopolistically competitive firms charge a price that exceeds marginal
cost is responsible for the
a.business-stealing externality that is observed in monopolistically competitive markets.
b.product-variety externality that is observed in monopolistically competitive markets.
c.inefficiencies of the long-term losses earned by monopolistically competitive firms.
d.persistence of positive profits into the long run for monopolistically competitive
firms.
5) Factors of production are
a.the mathematical calculations firms make in determining their optimal production
levels.
b.social and political conditions that affect production.
c.the physical relationships between economic inputs and outputs.
d.inputs into the production process.
6) Table 7-16
The following table represents the costs of five possible sellers.
Seller Cost ($)
If each producer has one unit available for sale, and if the market equilibrium price is
$70, how much is the combined total cost of all participating sellers in the market?
a.$100
b.$150
c.$250
d.$350
7) Most of the total income earned in the U.S. economy is ultimately paid to
a.households in the form of wages and fringe benefits.
b.landowners in the form of rent.
c.landowners in the form of interest.
d.landowners in the form of profit.
8) Figure 20-5
Refer to Figure 20-5. An effective minimum wage would be set at a level
a.above Wo, and employment would rise above Qo.
b.above Wo, and employment would fall below Qo.
c.below Wo, and employment would rise above Qo.
d.below Wo, and employment would fall below Qo.
9) An oligopoly is a market in which
a.there are only a few sellers, each offering a product similar or identical to the products
offered by other firms in the market.
b.firms are price takers.
c.the actions of one seller in the market have no impact on the other sellers’ profits.
d.there are many price-taking firms, each offering a product similar or identical to the
products offered by other firms in the market.
10) The U.S. federal government collects about
a.one-third of the taxes in our economy.
b.one-half of the taxes in our economy.
c.two-thirds of the taxes in our economy.
d.three-fourths of the taxes in our economy.
11) The infant-industry argument
a.is based on the belief that protecting industries when they are young will pay off later.
b.is based on the belief that protecting industries producing goods and services for
infants is necessary if a country is to have healthy children.
c.has the support of most economists.
d.is an argument that is advanced by advocates of free trade.
12) Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota.
Because the market for butter is generally considered to be competitive, LML
a.can choose the price at which it sells its butter but not the quantity of butter that it
produces.
b.can choose quantity of butter that it produces but not the price at which it sells its
butter.
c.can choose both the price at which it sells its butter and the quantity of butter that it
produces.
d.cannot choose either the price at which it sells it butter or the quantity of butter that it
produces.
13) Explicit costs
a.do not require an outlay of money by the firm.
b.enter into the accountant’s measurement of a firm’s profit.
c.enter into the economist’s measurement of a firm’s profit.
d.Both b and c are correct.
14) The slope of a fairly flat upward-sloping line will be a
a.small positive number.
b.large positive number.
c.small negative number.
d.large negative number.
15) Which of the following relationships involves asymmetric information?
a.Patients can look up information regarding certain prescription drugs giving them the
same information as their doctors.
b.Consumer Reports allows customers of DVD players to know as much about the
quality of various players as the store salesperson.
c.Car Fax allows car buyers to obtain used-vehicle histories providing them with the
same information as the dealership salesperson.
d.The batter in a baseball game must guess whether the pitcher is going to throw a
fastball, curveball, or change-up.