1) While pollution regulations yield the benefit of a cleaner environment and the
improved health that comes with it, the regulations come at the cost of reducing the
incomes of the regulated firms’ owners, workers, and customers. This statement
illustrates the principle that
a.trade can make everyone better off.
b.rational people think at the margin.
c.people face tradeoffs.
d.people respond to incentives.
2) The amount of money that a wheat farmer could have earned if he had planted barley
instead of wheat is
a.an explicit cost.
b.an accounting cost
c.an implicit cost.
d.forgone accounting profit.
3) In a competitive market, the actions of any single buyer or seller will
a.discourage entry by competitors.
b.influence the profits of other firms in the market.
c.have a negligible impact on the market price.
d.Both a and b are correct.
4) Table 22-17
Voter Type
Refer to Table 22-17. The table shows the preferences of three types of voters over
three possible outcomes: A, B, and C. The table also shows the percentage of voters of
each type. Based on this information, which voter type is the median voter?
a.Type 1
b.Type 2
c.Type 3
d.The median voter cannot be determined without knowing the pair of outcomes from
which the voters will be choosing.
5) Suppose that Chloe opens a dog grooming business in a local shopping center. Which
of the following would be an example of a factor of production used by Chloe?
(i)her employees’ time
(ii)brushes, combs, scissors, and clippers
(iii)shampoo, water, and flea prevention treatments
(iv)Chloe’s time spent on bookkeeping and bill paying
a.(i) only
b.(i) and (ii) only
c.(i), (ii), and (iii) only
d.(i), (ii), (iii), and (iv)
6) Figure 7-15
Suppose producer surplus is larger than C but smaller than A+B+C. The price of the
good must be
a.lower than P1.
b.P1.
c.between P1 and P2.
d.higher than P2.
7) 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. If ABC and XYZ operate to jointly maximize profits, then what
quantity is sold?
a.25
b.30
c.35
d.40
8) Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output
per week.
Refer to Figure 18-1. Suppose the firm sells its output for $12 per unit, and it pays
each of its workers $700 per week. The value of the marginal product of the fifth
worker is
a.$540
b.$700
c.$720
d.$1,080
9) The economy of the former Soviet Union is best described as a
a.primitive economy.
b.market economy.
c.hybrid economy.
d.centrally-planned economy.
10) Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports
channel in its market area. Let’s assume that Mega Media pays $100,000 a year for the
exclusive marketing rights to the sports channel. Since Mega Media has already
installed cable to all of the homes in its market area, the marginal cost of delivering the
sports channel to subscribers is zero. The manager of Mega Media needs to know what
price to charge for the sports channel service to maximize her profit. Before setting
price, she hires an economist to estimate demand for the sports channel. The economist
discovers that there are two types of subscribers who value premium sporting channels.
First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new
channel. Second, the premium sports channel will appeal to 20,000 occasional sports
viewers who will pay as much as $25 a year for a subscription to it.
How much profit will Mega Media Cable TV earn if it sets the price at $150?
a. $350,000
b. $450,000
c. $475,000
d. $575,000