Figure: The Market for Melons in Russia
(Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons
in Russia. Suppose the world price of melons is D. Russia will _____ of melons.
A) import I ” H
B) export I ” H
C) import G ” F
D) export G ” F
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social
benefit and cost of various amounts of pollution from a coal mine. The efficient
quantity of pollution is _____ tons.
A) 0
B) 2
C) 4
D) 8
A perfectly competitive firm will earn a profit and will continue producing the
profit-maximizing quantity of output in the short run if the price is:
A) less than the average fixed cost.
B) less than marginal cost.
C) greater than average variable cost but less than average total cost.
D) greater than average total cost.
The World Trade Organization:
A) is the primary member of the North American Free Trade Agreement.
B) resolves disputes between member nations arising from alleged violations of
previous agreements dealing with international trade.
C) is a world government with its own army.
D) lends money to developing countries.
Figure: Rent Controls
(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the
equilibrium quantity is:
A) Q4.
B) Q1.
C) Q2.
D) Q3.
A tax on imports of foreign goods is called:
A) an import quota.
B) a subsidy.
C) a tariff.
D) an export restriction.
Positive economics:
A) describes opinions and perspectives on how the world should work.
B) is based on opinion polls.
C) describes how the world does work.
D) is the same as normative economics.
Figure: Demand and Supply
(Figure: Demand and Supply) Look at
the figure Demand and Supply. The slope of the curve labeled S is:
A) “1.
B) 0.
C) 1.
D) 3.
Toby operates a small deli downtown. The deli industry is monopolistically
competitive. Toby, along with every other deli in town, is producing the quantity that
minimizes average total cost. Assuming the delis are maximizing profits, the:
A) number of delis will eventually decrease.
B) number of delis will eventually increase.
C) delis’ prices equal their average total costs.
D) delis have excess capacity.
Which of the following is TRUE?
A) Once an industry has achieved tacit collusion, producers have an incentive to raise
prices.
B) Tacit collusion is legal in the United States.
C) The fact that one firm changes its price shortly after another firm does is proof of
tacit collusion.
D) It is difficult to determine how much tacit collusion exists in a particular industry;
hence tacit collusion remains hard to prosecute in the United States.
Along a given downward-sloping demand curve, an increase in the price of a good will:
A) increase consumer surplus.
B) decrease consumer surplus.
C) have no effect on consumer surplus.
D) decrease producer surplus.
Externalities affect the welfare of others not involved in the production or consumption
of a good or service in ways that markets don’t take into account.
If the price of a cookie is $2 and the price of a brownie is $4, the price of cookies in
terms of brownies is:
A) 0.5.
B) 1.0.
C) 2.0.
D) undefined.
Which of the following industries is MOST likely to be monopolistically competitive?
A) automobile production
B) fresh bagel shops
C) corn farming
D) electric utility production
For the monopolistically competitive wild-caught seafood market, the demand curve for
any individual firm is _____, and there are _____ producers of seafood.
A) downward-sloping; few
B) upward-sloping; many
C) vertical; few
D) downward-sloping; many
Figure: Profit Maximization in Monopolistic Competition
(Figure: Profit Maximization in Monopolistic Competition) In panel (A) of the figure
Profit Maximization in Monopolistic Competition, the profit-maximizing price and
quantity are _____ and _____.
A) S; M
B) P; M
C) P; Q
D) T; Q
_____ taxes are paid on the purchase of most consumption goods.
A) Income
B) Property
C) Sales
D) Wealth
Brianna and Jess must pay an income tax. Both Brianna and Jess pay $1,000 in taxes
each year, but Brianna earns $20,000 and Jess earns $10,000. From this information,
you can infer that this tax is:
A) progressive.
B) regressive.
C) proportional.
D) equitable.
The tendency of people or firms to consume a public good without paying for it is
called the _____ problem.
A) free-cost
B) free-rider
C) free-goods
D) free-market
Pauli’s Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four
slices for $5.00. Sal orders two slices. From this we know that Sal’s marginal benefit
from the second slice must be at least _____ and the marginal benefit from the third
slice must be less than _____.
A) $3.50; $4.50
B) $3.50; $1.00
C) $1.50; $1.00
D) $1.50; $4.50
If a tax system is well designed:
A) it maximizes efficiency.
B) it maximizes fairness.
C) efficiency can be improved only by making the system less fair.
D) it maximizes efficiency and equity.
The United States must give up the production of 500 bicycles to produce 20 additional
tractors. The opportunity cost of producing 5 tractors is _____ bicycles.
A) 5
B) 20
C) 100
D) 125
Figure: The Socially Optimal Quantity of Pollution
(Figure: The Socially Optimal Quantity of Pollution) In the figure The Socially Optimal
Quantity of Pollution, the optimal quantity of pollution:
A) could be achieved with a Pigouvian subsidy.
B) is unlikely to be achieved without government intervention.
C) could be achieved with a Pigouvian tax.
D) is unlikely to be achieved without government intervention, but it could be achieved
with a Pigouvian tax.
One of the ways rent control is inefficient is that it leads to:
A) higher-quality apartments.
B) high opportunity costs associated with wasted time searching for apartments.
C) markets that maximize total surplus.
D) the construction of more apartments.
An individual gets 5 units of utility from one slice of pizza and 9 units of utility from
two slices of pizza. The principle of diminishing marginal utility implies that the total
utility from three slices of pizza will be _____ units of utility.
A) exactly 12
B) less than 13
C) less than 9
D) more than 14
Figure: The Marginal Benefit Curve
(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve.
The total benefit of mowing four lawns is approximately:
A) $25.
B) $35.
C) $80.
D) $114.
Figure: A Market with a Tax
(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The tax revenue
collected by the government is equal to the area:
A) (P1 ” P3)Q1.
B) (P1 ” P5)Q2.
C) (P2 ” P3)Q1.
D) (P1 ” P2)Q2.
Poverty programs are aimed at:
A) keeping people from earning less than $10,000.
B) people who have run into problems paying for high-priced gas.
C) reducing the percentage of families living below the poverty line.
D) Social Security recipients.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases one mixer and bakes 200 cakes per day, what is her average fixed cost?
A) $5
B) $10
C) $200
D) $1,000
(Table: Tutoring) Look at the table Tutoring. If the college requires all tutors to register
with the dean and charges each tutor $10 to register and if Sigmund can charge all
students their willingness to pay, his total profit from tutoring will be:
A) $10.
B) $20.
C) $30.
D) $40.
An example of an import quota is a:
A) limit on the total number of Honda automobiles imported from Japan.
B) regulation specifying that each imported Honda automobile must meet certain
emission exhaust guidelines.
C) tax of 10% of the value of each Honda automobile imported from Japan.
D) subsidy from the Japanese government of $500 for each Honda automobile imported
into the United States.