1) If a country allows trade and, for a certain good, the domestic price without trade is
higher than the world price,
a.the country will be an exporter of the good.
b.the country will be an importer of the good.
c.the country will be neither an exporter nor an importer of the good.
d.Additional information is needed about demand to determine whether the country will
be an exporter of the good, an importer of the good, or neither.
2) When homeowners sell a house, part of the paperwork they complete is a statement
of disclosure on which the homeowners are supposed to reveal everything that they
know is wrong with the house. The purpose of the statement of disclosure is to try to
solve the
a.principal-agent problem.
b.moral-hazard problem.
c.adverse-selection problem.
d.signaling problem.
3) If demand is price inelastic, then
a.buyers do not respond much to a change in price.
b.buyers respond substantially to a change in price, but the response is very slow.
c.buyers do not alter their quantities demanded much in response to advertising, fads, or
general changes in tastes.
d.the demand curve is very flat.
4) The rental price of land is
a.the price paid for ownership of the land.
b.the price paid for the flow of services from land over a specified time period.
c.always more than the purchase price.
d.All of the above are correct.
5) The term “factor market” applies to the market for
a.labor.
b.capital.
c.land.
d.All of the above are correct.
6) Scenario 20-3
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus
$20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax
and families earning more than $35,000 pay 10% of their income in taxes. The income
tax revenue collected from those families earning over
$35,000 is then redistributed equally to those families earning less than $35,000.
Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value
of after-tax income, which government policy would an advocate of utilitarianism
prefer?
a.Plan A
b.Plan B
c.either Plan A or Plan B
d.neither Plan A nor Plan B because any plan that forcibly redistributes income is
against the philosophy
7) Figure 10-11
Taking only private value and private cost into account, total surplus at the market
equilibrium amounts to
a. $3,850.
b. $4,320.
c. $4,980.
d. $5,530.
8) An example of a perfectly competitive market would be the market for
a.electricity.
b.soybeans.
c.coffee shops.
d.restaurants.
9) Table 15-6
A monopolist faces the following demand curve:
What is the marginal revenue from the sale of the 2nd unit?
a.$3
b.$3
c.$9
d.$24
10)
Using the midpoint method, what is the price elasticity of supply between points D and
G? a. 1.89
b.1.26
c.0.53
d.0.34
11) The Coase theorem asserts that, if externalities are present and if private parties can
bargain over the allocation of resources at no cost, then
a.the private market will reach an equilibrium in which resources are allocated
inefficiently.
b.the private market will reach an equilibrium in which resources are allocated
efficiently.
c.the private market cannot reach an equilibrium.
d.a mixture of corrective taxes and subsidies is necessary for a socially optimal
equilibrium.
12) Figure 15-1
Considering the relationship between average total cost and marginal cost, the marginal
cost curve for this firm must
a.lie entirely above the average total cost curve.
b.lie entirely below the average total cost curve.
c.be U-shaped.
d.be horizontal.
13) The Clayton Act
a.preceded the Sherman Act.
b.replaced the Sherman Act.
c.strengthened the Sherman Act.
d.was specifically designed to reduce the ability of cartels to organize.