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1) Unless markets are perfectly competitive, they may fail to maximize the total
benefits to buyers and sellers.
a.True
b.False
2) Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
If the market price rises above $6.30, the firm will earn
a.positive economic profits in the short run.
b.negative economic profits in the short run but remain in business.
c.negative economic profits and shut down.
d.zero economic profits in the short run.
3) When a single firm can supply a product to an entire market at a lower cost than
could two or more firms, the industry is called a
a.resource industry.
b.exclusive industry.
c.government monopoly.
d.natural monopoly.
4) In a monopolistically competitive market,
a.strategic interactions among the firms are very important.
b.the threat of entry by new firms is not an important consideration.
c.the attainment of a Nash equilibrium is an important objective.
d.firms may enter even though they will earn zero economic profit in the long run.
5) The following table shows a portion of the demand schedule for a particular good at
various levels of income.
Using the midpoint method, when income equals $7,500, what is the between $16 and
$20?
a.0.56
b.0.75
c.1.33
d.1.80
6) As price rises from $10 to $15, the using the midpoint method is approximately
a. 0.40
b. 0.56
c. 1.80
d. 2.50
7) Some prescription drugs sell for more in the United States than they do in other
countries. Which of the following statements about this issue is most likely to be true?
a.Drug companies are engaging in price discrimination, and this practice certainly
reduces global social welfare.
b.Global social welfare could be improved if the price in the United States were
reduced to the price charged in other countries.
c.Global social welfare could be improved if the price in the other countries were
increased to the price charged in the United States.
d.Drug companies are engaging in price discrimination, but this might improve global
social welfare if it gives more people access to the drugs.
8) Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.
Refer to Figure 21-3. Which of the graphs in the figure reflects a decrease in the price
of good X only?
a.graph a
b.graph b
c.graph c
d.graph d
9) When we compare economic welfare in a monopoly market to a competitive market,
the profits earned by the monopolist represent
a.a loss in total welfare.
b.a transfer of benefits from the buyer to the seller.
c.the higher marginal costs incurred by the monopolists in comparison to competitive
firms.
d.All of the above are correct.
10) Positive statements are
a.prescriptive.
b.claims about how the world should be.
c.claims about how the world is.
d.made by economists speaking as policy advisers.
