Refer to Exhibit 4-8.Suppose that wheat producerslobby the government for a price
floor and receive one.This price floor is set at PF.What is the size of the consumers’
surplus at PF?
Exhibit 4-8
a. area 5
b. area 6
c. area 1 + 2 + 4
d. area 1
When marginal private benefit is equal to marginal private cost,
a. the activity in question generates no negative externality.
b. all negative externalities have been internalized.
c. all positive externalities have been internalized.
d. all of the above
e. a or b
Refer to Exhibit 3-12.Fill in blanks (C) and (D) respectively with the market quantity
supplied at each given price.
a. 17.75; 21.00
b. 47; 52
c. 50; 55
d. 71; 84
e. none of the above
A good is unit elastic in demand if as the price changes there is no resulting change in
total revenue.
a. True
b. False
Most voters choose not to be informed about political and governmental issues because
they are not smart enough to really understand the issues.
a. True
b. False
Suppose that for a given good, demand decreases and supply decreases at the same
time.If demand decreases by a greater amount than supply decreases, then equilibrium
price __________ and equilibrium quantity __________ for that good.
a. rises; rises
b. rises; falls
c. falls; rises
d. falls; falls
Research by economists Bloom, Draca, and Van Reenen revealed that imports from
China were associated with not only lower consumer goods prices, but also a
______________ cost of inputs for domestic firms, a(n)______________ in the variety
of products those domestic firms sold, and a(n) _______________ in U.S. productivity.
a. lower; increase; increase
b. higher; decrease; increase
c. lower; increase; decrease
d. higher; increase; decrease
e. lower; decrease; decrease
Refer to Exhibit 2-6. Which graph depicts a discovery of a new cheap source of energy
that assists in the production of both good X and good Y?
Exhibit 2-6
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
Refer to Exhibit 23-8. What is the total variable cost of firm A at the profit-maximizing
(or loss-minimizing) level of production?
Exhibit 23-8
a. $300
b. $700
c. $1,000
d. $400
Suppose that labor is mobile between countries A and B.If the relative demand for
goods rises in country A, then labor can flow from ______________.It may be possible
in this situation for countries A and B to __________________ which would help
to___________________.
a. country A to country B; fix the exchange rate between the two countries (or have a
common currency); eliminate the risks associated with having a flexible exchange rate.
b. country B to country A; impose trade restrictions upon one another; increase
employment in country A
c. country B to country A; fix the exchange rate between the two countries (or have a
common currency); eliminate the risks associated with having a flexible exchange rate
d. country A to country B; adopt flexible exchange rates; reduce the risk of exchange
rate fluctuations
Refer to Exhibit 31-1. If the exhibit represents a negative externality situation, the
social cost of expanding output from Q2 to Q1 is the area of
Exhibit 31-1
a. ABC.
b. Q2BCQ1.
c. Q2BAQ1.
d. Q2EAQ1.
Refer to Exhibit 32-1.The exhibit shows the breakdown of benefits and costs for a
four-person town considering the purchase of an additional $1,200 worth of books for
the public library.If simple majority voting determines the outcome, the books will
Exhibit 32-l
a. be purchased because more persons are for it than against it.
b. be purchased because the total benefits are greater than the total costs.
c. not be purchased even though total benefits exceed total costs.
d. not be purchased because the total costs are greater than the total benefits.
The Mexican demand for American goods leads to
a. the demand for Mexican pesos and the supply of U.S. dollars on the foreign exchange
market.
b. the demand for U.S. dollars and the demand for Mexican pesos on the foreign
exchange market.
c. the demand for U.S. dollars and the supply of Mexican pesos on the foreign exchange
market.
d. the demand for U.S. dollars and the supply of U.S. dollars on the foreign exchange
market.
Refer to Exhibit 35-5.Based on the information provided in this table, between Monday
and Tuesday, the U.S. dollar ____________ against the Mexican peso and the peso
_____________ against the U.S. dollar.
Exhibit 35-5
U.S. $ EquivalentForeign Currency per U.S. $
a. appreciated; appreciated
b. depreciated; appreciated
c. appreciated; depreciated
d. depreciated; depreciated
Refer to Exhibit 21-8. If the price of good X falls, the budget constraint moves from
budget constraint
Exhibit 21-8
a. 1 to 2.
b. 3 to 2.
c. 3 to 1.
d. 1 to 3.
Which of the following statements is false?
a. A price searcher must lower price to sell an additional unit of its product.
b. For a price searcher, price equals marginal revenue for all units except the first.
c. For a price searcher, price is greater than marginal revenue for all units except the
first.
d. A price searcher, like a price taker, produces that quantity of output for which
marginal revenue equals marginal cost.
The long-run average total cost (LRATC) curve shows the
a. lowest average variable cost at which the firm can produce any given level of output.
b. lowest unit cost at which the firm can produce any given level of output.
c. highest average fixed cost at which the firm can produce any given level of output.
d. lowest marginal cost at which the firm can produce any given level of output.
e. none of the above
Refer to Exhibit 27-5. Assume that the firm is a factor price taker and that the price of a
unit of labor is constant at $480. The firm should hire __________ of labor.
a. one unit
b. two units
c. three units
d. four units
e. five units
The voting outcome and the most preferred outcome of the median voter are the same
in a simple majority vote where there are several options from which to choose.
a. True
b. False
Economist David Friedman pointed out that
a. the endowment effect is not limited to humans.
b. the law of diminishing marginal utility does not hold for money.
c. the diamond-water paradox would not exist if water was scarce and diamonds were
plentiful.
d. the government should provide the necessities of life for free.
Refer to Exhibit 3-8. A price of $1 will result in a ___________________ in this market
which will cause the price of the product to gravitate ________________.
Exhibit 3-8
a. shortage; downward
b. shortage; upward
c. surplus; downward
d. surplus; upward
If the demand for a good is unit elastic and the price of the good increases, then
a. total revenue increases.
b. total revenue decreases.
c. total revenue is not affected.
d. the direction of the change in total revenue cannot be determined from the
information given.
Which of the following is true of price and marginal revenue for the first unit of output
sold by a monopolist?
a. Price is greater than marginal revenue.
b. Price is less than marginal revenue.
c. Price is equal to marginal revenue.
d. This answer could be a or b, depending on whether it is a single-price or a price
discriminating monopolist.
A minimum wage law (that sets the minimum wage above the equilibrium wage) can be
expected to
a. clear the market for unskilled workers.
b. increase the number of unskilled workers employed.
c. increase the number of firms in those industries where the law is effective.
d. reduce the number of unskilled workers employed and/or reduce the number of hours
worked by unskilled workers.
e. all of the above
Refer to Exhibit 4-3. If price P1 is a price ceiling, then
Exhibit 4-3
a. there is a surplus in the market for good X.
b. the highest price that can legally be charged in this market is P3.
c. the price at which exchange legally takes place is P2.
d. the price at which exchange legally takes place is P1.
e. both a and b