1) Accounting profit is equal to
a.marginal revenue minus marginal cost.
b.total revenue minus the explicit cost of producing goods and services.
c.total revenue minus the opportunity cost of producing goods and services.
d.average revenue minus the average cost of producing the last unit of a good or
service.
2) Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of
wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of
wheat per year. Each nation has 10 workers. For many years the two countries traded,
each completely specializing according to their respective comparative advantages.
Now, however, war has broken out between them and all trade has stopped. Without
trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per
year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. The war
has caused the combined yearly output of the two countries to decline by
a.10 units of corn and 10 units of wheat.
b.20 units of corn and 20 units of wheat.
c.30 units of corn and 30 units of wheat.
d.40 units of corn and 40 units of wheat.
3) In the early 20th century, segregation of street cars made streetcar companies
a.more profitable and was supported by private streetcar companies.
b.more profitable but was opposed by private streetcar companies.
c.less profitable but was supported by private streetcar companies.
d.less profitable and was opposed by private streetcar companies.
4) When prisoners’ dilemma games are repeated over and over, sometimes the threat of
penalty causes both parties to cooperate.
a.True
b.False
5) When a tax is imposed on sellers, producer surplus decreases but consumer surplus
increases.
a.True
b.False
6) For a monopolist, when the price effect is greater than the output effect, marginal
revenue is
a.positive.
b.negative.
c.zero.
d.maximized.
7) The more elastic the supply, the larger the deadweight loss from a tax, all else equal.
a.True
b.False
8) Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the
entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and
pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza.
Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne.
Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
Refer to Scenario 22-4. If, before any votes were cast, ravioli was eliminated from the
choices, the median voter’s first choice would be
a.pizza.
b.spaghetti
c.lasagne.
d.There is not enough information to answer this question.
9) The ancient Greek philosopher, Plato, concluded that in an ideal society the income
of the richest person
a.would be equal to the income of the poorest person.
b.would be no more than four times the income of the poorest person.
c.would be reflective of the effort put forth by that person.
d.would be taxed at a higher rate than the income of the poorest person.
10) The theory of consumer choice provides the foundation for understanding the
a.structure of a firm.
b.profitability of a firm.
c.demand for a firm’s product.
d.supply of a firm’s product.
11) The term price takers refers to buyers and sellers in
a.perfectly competitive markets.
b.monopolistic markets.
c.markets that are regulated by the government.
d.markets in which buyers cannot buy all they want and/or sellers cannot sell all they
want.
12) Trade among nations is ultimately based on
a.absolute advantage.
b.strategic advantage.
c.comparative advantage.
d.technical advantage.
13) What would happen to the equilibrium price and quantity of coffee if the wages of
coffee-bean pickers fell and the price of tea fell?
a.Price would fall, and the effect on quantity would be ambiguous.
b.Price would rise, and the effect on quantity would be ambiguous.
c.Quantity would fall, and the effect on price would be ambiguous.
d.Quantity would rise, and the effect on price would be ambiguous.
14) A decrease in supply will cause the smallest increase in price when
a.both supply and demand are inelastic.
b.demand is elastic and supply is inelastic.
c.both supply and demand are elastic.
d.demand is inelastic and supply is elastic.
15) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities
Frontier
If Bintu and Juba switch from each person dividing her time equally between the
production of cups and bowls to each person spending all of her time producing the
good in which she has a comparative advantage, then total production will increase by
a.1 bowl and 1 cup.
b.2 bowls and 4 cups.
c.3 bowls and 5 cups.
d.4 bowls and 8 cups.
16) Who wrote, “People of the same trade seldom meet together, but the conversation
ends in a conspiracy against the public, or in some diversion to raise prices.”?
a.Thomas Jefferson
b.Adam Smith
c.Bill Gates
d.Robert Axelrod
17) Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline
slopes upward. The production of the 1,000th gallon of gasoline entails the following:
♦ private cost of $3.10;
♦ social cost of $3.55;
♦ value to consumers of $3.70.
Let Q represent the number of gallons of gasoline and let P represent the price of a
gallon of gasoline. Which of the following statements is correct?
a.One point on the social-cost curve is (Q = 1,000, P = $0.45).
b.One point on the supply curve is (Q = 1,000, P = $3.10).
c.One point on the demand curve is (Q = 1,000, P = $3.55).
d.The socially optimal quantity of gasoline is less than 1,000 gallons.
18) An overcrowded beach is an example of
a.a positive externality.
b.a Tragedy of the Commons.
c.an environmentally inefficient allocation of resources.
d.an economically unfair allocation of resources.