1) Which of the following is not an example of the principle that trade can make
everyone better off?
a.Americans buy tube socks from China.
b.Residents of Maine drink orange juice from Florida.
c.A homeowner hires the kid next door to mow the lawn.
d.All of the above are examples of the principle that trade can make everyone better off.
2) Predatory pricing occurs when
a.firms collude to set prices. Economists are certain this practice is profitable.
b.firms collude to set prices. Economists are skeptical that this practice is profitable.
c.A monopolist decreases its prices to maintain its monopoly. Economists are certain
this practice is profitable.
d.A monopolist decreases its prices to maintain its monopoly. Economists are skeptical
that this practice is profitable.
3) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The loss of producer surplus as a result of the tax is
a. $3,000.
b. $6,000.
c. $9,000.
d. $12,000.
4) Utilitarians believe
a.that the government should choose just policies as evaluated by an impartial observer
behind a “veil of ignorance.”
b.in the assumption of diminishing marginal utility.
c.that everyone in society should have equal utility.
d.that the government should not redistribute income.
5) Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
The opportunity cost of 1 cup for Juba is
a.1/6 bowl.
b.2/3 bowl.
c.3/2 bowls.
d.6 bowls.
6) Consider the market for medical doctors. Suppose the opportunity cost of going to
medical school decreases for many individuals. Suppose it generally takes about ten
years to become a practicing doctor. Holding all else constant, in ten years the
equilibrium quantity of doctors will
a.increase.
b.decrease.
c.not change.
d.It is not possible to determine what will happen to the equilibrium quantity.
7) Figure 15-5
Profit on a typical unit sold for a profit-maximizing monopoly would equal
a.P1-P6.
b.P2-P4.
c.P2-P5.
d.P2-P3.
8) Consider a firm operating in a competitive market. The firm is producing 40 units of
output, has an average total cost of production equal to $6, and is earning $240
economic profit in the short run. What is the current market price?
a.$0
b.$6
c.$10
d.$12
9) The accumulation of investments in people, such as education and on-the-job
training, is known as
a.physical capital.
b.human capital.
c.efficiency wage.
d.compensating differentials.
10) Which of the following statements is correct for both a monopolist and a perfectly
competitive firm?
(i)The firm maximizes profits by equating marginal revenue with marginal cost.
(ii)The firm maximizes profits by equating price with marginal cost.
(iii)Demand equals marginal revenue.
(iv)Average revenue equals price.
a.(i), (iii), and (iv) only
b.(i) and (iv) only
c.(i), (ii), and (iv) only
d.(i), (ii), (iii), and (iv)
11) If the demand curve is linear and downward sloping, which of the following
statements is not correct?
a.Demand is more elastic on the lower part of the demand curve than on the upper part.
b.Different pairs of points on the demand curve can result in different values of the .
c.Different pairs of points on the demand curve result in identical values of the slope of
the demand curve.
d.Starting from a point on the upper part of the demand curve, an increase in price leads
to a decrease in total revenue.