ECON FINAL EXAM

19. Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium? a. ATC > AR and MR = MC b. P > MC and AR = ATC c. P < ATC and AR > MR d. P > AR and P = MR

b. P > MC and AR = ATC

14. Refer to Figure 8-5. The loss in consumer surplus that results from the tax is represented by area a. A+B+D+F. b. A+B+C. c. B+C d. C+H.

c. B+C

30. Total surplus with a tax is equal to a. consumer surplus plus producer surplus minus tax revenue. b. consumer surplus minus producer surplus. c. consumer surplus plus producer surplus plus tax revenue. d. consumer surplus plus producer surplus.

c. consumer surplus plus producer surplus plus tax revenue.

27. Refer to Figure 6-10. A price floor set at a. $16 will be binding and will result in a surplus of 10 units. b. $16 will be binding and will result in a surplus of 4 units. c. $6 will be binding and will result in a surplus of 10 units. d. $6 will be binding and will result in a surplus of 6 units.

a. $16 will be binding and will result in a surplus of 10 units.

Table 7-7 Buyer Willingness to Pay Michael $500 Earvin $400 Larry $350 Charles $300 25. Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets at that price. What is the total consumer surplus generated by this transaction? a. $180 b. $720 c. $140 d. $40

a. $180

Table 13-8 Quantityof Output FixedCost VariableCost 0 $20 $0 1 $20 $10 2 $20 $40 3 $20 $80 4 $20 $130 5 $20 $200 6 $20 $300 17. Refer to Table 13-8. What is the marginal cost of producing the fifth unit of output? a. $70 b. $40 c. $50 d. $4

a. $70

1. Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is a. $90. b. $110. c. $30. d. $140.

a. $90.

20. A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i) they both face downward-sloping demand curves. (ii) they both charge a price that exceeds marginal cost. (iii) free entry and exit determines the long-run equilibrium. a. (i) and (ii) only b. (i) only c. (ii) only d. (i), (ii), and (iii) only

a. (i) and (ii) only

10. Refer to Figure 15-9. To maximize its profit, a monopolist would choose which of the following outcomes? a. 100 units of output and a price of $40 per unit b. 200 units of output and a price of $40 per unit c. 100 units of output and a price of $20 per unit d. 150 units of output and a price of $30 per unit

a. 100 units of output and a price of $40 per unit

20. If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a a. 20 percent decrease in the quantity demanded. b. 0.2 percent decrease in the quantity demanded. c. 5 percent decrease in the quantity demanded. d. 40 percent decrease in the quantity demanded.

a. 20 percent decrease in the quantity demanded.

Table 14-8Suppose that a firm in a competitive market faces the following revenues and costs: Quantity Total Revenue Total Cost 0 $0 $3 1 $6 $5 2 $12 $8 3 $18 $12 4 $24 $17 5 $30 $24 6 $36 $31 7 $42 $39 15. Refer to Table 14-8. The firm's profit maximizing output level is a. 4 units. b. 6 units. c. 5 units. d. 7 units.

a. 4 units.

5. Refer to Figure 15-17. If this firm is not able to price discriminate, which of the following areas represents the consumer surplus from this profit-maximizing monopolist? a. ABE b. EFG c. ACG d. BCFE

a. ABE

6. Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist? a. ACG b. BCFE c. ABE d. EFG

a. ACG

25. DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $1200 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $700, in order to make the boat worth $1200 to potential buyers. He can sell the boat as it is now for $200. What should he do? a. He should complete the repairs and sell the boat for $1200. b. It does not matter which action he takes; the outcome is the same either way. c. He should keep the boat since it would not be rational to spend $1,300 on repairs and then sell the boat for $1200. d. He should sell the boat as it is now for $200.

a. He should complete the repairs and sell the boat for $1200.

28. Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts? a. It increases. b. It may increase, decrease, or remain unchanged. c. It remains unchanged. d. It decreases.

a. It increases.

Table 17-19Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). Store 2 Low Price High Price Store 1 Low Price (400, 400) (500, 50) High Price (50, 500) (325, 325) 2. Refer to Table 17-19. The dominant strategy for grocery store 2 is a. Low price b. High price c. there is no dominant strategy d. both a and b

a. Low price

Table 17-19Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). Store 2 Low Price High Price Store 1 Low Price (400, 400) (500, 50) High Price (50, 500) (325, 325) 1. Refer to Table 17-19. The Nash equilibrium is a. Low price, Low price b. High price, High price c. both a and b d. there is no Nash equilibrium

a. Low price, Low price

7. Which of the following is not a true statement when comparing monopolies and perfectly competitive markets? a. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not. b. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost. c. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal perfectly elastic demand curves. d. Monopolies can earn profits in the long run while perfectly competitive firms break even.

a. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

23. Suppose buyers of cans of soft drinks are required to send $0.50 to the government for every one they buy. Further, suppose this tax causes the effective price received by sellers of these cans of soft drinks to fall by $0.20 per drink. Which of the following statements is correct? a. The price paid by buyers is $0.30 per drink more than it was before the tax. b. This tax causes the price the seller receives to exceed the price the buyer pays. c. The tax burden is shared equally. d. More than half of the burden of the tax falls on sellers.

a. The price paid by buyers is $0.30 per drink more than it was before the tax.

10. Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 10 percent, the number of ice cream cones demanded falls to 40. It follows that the a. demand for ice cream cones in this price range is elastic. b. demand for ice cream cones in this price range is inelastic. c. price elasticity of demand for ice cream cones in this price range is 0. d. demand for ice cream cones in this price range is unit elastic.

a. demand for ice cream cones in this price range is elastic.

24. The players in a two-person game are choosing between Strategy X and Strategy Y. If the second player chooses Strategy X, the first player's best response is to select X. If the second player chooses Strategy Y, the first player's best response is to select X. For the first player, Strategy X is called a a. dominant strategy. b. collusive strategy. c. cartel strategy. d. repeated-trial strategy.

a. dominant strategy.

20. When the government places a tax on a product, the reduction in consumer and producer surplus to buyers and sellers a. exceeds the revenue raised from the tax by the government. b. is less than the revenue raised from the tax by the government. c. is equal to the revenue raised from the tax by the government. d. Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

a. exceeds the revenue raised from the tax by the government.

27. For a monopolistically competitive firm, at the profit-maximizing quantity of output, a. price exceeds marginal cost. b. marginal revenue exceeds marginal cost. c. marginal cost exceeds average revenue. d. price equals marginal revenue.

a. price exceeds marginal cost.

13. Refer to Table 3-27. Assume that Huang and Min each has 36 labor hours available. Originally, each person divided his/her time equally between the production of parasols and plates. Now, each person spends all their time producing the good in which they have a comparative advantage. As a result, the total output of plates is increased by a. 3. b. 0. c. 9. d. 1.5.

a. 3.

28. Refer to Figure 2-4. At which point is this economy producing its maximum possible quantity of doors? a. U b. T c. S d. R

a. U

3. If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in a(n) a. increase in the demand for Kindles. b. decrease in the demand for Kindles. c. decrease in the demand for Nooks. d. increase in the demand for Nooks.

a. increase in the demand for Kindles.

16. When demand is inelastic, the price elasticity of demand is a. less than 1, and price and total revenue will move in the same direction. b. greater than 1, and price and total revenue will move in the same direction. c. less than 1, and price and total revenue will move in opposite directions. d. greater than 1, and price and total revenue will move in opposite directions.

a. less than 1, and price and total revenue will move in the same direction.

Erin would be willing to pay as much as $150 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $100 per week. 7. Refer to Scenario 8-1. If Erin hires Ernesto to clean her house, total surplus (Erin's consumer surplus plus Ernesto's producer surplus) is a. $150. b. $50. c. $100. d. $80.

b. $50.

11. Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to a. $750. b. $500. c. $250. d. $1,000.

b. $500.

Table 17-18This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B). Firm B Q=10 Q=12 Firm A Q=10 (48, 48) (20, 60) Q=12 (60, 20) (38, 38) 30. Refer to Table 17-18. The Nash equilibrium for this game is a. 10 units of output for Firm A and 10 units of output for Firm B. b. 12 units of output for Firm A and 12 units of output for Firm B. c. 12 units of output for Firm A and 10 units of output for Firm B. d. 10 units of output for Firm A and 12 units of output for Firm B.

b. 12 units of output for Firm A and 12 units of output for Firm B.

12. Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area a. C+H. b. D+H. c. A. d. B+C.

b. D+H.

17. Suppose the incomes of buyers in a market for a particular normal good decrease and there is also an increase in supply. What would we expect to occur in this market? a. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

2. Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in a. a decrease in total surplus in Guatemala. b. Guatemalan consumers paying a higher price for coffee. c. a decrease in producer surplus in Guatemala. d. All of the above are correct.

b. Guatemalan consumers paying a higher price for coffee.

2. Which of the following events must result in a lower price in the market for Snickers? a.Demand for Snickers increases, and supply of Snickers decreases. b.Demand for Snickers and supply of Snickers both increase c.Demand for Snickers and supply of Snickers both decrease. d.Demand for Snickers decreases, and supply of Snickers increases.

D. Demand for Snickers decreases, and supply of Snickers increases.

9. Monopolies are socially inefficient because the price they charge is a. equal to demand. b. above marginal cost. c. equal to marginal revenue. d. above demand.

b. above marginal cost.

4. Refer to Figure 9-1. Compared with no trade, when trade in coffee is allowed, consumer surplus in Guatemala a. decreases by the area D + G. b. decreases by the area B + D. c. increases by the area B + D. d. increases by the area C + F.

b. decreases by the area B + D.

3. An agreement between two duopolists to function as a monopolist usually breaks down because a. they disagree agree on the price that a monopolist would charge. b. each duopolist wants to produce more than the agreement specifies to capture more profit. c. they disagree on the output that a monopolist would produce. d. each duopolist wants to charge a higher price than the agreement specifies to capture more profit.

b. each duopolist wants to produce more than the agreement specifies to capture more profit.

11. The deadweight loss from a tax of $1 per unit will be smallest in a market a. in which demand is elastic and supply is inelastic. b. in which demand is inelastic and supply is inelastic. c. in which demand is inelastic and supply is elastic. d. None of the above are correct; we need to know more information.

b. in which demand is inelastic and supply is inelastic.

3. Refer to Figure 9-1. Compared with no trade, when trade in coffee is allowed, producer surplus in Guatemala a. decreases by the area G. b. increases by the area B + D + G. c. decreases by the area C + F. d. increases by the area B + D.

b. increases by the area B + D + G.

21. In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if a. average revenue is greater than average fixed cost. b. price is less than average total cost. c. price is greater than average total cost. d. average revenue is greater than marginal cost.

b. price is less than average total cost.

8. The deadweight loss associated with a monopoly occurs because the monopolist a. produces an output level greater than the socially optimal level. b. produces an output level less than the socially optimal level. c. maximizes profits. d. equates marginal revenue with marginal cost.

b. produces an output level less than the socially optimal level.

6. If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price, a. the country will be an importer of the good. b. the country will be an exporter 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.

b. the country will be an exporter of the good.

5. When a country allows trade and becomes an exporter of a good, a. the losses of the domestic consumers of the good exceed the gains of the domestic producers of the good. b. the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good. c. the losses of the domestic producers of the good exceed the gains of the domestic consumers of the good. d. the gains of the domestic consumers of the good exceed the losses of the domestic producers of the good.

b. the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good.

21. Barb's aunt gave her $100 for her birthday with the condition that Barb must buy one of four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Barb decides on Option B. The opportunity cost of this decision is a. $100. b. the value to Barb of the option she would have chosen had Option B not been available. c. the value to Barb of Options A, C and D combined. d. the average of the values to Barb of Options A, C, and D.

b. the value to Barb of the option she would have chosen had Option B not been available.

30. Economists think that high-school athletes who skip college to become professional athletes a. do not understand the value of a college education. b. understand that the opportunity cost of attending college is very high for professional athletes. c. do so because they cannot get into college. d. are not making a rational decision.

b. understand that the opportunity cost of attending college is very high for professional athletes.

7. An increase in quantity demanded a. is a shift in the demand curve to the right. b. is a movement downward and to the right along a demand curve. c. is a shift in the demand curve to the left. d. is a movement upward and to the left along a demand curve.

b. is a movement downward and to the right along a demand curve.

18. Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 100 units b. $10 and 50 units c. $10 and 100 units d. $5 and 50 units

c. $10 and 100 units

Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but can earn $8 per hour at the local hardware store when he chooses to work there. He can sell a birdhouse for $20 each. 21. Refer to Scenario 13-11. An economist would calculate the total profit from building one birdhouse to be a. $15. b. $12. c. $11. d. $7.

c. $11.

Figure 14-3Suppose a firm operating in a competitive market has the following cost curves: 26. Refer to Figure 14-3. If the market price is $10, what is the firm's economic profit? a. $50 b. $9 c. $15 d. $30

c. $15

26. Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product? a. 22.5 bouquets per day. b. 5 bouquets per day. c. 15 bouquets per day. d. 35 bouquets per day.

c. 15 bouquets per day.

22. If a 5% change in price results in a 10% change in quantity supplied, then the price elasticity of supply is about a. 0.50, and supply is inelastic. b. 2.0, and supply is inelastic. c. 2.0, and supply is elastic. d. 0.50, and supply is elastic.

c. 2.0, and supply is elastic.

9. Suppose that a worker in Cornland can grow either 50 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true? a. Oatland could gain from trade between the two countries, but Cornland definitively would lose. b. Neither country could gain from trade with each other because Cornland has an absolute advantage in both goods. c. Both countries could gain from trade with each other. d. Neither country could gain from trade with each other because neither one has a comparative advantage.

c. Both countries could gain from trade with each other.

26. Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then a. Jim must have an absolute advantage in the production of baseball bats. b. Tom has a comparative advantage in the production of baseball bats. c. Jim has a comparative advantage in the production of baseball bats. d. Tom must have an absolute advantage in the production of baseball bats.

c. Jim has a comparative advantage in the production of baseball bats.

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. 12. Refer to Figure 17-2. The Nash equilibrium in this game is that a. both firms produce a poor quality product. b. Acme produces a poor quality product and Pinnacle produces a good quality product. c. both firms produce a good quality product. d. Acme produces a good quality product and Pinnacle produces a poor quality product.

c. both firms produce a good quality product.

22. If the government adds a binding price ceiling to a market, then the price received by sellers will a. increase, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will increase. c. decrease, and the quantity sold in the market will decrease. d. increase, and the quantity sold in the market will increase.

c. decrease, and the quantity sold in the market will decrease.

19. Which of the following events must cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both increase c. demand and supply both decrease d. demand decreases and supply increases

c. demand and supply both decrease

14. Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total cost, in the short run the firm will a. shut down. b. earn both economic and accounting profits. c. experience losses but will continue to produce rubber bands. d. raise the price of its product.

c. experience losses but will continue to produce rubber bands.

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. 13. Refer to Figure 17-2. The dominant strategy for Acme is to a. produce a poor quality product, and the dominant strategy for Pinnacle is to produce a poor quality product. b. neither firm has a dominant strategy. c. produce a good quality product, and the dominant strategy for Pinnacle is to produce a good quality product. d. produce a good quality product, and Pinnacle has no dominant strategy.

c. produce a good quality product, and the dominant strategy for Pinnacle is to produce a good quality product.

23. Production possibilities frontiers are usually bowed outward. This is because a. the opportunity cost of producing a good decreases as more and more of that good is produced. b. the more resources a society uses to produce one good, the fewer resources it has available to produce another good. c. resources are specialized; that is, some are better at producing particular goods rather than other goods. d. of the effects of technological change.

c. resources are specialized; that is, some are better at producing particular goods rather than other goods.

11. Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result, a. buyers' total expenditure on the good is unchanged. b. the equilibrium quantity and the equilibrium price both are unchanged. c. the equilibrium price increases, and the equilibrium quantity is unchanged. d. the equilibrium quantity decreases, and the equilibrium price is unchanged.

c. the equilibrium price increases, and the equilibrium quantity is unchanged.

17. When a competitive firm doubles the quantity of output it sells, its a. marginal revenue doubles. b. profits must increase. c. total revenue doubles. d. average revenue doubles.

c. total revenue doubles.

13. Refer to Figure 8-5. The tax causes a reduction in social surplus that is represented by area a. F. b. B+C+D+H. c. C+H. d. A.

c. C+H.

27. Refer to Figure 2-4. This economy cannot produce at which point(s)? a. Q, S, T b. Q c. Q, S d. S

c. Q, S

22. The prisoners' dilemma game a. is a situation in which two players both have dominant strategies which lead to the highest total payoff for the two players. b. has no Nash equilibrium since players, after agreeing to play their dominant strategy, will have an incentive to switch to another strategy. c. has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other. d. Both a and c are correct.

c. has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other.

1. If Max experiences a decrease in his income, then we would expect Max's demand for a. each good he purchases to remain unchanged. b. inferior goods to decrease. c. normal goods to decrease. d. complementary goods to increase.

c. normal goods to decrease.

5. A tradeoff exists between having a clean environment and having a higher standard of living when a. efforts to reduce pollution are not completely successful. b. employing individuals to clean up pollution increases their income. c. reducing pollution decreases productivity. d. individuals with higher levels of income pollute less than low-income individuals.

c. reducing pollution decreases productivity.

Table 13-8 Quantityof Output FixedCost VariableCost 0 $20 $0 1 $20 $10 2 $20 $40 3 $20 $80 4 $20 $130 5 $20 $200 6 $20 $300 18. Refer to Table 13-8. What is the average cost of producing 5 units of output? a. $40 b. $5 c. $4 d. $44

d. $44

8. Consider Mandy's decision to go to college. If she goes to college, she will spend $30,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Using this information economists calculate that Mandy's cost of going to college is a. $42,000. b. $58,000. c. $32,000. d. $50,000.

d. $50,000.

A firm in a competitive market has the following cost structure: Output ATC 0 -- 1 $10 2 $8 3 $7 4 $8 5 $10 If the firm's fixed cost of production is $5, and the market price is $7, how many units should the firm produce to maximize profit? a. 1 unit b. 2 units c. 4 units d. 3 units

d. 3 units

Table 13-1 Number of Workers Total Output Marginal Product 0 0 -- 1 30 2 45 3 60 4 50 5 40 9. Refer to Table 13-1. What is average output when 3 workers are hired? a. 75 b. 30 c. 135 d. 45

d. 45

16. Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal, a. the smaller is the tax burden on buyers relative to the tax burden on sellers. b. the larger is the deadweight loss of the tax. c. the larger is the decrease in quantity demanded as a result of the tax. d. All of the above are correct.

d. All of the above are correct.

Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B). Firm B Q=2 Q=3 Firm A Q=2 (10, 10) (8, 12) Q=3 (12, 8) (6, 6) 28. Refer to Table 17-17. Which of the following outcomes represent the Nash equilibrium in this game? a. Q=2 for Firm A and Q=3 for Firm B. b. Q=3 for Firm A and Q=2 for Firm B. c. There is no Nash equilibrium in this game since neither player has a dominant strategy. d. Both a and b are correct.

d. Both a and b are correct.

29. If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise? a. Both the equilibrium price and quantity would increase. b. The equilibrium price would increase, and the equilibrium quantity would decrease. c. The equilibrium price would decrease, and the equilibrium quantity would increase. d. Both the equilibrium price and quantity would decrease.

d. Both the equilibrium price and quantity would decrease.

4. Refer to Figure 15-17. If this firm is not able to price discriminate, which of the following areas represents the deadweight loss from this profit-maximizing monopolist? a. ACG b. BCFE c. ABE d. EFG

d. EFG

10. Suppose the demand for peanuts increases. What will happen to consumer surplus in the market for peanuts? a. It remains unchanged. b. It decreases. c. It increases. d. It may increase, decrease, or remain unchanged.

d. It may increase, decrease, or remain unchanged.

15. Total surplus in a market will increase when the government a. imposes a tax on that market. b. imposes a binding price floor or a binding price ceiling on that market. c. Both a and b are correct. d. Neither a nor b is correct.

d. Neither a nor b is correct.

29. Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist? a. The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit. b. The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. c. The monopolist is currently maximizing profits, and its total profits are $200. d. The monopolist is currently maximizing profits, and its total profits are $250.

d. The monopolist is currently maximizing profits, and its total profits are $250.

19. On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,000 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product? a. The farmer is able to produce 4,500 bushels of wheat when he hires 4 workers. b. The farmer is able to produce 4,900 bushels of wheat when he hires 4 workers. c. The farmer is able to produce 5,100 bushels of wheat when he hires 4 workers. d. a and b are both correct.

d. a and b are both correct.

8. The price paid by buyers in a market will increase if the government a. increases a binding price floor in that market. b. increases a tax on the good sold in that market. c. increases a binding price ceiling in that market. d. all of the above.

d. all of the above.

29. Refer to Figure 7-15. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be a. higher than P2. b. P1. c. lower than P1. d. between P1 and P2.

d. between P1 and P2.

18. Demand is said to be price elastic if a. buyers do not respond much to changes in the price of the good. b. demand shifts substantially when income or the expected future price of the good changes. c. demand shifts substantially when the price of a substitute good changes. d. buyers respond substantially to changes in the price of the good.

d. buyers respond substantially to changes in the price of the good.

24. Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should a. decrease the price to both groups of customers. b. increase the price charged to vacationers and decrease the price charged to business travelers. c. increase the price for both groups of customers. d. decrease the price charged to vacationers and increase the price charged to business travelers.

d. decrease the price charged to vacationers and increase the price charged to business travelers.

24. A deadweight loss is a consequence of a tax on a good because the tax a. imposes a loss on buyers that is smaller than the loss to sellers. b. imposes a loss on buyers that is greater than the loss to sellers. c. induces the government to increase its expenditures. d. induces buyers to consume less, and sellers to produce less.

d. induces buyers to consume less, and sellers to produce less.

23. A profit-maximizing firm in a competitive market is maximizing profit and is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm is earning a a. profit of more than $27. b. profit of exactly $27. c. loss of more than $27. d. loss of exactly $27.

d. loss of exactly $27.

16. In a perfectly competitive market, the process of entry and exit will end when a. total revenue is equal to average total cost. b. average revenue is greater than marginal cost. c. accounting profits is equal to zero. d. marginal revenue is equal to long-run average total cost.

d. marginal revenue is equal to long-run average total cost.

12. Refer to Table 3-27. Min has an absolute advantage in the production of a. parasols and a comparative advantage in the production of parasols. b. parasols and a comparative advantage in the production of plates. c. neither good and a comparative advantage in the production of plates. d. neither good and a comparative advantage in the production of parasols.

d. neither good and a comparative advantage in the production of parasols.

14. Refer to Table 3-27. The opportunity cost of 1 parasol for Huang is a. 3 plates. b. 1/2 plate. c. 1 plate. d. 2 plates.

d. 2 plates.

15. Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour. a. Susan has an absolute advantage over Paul in washing windows. b. Susan has a comparative advantage over Paul in washing windows. c. Paul has a comparative advantage over Susan in ironing shirts. d. All of the above are correct.

d. All of the above are correct.

4. Suppose that demand for a good increases, and at the same time, the supply of the good also increases. What would happen in the market for the good? a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

6. Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result, a. the equilibrium quantity and the equilibrium price both are unchanged. b. the equilibrium price increases, and the equilibrium quantity is unchanged. c. buyers' total expenditure on the good is unchanged. d. the equilibrium quantity decreases, and the equilibrium price is unchanged.

d. the equilibrium quantity decreases, and the equilibrium price is unchanged.