Micro Exam Questions

17. The Laffer curve relates to a. The tax rate to tax revenue raised by the tax b. The tax rate to the deadweight loss of the tax c. The price elasticity of supply to the deadweight loss of the tax d. Government welfare payments to the birth rate

a. The tax rate to tax revenue raised by the tax

36. Economists blame the long lines at gasoline stations in the U.S. in the 1970's on a. US government regulations pertaining to the price of gasoline b. The OPEC c. Major oil companies operating in the US d. Consumers who bought gasoline frequently, even when their cars' gasoline tanks were nearly full

a. US government regulations pertaining to the price of gasoline

9. A seller's opportunity cost measures the a. Value of everything she must give up to produce a good b. Amount she is paid for a good minus her cost of providing it c. Consumer surplus d. Out of pocket expenses to produce a good but not the value of her time

a. Value of everything she must give up to produce a good

15. The decrease in total surplus that results from a market distortion, such as a tax, is called a a. Wedge loss b. Revenue loss c. Deadweight loss d. Consumer surplus loss

c. Deadweight loss

11. Total surplus a. Can be used to measure a market's efficiency b. Is the sum of consumer and producer surplus c. Is the value to buyers minus the cost to sellers d. All of the above are correct

d. All of the above are correct

17. In a market economy, supply and demand are imported because they a. Play a critical role in the allocation of the economy's scarce resources b. Determine how much of each good gets produced c. Can be used to predict the impact on the economy of various events and policies d. All of the above are correct

d. All of the above are correct

39. Price ceilings cause shortages, and price floors cause surpluses a. True b. False

A. True

6. When government receipts exceed total government sending during a fiscal year, the difference is a. A budgeted surplus b. A budgeted deficit c. The national debt d. Automatically refunded

a. A budgeted surplus

26. A competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then a. A one-unit increase in output will increase the firm's profit b. A one-unit decrease in output will increase the firm's profit c. Total revenue exceeds total cost d. Total cost exceeds total revenue

a. A one-unit increase in output will increase the firm's profit

25. If a surplus exists in a market, then we know that the actual price is a. Above the equilibrium price, and quantity supplied is greater than quantity demanded b. Above the equilibrium price, and quantity demanded is greater than quantity supplied c. Below the equilibrium price, and quantity demanded is greater than quantity supplied d. Below the equilibrium price, and quantity supplied is greater than quantity demanded

a. Above the equilibrium price, and quantity supplied is greater than quantity demanded

8. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a. Amount of the other good that must be given up b. Market price of the additional amount produced c. Amount of resources that must be devoted to its production d. Number of dollars that must be spent to produce it

a. Amount of the other good that must be given up

25. A negative externality arises when a person in an activity that has a. An adverse effect of a bystander who is not compensated by the person who caused the effect b. An adverse effect of a bystander who is compensated by the person who causes the effect c. A beneficial effect on a bystander who pays the person who causes the effect d. A beneficial effect on a bystander who does not pay the person who causes the effect

a. An adverse effect of a bystander who is not compensated by the person who caused the effect

25. In a perfectly competitive market, the process of entry and exit will end when firms in the market a. Are making zero economic profit b. Are operating with excess capacity c. Capture market power d. Experience decreasing marginal revenue

a. Are making zero economic profit

15. Total costs divided by quantity produced is a. Average total cost b. Marginal cost c. Marginal fixed cost d. None of the above

a. Average total cost

28. A fundamental source of monopoly market power arises from a. Barriers to entry b. Perfectly elastic demand c. Perfectly inelastic demand d. Availability of "free" natural resources, such as water or air

a. Barriers to entry

3. If a tax is imposed on a market with inelastic demand and elastic supply, then a. Buyers will bear most of the burden of the tax b. Sellers will bear most of the burden of the tax c. The burden of the tax will be shared equally between buyers and sellers d. It is impossible to determine how the burden of the tax will be shared

a. Buyers will bear most of the burden of the tax

32. Transaction costs a. Can keep private parties from solving externality problems b. Are incurred in the production process due to externalities c. Increase when taxes are imposed to correct negative externalities d. Are eliminated when the government intervenes in a market with externalities

a. Can keep private parties from solving externality problems

5. An efficient tax system is one that imposes small a. Deadweight losses and administrative burdens b. Marginal rates and deadweight losses c. Administrative burdens and transfers of money d. Marginal rates and transfers of money

a. Deadweight losses and administrative burdens

9. High marginal income tax rates a. Distort incentives to work b. Are used to encourage savings behavior c. Will invariably lead to lower average tax rates d. Are not associated with deadweight losses

a. Distort incentives to work

4. The largest budgetary expense for a typical state or local government is a. Education b. Medicare c. Highways d. Income security

a. Education

23. For a firm in a perfectly competitive market, the price if the good is always a. Equal to the marginal revenue b. Equal to total revenue c. Greater than average revenue d. Equal to the firm's efficient scale of output

a. Equal to the marginal revenue

26. Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous d. None of the above is correct

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

21. Pizza is a normal good if the demand a. For pizza rises when income rises b. For pizza rises when the price of pizza falls c. Curve for pizza slopes upward d. Curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes

a. For pizza rises when income rises

27. Negative externalities lead markets to produce a. Greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels b. Smaller than efficient levels and positive externalities lead markets to produce greater than efficient output levels c. Greater than efficient output levels and positive externalities lead markets to produce efficient output levels d. Efficient output levels and positive externalities lead markets to produce greater than efficient output levels

a. Greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels

1. The largest source of revenue for the federal government is the a. Individual income tax b. Property tax c. Sales tax d. Corporate income tax

a. Individual income tax

7. Another term for factors of production is a. Inputs b. Outputs c. Goods d. Services

a. Inputs

14. The amount that total cost rises when the firm produces one additional unit is called a. Marginal cost b. Average cost c. Fixed cost d. Variable cost

a. Marginal cost

30. A profit maximizing monopolist will produce the level of output at which a. Marginal revenue is equal to marginal cost b. Average revenue is equal to average total cost c. Average revenue is equal to marginal cost d. Total economic revenue is equal to opportunity cost

a. Marginal revenue is equal to marginal cost

29. Goods with many close substitutes tend to have a. More elastic demands b. Less elastic demands c. Price elasticity's of demand that are unit elastic d. Income elasticity's of demand that are negative

a. More elastic demands

33. The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as a. Price discrimination b. Monopoly pricing c. Arbitrage d. Price segregation

a. Price discrimination

36. Because of the free-rider problem a. Private markets tend to undersupply public goods b. The federal government spends too many resources on national defense and not enough resources on medical research c. Fireworks displays have become increasingly dangerous d. Poverty has increases

a. Private markets tend to undersupply public goods

28. The price elasticity of demand measures how much a. Quantity demanded responds to a change in price b. Quantity demanded responds to a change in income c. Price responds to a change in demand d. Demand responds to a change in supply

a. Quantity demanded responds to a change in price

35. If one person's use of a good diminishes another person's enjoyment of it, the good is a. Rival in consumption b. Excludable c. Normal d. Exhaustible

a. Rival in consumption

1. Economics deals primarily with the concept of a. Scarcity b. Money c. Poverty d. Banking

a. Scarcity

24. When total revenue is less than total variable cost, a firm in a competitive market will a. Shut down b. Continue to operate as long as average revenue exceeds marginal cost c. Continue to operate as long as average revenue exceeds average fixed cost d. Always exit the industry

a. Shut down

2. Which of the following is not correct? a. Taxes levied on sellers and taxes levied on buyers are not equivalent b. A tax places a wedge between the price that buyers pay and the price that sellers receive c. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers d. In the new after-tax equilibrium, buyers and sellers share the burden of the tax

a. Taxes levied on sellers and taxes levied on buyers are not equivalent

6. Consumer surplus is a. The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it b. The amount a buyer is willing to pay for a good minus the cost of producing the good c. The amount by which the quantity supplied of a good exceeds the quantity demanded d. A buyer's willingness to pay for a good plus the price of the good

a. The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

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

a. The gains of the domestic producers of the good exceed the losses of the domestic consumers of the good

18. Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? a. The greater are the price elasticities of supply and demand, the greater is the deadweight loss b. The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss c. The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss d. The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss

a. The greater are the price elasticities of supply and demand, the greater is the deadweight loss

3. Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades? a. The increase in life expectancy resulting from advances in healthcare b. An increase in the average number of children per family c. The increase in the number of jobs lost each year to foreign countries as a result of outsourcing d. The reduction in the number of high-cost medical procedures

a. The increase in life expectancy resulting from advances in healthcare

13. The "invisible hand" refers to a. The marketplace guiding the self-interests of market participants into promoting general economic well-being b. The fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient c. The equality that results from market forces allocating the goods produced in the market d. The automatic maximization of consumer satisfaction in free markets

a. The marketplace guiding the self-interests of market participants into promoting general economic well-being

20. Which of the following changes would not shift the demand curve for a good or service? a. A change in income b. A change in the price of the good or service c. A change in expectations about the future price of the good or service d. A change in the price of a related good or service

b. A change in the price of the good or service

7. Why do some policymakers support a consumption tax rather than an earning tax? a. The average tax rate would be lower under a consumption tax b. A consumption would encourage people to save earned income c. A consumption tax would raise more revenues than an income tax d. The marginal tax rate would be higher under an earnings tax

b. A consumption would encourage people to save earned income

33. Excludability is the property of a good whereby a. One person's use diminishes other people's use b. A person can be prevented from using it c. The government rations the quantity of a good that is available d. The resource is congestible

b. A person can be prevented from using it

5. A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies a. Enhance equality b. Reduce efficiency c. Reduce the reward for working hard b. All of the above

b. All of the above

10. Producer surplus is the a. Area under the supply curve to the left of the amount sold b. Amount a seller is paid minus the cost of production c. Area between the supply and demand curves, above the equilibrium price d. Cost to sellers of participating in a market

b. Amount a seller is paid minus the cost of production

7. On a graph, the area below a demand curve and above the price measures a. Producer surplus b. Consumer surplus c. Deadweight loss d. Willingness to pay

b. Consumer surplus

8. All else equal, what happens to consumer surplus if the price of a good increases? a. Consumer surplus increases b. Consumer surplus decreases c. Consumer surplus is unchanged d. Consumer surplus may increase, decrease, or remain unchanged

b. Consumer surplus decreases

37. The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a guardian of the cow. This is because a. The cow is raised in developed countries, while the elephant lives primarily in less-developed countries b. Cows are private goods, while elephants tend to roam freely without owners c. Cows and elephants are public goods, but ivory is nonrival d. Ivory is nonrival and nonexclusive, but beef is rival and exclusive

b. Cows are private goods, while elephants tend to roam freely without owners

20. A country has a competitive advantage in a product if the world price is a. Lower than that country's domestic price without trade b. Higher than that country's domestic price without trade c. Equal to that country's domestic price without trade d. Not subject to manipulation by organizations that govern international trade

b. Higher than that country's domestic price without trade

9. Microeconomics is the study of a. How money affects the economy b. How individual households and firms make decisions c. How government affects the economy d. How the economy as a whole works

b. How individual households and firms make decisions

29. A positive externality will cause a market to produce a. More than is socially desirable b. Less than is socially desirable c. The socially optimal equilibrium amount d. More than the same market would produce in the presence of a negative externality

b. Less than is socially desirable

19. Economies of scale occur when a firm's a. Marginal costs are constant as output increases b. Long-run average costs are decreasing as output increases c. Long-run average total costs are increasing as output increases d. Marginal costs are equal to average total costs for all levels of output

b. Long-run average costs are decreasing as output increases

16. If marginal cost is rising, a. Marginal product must be rising b. Marginal product must be falling c. Average variable cost must be falling d. Average fixed cost must be rising

b. Marginal product must be falling

10. Economists normally assume that the goal of a firm is to a. Maximize its total revenue b. Maximize its profit c. Minimize its explicit costs d. Minimize its total cost

b. Maximize its profit

17. The efficient scale of the firm is the quantity of output that a. Maximizes marginal product b. Minimizes average total cost c. Minimizes average fixed cost d. Minimizes average variable cost

b. Minimizes average total cost

13. One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation d. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements

b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be

38. The minimum wage is an example of a a. Price ceiling b. Price floor c. Wage subsidy d. Tax

b. Price floor

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

28. If we know that the demand curve for good X fails to reflect the total value to society of that good, then we know that a. The market for good X is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone b. The market for good X is characterized by a positive externality c. The market for good X is characterized by a negative externality d. The supply curve for good X fails to reflect the cost to society of producing that good

b. The market for good X is characterized by a positive externality

33. If the cross-price elasticity of demand for two goods is -4.5, then a. The two goods are substitutes b. The two goods of complements c. One of the goods is normal while the other good is inferior d. One of the goods is a luxury while the other good is a necessity

b. The two goods of complements

15. When an economy is operating at a point on its production possibilities frontier, then a. Consumers are content with the mix of goods and services that is being produced b. There is no way to produce more of one good without producing less of the other c. Equal amounts of the two goods are being produced d. All of the above are correct

b. There is no way to produce more of one good without producing less of the other

4. The opportunity cost of an item is a. The number of hours needed to earn money to buy the item b. What you give up to get that item c. Usually less than the dollar value of the item d. The dollar value of the item

b. What you give up to get that item

5. The maximum price that a buyer will pay for a good is called a. Consumer surplus b. Willingness to pay c. Equilibrium d. Efficiency

b. Willingness to pay

32. Suppose good X has a negative income elasticity of demand. This implies that good X is a. A normal good b. A necessity c. An inferior good d. A luxury

c. An inferior good

30. If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is a. 0.75 b. 1.25 c. 1.33 d. 1.60

c. 1.33

26. Which of the following statements about a well-maintained yard best conveys the general nature of the externality? a. A well-maintained yard conveys a positive externality because it increases the home's market value b. A well-maintained yard conveys a negative externality because it increases the property tax liability to the owner c. A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood d. A well-maintained year cannot provide any type of externality

c. A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood

34. Which of the following statements is NOT valid when the market supply curve is vertical? a. Market quantity supplied does not change when the price changes b. Supply is perfectly inelastic c. An increase in market demand will increase the equilibrium quantity d. An increase in market demand will increase the equilibrium

c. An increase in market demand will increase the equilibrium quantity

13. When adding another unit of labor leads to an increase in output that is smaller than the increase in output that resulted from adding previous units of labor, the firm is experiencing a. Diminishing labor b. Diminishing output c. Diminishing marginal product d. Negative marginal product

c. Diminishing marginal product

20. Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers b. Each firm sells a virtually identical product c. Entry is limited d. Each firm chooses an output level that maximizes profits

c. Entry is limited

16. When the government places a tax on a product,, the cost of the tax to buyers and sellers a. Is less than the revenue raised from the tax by the government b. Is equal to the revenue raised from the tax by the government c. Exceeds the revenue raised from the tax by the government d. Is zero

c. Exceeds the revenue raised from the tax by the government

34. Patent and copyright laws are major sources of a. Resource monopolies b. Natural monopolies c. Government-created monopolies d. None of the above

c. Government-created monopolies

19. To obtain the market demand curve for a product, sum the individual demand curves a. Vertically b. Diagonally c. Horizontally d. And then average them

c. Horizontally

4. Welfare economics is the study of a. The well-being of less fortunate people b. Welfare programs in the US c. How market outcomes affect economic well-being d. The effect of income redistribution on work effect

c. How market outcomes affect economic well-being

22. If muffins and bagels are substitutes, a higher price for bagels would result in a(n) a. Increase in the demand for bagels b. Decrease in the demand for bagels c. Increase in the demand for muffins d. Decrease in the demand for muffins

c. Increase in the demand for muffins

24. In what sense do externalities cause the "invisible hand" of the marketplace to fail? a. Externalities lead to government intervention in markets, which exacerbates the problems associated with externalities b. Externalities result in prices that are too high for many consumers to pay c. Markets fail to produce the maximum total benefit to society when positive or negative externalities are present d. Markets produce too little of a good when positive or negative externalities are present

c. Markets fail to produce the maximum total benefit to society when positive or negative externalities are present

27. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumer have experienced an increase in income, and beef-production technology has improved b. The price of chicken has risen, and the price of steak sauce has fallen c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy d. The demand curve for beef must be positively sloped

c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy

30. Taxes that are enacted to mitigate (lessen) the effects of negative externalities are sometimes called a. Control taxes b. Command levels c. Pigovian taxes d. Marshallian taxes

c. Pigovian taxes

8. If a tax takes a constant fraction of income as income rises, it is a. Regressive b. Proportional c. Progressive d. Based in the ability to pay principle

c. Progressive

3. Efficiency a. And equality both refer to how much a society can produce with its resources b. And equality both refer to how fairly the benefits from using resources are distributed between members of a society c. Refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society d. Refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources

c. Refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society

24. Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the a. Demand for flour to increase b. Demand for flour to decrease c. Supply of flour to increase d. Supply of flour to decrease

c. Supply of flour to increase

2. Corporate profits are a. Included in payroll taxes b. Exempt from taxes c. Taxed twice, once as profit and once as dividends d. Taxed to pay for Medicare

c. Taxed twice, once as profit and once as dividends

6. The scientific method is a. The use of modern technology to understand the way the world works b. The use of controlled laboratory experiments to understand the way the world works c. The dispassionate development and teasing of theories about how the world works d. The search for evidence to support preconceived theories about how the world works

c. The dispassionate development and teasing of theories about how the world works

22. When a country allows international trade and becomes an importer of a good, a. Domestic producers of the good become better off b. Domestic consumers of the good become worse off c. The gains of the winners exceed the losses of the losers d. All of the above are correct

c. The gains of the winners exceed the losses of the losers

27. When entry and exit behavior of firms in an industry does not affect a firm's cost structure a. The long-run market supply curve must be upward sloping b. The long-run market supply curve must ne downward sloping c. The long-run market supply curve must be horizontal d. The long-run market supply curve must be vertical

c. The long-run market supply curve must be horizontal

11. The difference between accounting profit and economic profit relates to a. The manner in which revenues are determined b. How marginal revenue is calculated c. The manner in which costs are defined d. The price of the good in the market

c. The manner in which costs are defined

18. One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short-run a. Output is not variable b. The number of workers used to produce the firm's product is fixed c. The size of the factory is fixed d. There are no fixed costs

c. The size of the factory is fixed

14. What happens to the total surplus in a market when the government imposes a tax? a. Total surplus increases by the amount of the tax b. Total surplus increases but by less than the amount of the tax c. Total surplus decreases d. Total surplus is unaffected by the tax

c. Total surplus decreases

12. We can say that the allocation of resources is efficient if a. Producer surplus is maximized b. Consumer surplus is maximized c. Total surplus is maximized d. Sellers' costs are minimized

c. Total surplus is maximized

18. Which of these statements best represents the law of demand? a. When buyers' tastes for a good increase, they purchase more of the good b. When income levels increase, buyers purchase more of most goods c. When the price of a good decreases, buyers purchase more of the good d. When buyers' demands for a good increase, the price of the good increases

c. When the price of a good decreases, buyers purchase more of the good

37. Under rent control, landlords crease to be responsive to tenants' concerns about the quality of the housing because a. With rent control, the government guarantees landlords a minimum level of profit b. They become resigned to the fact that many of their apartments are going to be vacant at any given time c. With shortages and waiting lists, they have no incentive to maintain and improve their property d. With rent control, it becomes the government's responsibility to maintain rental housing

c. With shortages and waiting lists, they have no incentive to maintain and improve their property

22. Why does a firm in a competitive industry charge the market price? a. If a firm charges less than the market price, it loses potential revenue b. If a firm charges more than the market price, it loses all its customers to other firms c. The firm can sell as many units of output as it wants to at the market price d. All of the above are correct

d. All of the above are correct

23. If the US imports TVs and the US government imposes a tariff on TVs, then a. Total surplus in the American TV market decreases b. Producer surplus in the American TV market increases c. US imports of foreign TV decrease d. All of the above are correct

d. All of the above are correct

31. In which of the following situations will total revenue increase? a. Price elasticity of demands is 1.2, and the price of the good decreases b. Price elasticity of demand is 0.5, and the price of the good increases c. Price elasticity of demand is 3.0, and the price of the good decreases d. All of the above are correct

d. All of the above are correct

23. A supply curve slopes upward because a. As more is produced, total cost of production falls b. An increase in input prices increases supply c. The quantity supplied of most goods and services increases over time d. An increase in price gives producers an incentive to supply a larger quantity

d. An increase in price gives producers an incentive to supply a larger quantity

29. A natural monopoly occurs when a. The monopolist product is sold in its natural state (such as water or diamond) b. Firms are characterized by rising marginal cost curves c. A monopoly firm requires the use of free natural resources ( such as water or air) to produce its product d. Average total cost of production decreases as more output is produced

d. Average total cost of production decreases as more output is produced

35. A legal maximum on the price at which a good can be sold is called a price a. Floor b. Subsidy c. Support d. Ceiling

d. Ceiling

32. If a monopolist is able to perfectly price discriminate, a. Consumer surplus is increased b. Deadweight loss is increases c. The price effect dominates the output effect on monopoly revenue d. Consumer surplus and deadweight losses are transformed into monopoly profits

d. Consumer surplus and deadweight losses are transformed into monopoly profits

1. A tax on the sellers of coffee will increase the price of coffee paid by buyers, a. Increase the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee b. Increase the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee c. Decrease the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee d. Decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee

d. Decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee

16. Which of the following would not result from all countries specializing according to the principle of comparative advantage a. The size of the economic pie would increase b. Worldwide production of goods and services would increase c. The well-being of citizens in each country would be enhanced d. Each country's production possibilities frontier would shift inward

d. Each country's production possibilities frontier would shift inward

12. The marginal product of labor is equal to the a. Incremental cost associated with a one unit increase in labor b. Incremental profit associated with a one unit increase in labor c. Increase in labor necessary to generate a one unit increase in output d. Increase in output obtained from a one unit increase in labor

d. Increase in output obtained from a one unit increase in labor

31. One problem with regulating monopolist on the basis of cost is that a. A monopolist is still able to generate excessive economic profits b. Regulators are unable to effectively control prices and / or production c. A monopolist's costs, by definition, are higher than costs of perfectly competitive firms d. It does not provide an incentive for the monopolist to reduce its cost

d. It does not provide an incentive for the monopolist to reduce its cost

34. Both public goods and common resources are a. Rival in consumption b. Nonrivial in consumption c. Excludable d. Nonexcludable

d. Nonexcludable

21. When buyers in a competitive market take the selling price as given, they are said to be a. Market entrants b. Monopolists c. Free riders d. Price takers

d. Price takers

38. A cheeseburger is a a. Common resource because it is rival in consumption but not excludable b. Public good because it is rival in consumption but not excludable c. Public good because it is excludable and rival in consumption d. Private good because it is excludable and rival in consumption

d. Private good because it is excludable and rival in consumption

31. The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called a. The Pigovian tax b. A corrective tax c. The externality theorem d. The Coase theorem

d. The Coase theorem

2. In market economics, resources are allocated by a. A single central planner b. A small number of central planners c. Those firms that use resources to provide goods and services d. The combined actions of millions of households and firms

d. The combined actions of millions of households and firms