QN=1 (17119) Trade between countries tends to

a. reduce both competition and specialization.

b. reduce competition and increase specialization.
c. increase competition and reduce specialization.
d. increase both competition and specialization.

QN=2 (17118) When society requires that firms reduce pollution, there is
a. a tradeoff because of reduced incomes to the firms' owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the
requirements.
d. no tradeoff, since everyone benefits from reduced pollution.

QN=3 (17142) The term market failure refers to

a. a situation in which the market on its own fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces demand for a product.
c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.

QN=4 (17129) A tradeoff exists between a clean environment and a higher level of income in that
a. studies show that individuals with higher levels of income actually pollute less than
low-income individuals.
b. to pay for pollution clean-up, the government must increase taxes which lowers
income.
c. laws that reduce pollution raise costs of production and reduce incomes.
d. by employing individuals to clean up pollution, employment and income both rise.

QN=5 (17151) Refer to Figure 2-2. Alisha regularly buys fruits and vegetables at a grocery store. Santo
regularly pays a lawn-care company to mow his lawn. If the flow of fruits and
vegetables from the grocery store to Alisha is represented by an arrow from Box C to
Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care
company is represented by an arrow
a. from Box A to Box D.
b. from Box B to Box C.
c. from Box C to Box B.
d. from Box D to Box A.

QN=6 (17161) Refer to Figure 2-2. Boxes C and D represent

a. households and firms.

b. the goods and services market and the factors of production market.
c. the goods and services market and the financial market.
d. households and government.

QN=7 (17154) Positive statements are

a. prescriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as policy advisers.

QN=8 (17170) The slope of a fairly flat upward-sloping line will be a

a. small positive number.
b. large positive number.
c. small negative number.
d. large negative number.

QN=9 (17194) Other things equal, when the price of a good falls, the
a. quantity demanded of the good decreases.
b. supply decreases.
c. quantity supplied of the good decreases.
d. demand increases.

QN=10 (17213) Which of the following events would cause the price of oranges to fall?
a. (i) There is a shortage of oranges.
b. (ii) An article is published in which it is claimed that tangerines cause a serious disease,
and oranges and tangerines are substitutes.
c. (iii) The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nation’s oranges.
d. All of (i), (ii), and (iii) are correct.

QN=11 (17225) Pens are normal goods. What will happen to the equilibrium price of pens if the price
of pencils rises, consumers experience an increase in income, writing in ink becomes
fashionable, people expect the price of pens to rise in the near future, the population
increases, fewer firms manufacture pens, and the wages of pen-makers increase?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.

QN=12 (17191) In a market economy,

a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine
 supply and demand.
d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce
resources.

QN=13 (17259) Which of the following expressions represents a cross-price elasticity of demand?
a. percentage change in quantity demanded of bread divided by percentage change in
quantity supplied of bread
b. percentage change in quantity demanded of bread divided by percentage change in
price of butter
c. percentage change in price of bread divided by percentage change in quantity
demanded of bread
d. percentage change in quantity demanded of bread divided by percentage change in
income

QN=14 (17264) Scenario 5-2

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both
goods are considered to be normal goods by a majority of consumers. Suppose that a
large income tax increase decreases the demand for both goods by 10%.

Refer to Scenario 5-2. The change in equilibrium price will be

a. greater in the aged cheddar cheese market than in the bread market.
b. greater in the bread market than in the aged cheddar cheese market.
c. the same in the aged cheddar cheese and bread markets.
d. may be greater in either the aged cheddar cheese market or the bread market.

QN=15 (17231) Elasticity is

a. a measure of how much buyers and sellers respond to changes in market conditions.
b. the study of how the allocation of resources affects economic well-being.
c. the maximum amount that a buyer will pay for a good.
d. the value of everything a seller must give up to produce a good.

QN=16 (17247) Which of the following statements is not valid when supply is perfectly elastic?
a. The elasticity of supply approaches infinity.
b. The supply curve is horizontal.
c. Very small changes in price lead to large changes in quantity supplied.
d. The time period under consideration is more likely a short period rather than a long
period.

QN=17 (17290) If the government removes a binding price floor from a market, then the price
received by sellers will
a. decrease and the quantity sold in the market will decrease.
b. decrease and the quantity sold in the market will increase.
c. increase and the quantity sold in the market will decrease.
d. increase and the quantity sold in the market will increase.

QN=18 (17298) Suppose sellers of liquor are required to send $1.00 to the government for every bottle
of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor
to rise by $0.60 per bottle. Which of the following statements is correct?
a. (i) The effective price received by sellers is $0.40 per bottle less than it was before the
tax.
b. (ii) Sixty percent of the burden of the tax falls on sellers.
c. (iii) This tax causes the demand curve for liquor to shift downward by $1.00 at each
quantity of liquor.
d. All of (i), (ii), and (iii) are correct.

QN=19 (17295) The imposition of a binding price floor on a market causes quantity demanded to be
a. (i) greater than quantity supplied.
b. (ii) less than quantity supplied.
c. (iii) equal to quantity supplied.
d. Both (i) and (ii) are possible.

QN=20 (17281) In the housing market, rent controls cause quantity supplied to
a. fall and quantity demanded to fall.
b. fall and quantity demanded to rise.
c. rise and quantity demanded to fall.
d. rise and quantity demanded to rise.

QN=21 (17329) 5. Refer to Table 7-9. The equilibrium price is

a. $10.00.
b. $8.00.
c. $6.00.
d. $4.00.
QN=22 (17328) Raisins and milk are complementary goods. An increase in supply of raisins will
a. increase consumer surplus in the market for raisins and decrease producer surplus in
the market for milk.
b. increase consumer surplus in the market for raisins and increase producer surplus in
the market for milk.
c. decrease consumer surplus in the market for raisins and increase producer surplus in
the market for milk.
d. decrease consumer surplus in the market for raisins and decrease producer surplus in
the market for milk.

QN=23 (17331) 2. Refer to Figure 7-15. If the price decreases from $22 to $16 due to a shift in
the supply curve, consumer surplus increases by

a. $120.
b. $360.
c. $480.
d. $600.

QN=24 (17380) Which of the following is a way to address an externality problem?

a. (i) command and control solution
b. (ii) corrective tax
c. (iii) corrective subsidy
d. all of (i), (ii), and (iii).

QN=25 (17363) A positive externality

a. is a benefit to the producer of the good.
b. is a benefit to the consumer of the good.
c. is a benefit to someone other than the producer and consumer of the good.
d. results in an optimal level of output.

QN=26 (17389) Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy
values smoke-free air at $15. Which of the following scenarios is a successful example
of the Coase theorem?
a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke.
b. Mary pays Cathy $16 so that Mary can smoke.
c. Mary pays Cathy $14 so that Mary can smoke.
d. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.

QN=27 (17413) Which of the following is not a public good?

a. national defense
b. patented technological knowledge
c. general knowledge
d. the elimination of poverty

QN=28 (17400) Common resources are both

a. rival and nonexcludable.
b. rival and excludable.
c. nonrival and excludable.
d. nonrival and nonexcludable.

QN=29 (17417) If the government decides to build a new highway, the first step would be to conduct a
study to determine the value of the project. The study is called a
a. fiscal analysis.
b. monetary analysis.
c. welfare analysis.
d. cost-benefit analysis.

QN=30 (17436) Which field of economics studies how the number of firms affects the prices in a
market and the efficiency of market outcomes?
a. macro economics
b. industrial organization
c. labor economics
d. monetary economics
QN=31 (17430) The firm's efficient scale is the quantity of output that minimizes
a. average total cost.
b. average fixed cost.
c. average variable cost.
d. marginal cost.

QN=32 (17433) Refer to Table 13-2. The marginal product of the second worker is

a. 90 units.
b. 85 units.
c. 80 units.
d. 20 units.

QN=33 (17475) Which of the following is not a characteristic of a perfectly competitive market?
a. Firms are price takers.
b. Firms have difficulty entering the market.
c. There are many sellers in the market.
d. Goods offered for sale are largely the same.

QN=34 In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market,
(17491) and panel (b) depicts the linear market supply curve for a market with a fixed number of
identical firms.

Refer to Figure 14-8. If at a market price of $1.75, 52,500 units of output are supplied to this
market, how many identical firms are participating in this market?
a. 75
b. 100
c. 250
d. 300

QN=35 (17470) 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. Free entry is limited.
d. Each firm chooses an output level that maximizes profits.

QN=36 (17521) The deadweight loss that arises from a monopoly is a consequence of the fact that the
monopoly
a. quantity is lower than the socially-optimal quantity.
b. price equals marginal revenue.
c. price is the same as average revenue.
d. earns positive profits.

QN=37 (17524) A perfectly competitive market

a. may not be in the best interests of society, whereas a monopoly market promotes
general economic well-being
b. promotes general economic well-being, whereas a monopoly market may not be in the
best interests of society.
c. and a monopoly market are equally likely to promote general economic well-being.
d. is less likely to promote general economic well-being than a monopoly market.
QN=38 (17523) During the holiday season, high-end retailers frequently place a high price on
merchandise on weekends and discount the price during the week. They do this
because they believe that two groups of customers exist: shoppers with little free time
and bargain hunters. Bargain hunters have time to shop around and frequently shop
during the week. What do economists call this price strategy used by high-end
retailers?
a. oligopoly
b. price discrimination
c. compensating differential
d. in-kind transfers

QN=39 (17578) A monopolistically competitive market has characteristics that are similar to
a. a monopoly only.
b. a competitive firm only.
c. both a monopoly and a competitive firm.
d. neither a monopoly nor a competitive firm.

QN=40 (17595) Refer to Figure 16-3. The firm in this figure is monopolistically competitive. It illustrates

a. the shut-down case.

b. a long-run economic profit.
c. a short-run economic profit.
d. a short-run loss.

QN=41 (17592) A monopolistically competitive market is like a competitive market in that

a. both market structures feature easy entry by new firms in the long run.
b. the main objective of firms in both market structures is something other than profit
maximization.
c. firms in both market structures produce the welfare-maximizing level of output.
d. firms in both market structures set price above marginal cost.

QN=42 (17606) The equilibrium quantity in markets characterized by oligopoly is

a. higher than in monopoly markets and higher than in perfectly competitive markets.
b. higher than in monopoly markets and lower than in perfectly competitive markets.
c. lower than in monopoly markets and higher than in perfectly competitive markets.
d. lower than in monopoly markets and lower than in perfectly competitive markets.

QN=43 (17607) Which of the following statements is correct?

a. (i) If duopolists successfully collude, then their combined output will be equal to the
output that would be observed if the market were a monopoly.
b. (ii) Although the logic of self-interest decreases a duopoly’s price below the monopoly
price, it does not push the duopolists to reach the competitive price.
c. (iii) Although the logic of self-interest increases a duopoly’s level of output above the
monopoly level, it does not push the duopolists to reach the competitive level.
d. All of (i), (ii), and (iii) are correct.

QN=44 (17603) 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 outcome is to select X. If
the second player chooses Strategy Y, the first player's best outcome is to select X. For
the first player, Strategy X is called a
a. dominant strategy.
b. collusive strategy.
c. repeated-trial strategy.
d. cartel strategy.

QN=45 (17664) Competitive firms decide how much output to sell by producing output until the price
of the good equals
a. marginal product.
b. the value of marginal product.
c. marginal cost.
d. marginal profit.

QN=46 (17669) If the price of airline tickets falls, what will happen to the demand curve for flight
 attendants?
a. It will shift to the right.
b. It will shift to the left.
c. The direction of the shift is ambiguous.
d. It will remain unchanged.

QN=47 (17646) A decrease in population can be expected to

a. increase the marginal product of land.
b. decrease the supply of land.
c. decrease the rents on land.
d. increase the demand for land.

QN=48 (17685) 2. Refer to Figure 21-2. Which of the following statements is not correct?

a. Points W, X, and Y all cost the consumer the same amount of money.
b. Point Z is unaffordable for the consumer given his budget constraint.
c. Point V costs less than point Z.
d. Points W, X, and Y give the consumer the same level of satisfaction.

QN=49 (17683) When a consumer experiences a price decrease for an inferior good, it is possible that
the income effect is
a. (i) less than the substitution effect, and the demand curve will be downward sloping.
b. (ii) greater than the substitution effect, and the demand curve will be upward sloping.
c. (iii) less than the substitution effect, and the demand curve will be upward sloping.
d. both (i) and (ii) are correct.

QN=50 (17690) If the price of X is $10, what is the price of Y?

a. $15
b. $25
c. $35
d. $70
[id=17119, Mark=1]1. D

[id=17118, Mark=1]2. A

[id=17142, Mark=1]3. A

[id=17129, Mark=1]4. C

[id=17151, Mark=1]5. B

[id=17161, Mark=1]6. B

[id=17154, Mark=1]7. C

[id=17170, Mark=1]8. A

[id=17194, Mark=1]9. C

[id=17213, Mark=1]10. C

[id=17225, Mark=1]11. A

[id=17191, Mark=1]12. D

[id=17259, Mark=1]13. B

[id=17264, Mark=1]14. A

[id=17231, Mark=1]15. A

[id=17247, Mark=1]16. D

[id=17290, Mark=1]17. B

[id=17298, Mark=1]18. A

[id=17295, Mark=1]19. B

[id=17281, Mark=1]20. B

[id=17329, Mark=1]21. B

[id=17328, Mark=1]22. B

[id=17331, Mark=1]23. B

[id=17380, Mark=1]24. D

[id=17363, Mark=1]25. C

[id=17389, Mark=1]26. B

[id=17413, Mark=1]27. B

[id=17400, Mark=1]28. A

[id=17417, Mark=1]29. D
[id=17436, Mark=1]30. B

[id=17430, Mark=1]31. A

[id=17433, Mark=1]32. C

[id=17475, Mark=1]33. B

[id=17491, Mark=1]34. D

[id=17470, Mark=1]35. C

[id=17521, Mark=1]36. A

[id=17524, Mark=1]37. B

[id=17523, Mark=1]38. B

[id=17578, Mark=1]39. C

[id=17595, Mark=1]40. C

[id=17592, Mark=1]41. A

[id=17606, Mark=1]42. B

[id=17607, Mark=1]43. D

[id=17603, Mark=1]44. A

[id=17664, Mark=1]45. C

[id=17669, Mark=1]46. B

[id=17646, Mark=1]47. C

[id=17685, Mark=1]48. D

[id=17683, Mark=1]49. D

[id=17690, Mark=1]50. C