1.The following are four differences between monopoly and perfect competition. Which of these is INCORRECT?
a. a monopolist has market power while a perfect competitor does not
b. unlike a perfectly competitive firm, a monopoly can make positive economic profits in the long run.
c. a monopoly will charge a higher price and produce a smaller quantity than a competitive market with the same demand and cost structure.
d. monopoly profits can continue to exist in the long run, because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
2. One government policy for dealing with a natural monopoly is to:
a. impose a price floor to eliminate the deadweight loss.
b. impose a price ceiling to eliminate any economic profit.
c. break it up into smaller firms.
d. do all of the above.
3.A monopoly can choose the price or it can choose the quantity, but it cannot choose price and quantity independent of each other.---True or False
5.A situation in which each firm acts in order to raise the profits of its rivals (and of itself) without any formal agreement between firms is known as tacit collusion.---True or False
6.Gary’s Gas and Frank’s Fuel are the only 2 providers of gasoline in Smalltown and decide to form a cartel to raise the price of gasoline. The total industry profits are highest when ____and Gary’s profits are highest when ____.
a. neither firm cheats on the agreement; neither firm cheats on the agreement.
b. neither firm cheats on the agreement; Gary cheats on the agreement and Frank does not cheat.
c. both firms cheat on the agreement; Gary cheats on the agreement and Frank does not cheat.
d. both Gary and Frank cheat on the agreement; both Gary and Frank cheat on the agreement.
7.The most important source of oligopoly is:
a. economies of scale
b. government-created barriers
c. technological superiority
d. all of the above
8.In the long run, monopolistically competitive firms:
a. produce output at the level that minimizes average total cost.
b. set marginal revenue equal to price.
c. can’t earn a profit.
d. produce so that marginal cost equals price.
9.If the toothpaste market is monopolistically competitive, product differentiation will take place in which of the following forms?
a. different varieties of toothpaste-including whitening agents.
b. differentiation in the locations that certain toothpastes are available.
c. quality differences among the various brands.
d. all of the above.
10.A warranty on a DVD player is an example of paying to avoid risk.---True or False
11.Mary and Bob are trying to decide how much auto insurance to buy. They share the same expectations of an accident, with the same dollar loss. They also have the same income levels. But, Mary would rather buy very little insurance, while Bob would rather buy much more insurance. This suggests that:
a. Bob is more risk-averse than Mary.
b. Mary is more risk-averse than Bob.
c. Bob is risk-averse and Mary is risk-loving.
d. Mary is risk-averse and Bob is risk-loving.
12.If government officials set an emissions tax too high:
a. there will be too little pollution.
b. there will be too much pollution.
c. the marginal social cost of pollution will exceed the marginal social benefit of pollution
d. both b and c.
13.An externality is said to be internalized:
a. when individuals take external costs and benefits into account in their decision making.
b. in situations in which the Coase theorem is irrelevant or can’t be applied.
c. when individuals successfully petition the government to ban or restrict activities that generate negative externalities.
d. when individuals learn to adapt to negative externalities through introspection or internal acceptance of what are viewed as unchangeable facts of life.
15.With tradable emissions permits, the price of the permit is determined by:
a. the government
b. the supply and demand of permits
c. environmental protection organizations
d. WTO
17.Which of the following goods is most likely an artificially scarce good?
a. tickets to a boxing match
b. pay per view of a boxing match
c. health care
d. the police department
18.Which of the following is used to provide public goods?
a. voluntary contributions
b. taxes
c. self-interested business firms
d. all of the above
19. A public good is:
a. excludable and rival in consumption
b. no excludable and nonrival in consumption
c. excludable and nonrival in consumption
d. no excludable and rival in consumption
20.A ticket to a concert is excludable if the concert hall can prevent people who don’t have a ticket from entering.----True or False
22.Which of the following is one of the leading causes of poverty in the U.S?
a. lack of adequate employment
b. lack of education and poor proficiency in English
c. discrimination
d. all of the above
23.A lump-sum tax, such as the fee for a driver’s license, does not take into consideration:
a. efficiency
b. benefits principle
c. ability-to-pay principle
d. tax base
24.which of the following situations provides an example of the benefits principle?
a. employed workers pay taxes that are used to fund technical training programs.
b. revenue from the federal tax on gasoline is used to maintain and improve the Interstate Highway system.
c. Most of the revenue from property taxes is used to fund public schools. The taxes are paid by all homeowners.
d. taxes on cigarettes are used to pay state employees’ salaries.
25.Tax cuts authorized between 2000 and 2004 tended to favor the rich, but the federal tax system remains progressive overall. But, taxes at the state and local level are regressive.----True or False.
Tags: