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Scenario MRZ. Suppose Firm XYZ produces in a
perfectly competitive market and has the following
marginal costs: for each unit from 1 to 100, MC =
$20, and for each unit from 101 to 1000, MC = $30.
1. See Scenario MRZ. If the market price is $25, then
the firm will produce ______ units and get a producer
surplus of ______.
a. 100, $500
b. 1000, $5000
c. 0, 0
d. UNDEFINED, because price doesn’t equal
2. See Scenario MRZ. If the market price is $15 then
Firm XYZ will
a. produce zero.
b. produce 100 units and raise its price to $20.
c. continue to produce until price equals marginal
d. NONE of the above
3. Which of the follow is not a true statement about
a. Literacy is a capital good.
b. Capital goods are tools that increase the
productivity of labor.
c. Capital goods cannot be created if people
consume everything they produce.
d. Paper money is a capital good if it is issued by
4. A professional soccer game is broadcast by the BBC
(free public television without advertising). Anyone
with a TV can watch it. The broadcast is
a. efficient, because watching the game doesn’t
prevent others from watching it.
b. inefficient, because the BBC loses money by
broadcasting the game.
c. inefficient, because professional soccer teams
are privately owned businesses.
d. inefficient, because all viewers are free riders.
5. When you calculate your (opportunity) costs of going
to college, what portion of your room-and-board
expenses should be included?
a. none of your room-and-board expenses
b. your room-and-board expenses minus the
income you earn while attending college
c. your full room-and-board expenses
d. your room-and-board expenses minus
room-and-board expenses you would have had
if you weren’t in college
Figure WPE. Emily’s Marginal Willingness to Pay
6. See Figure WPE. Emily’s total willingness to pay for
3 plums is about $______. [Choose the closest value.]
7. See Figure WPE. At a price of $5, how many plums
will Emily demand?
8. See Figure WPE. If the price is $6, Emily’s consumer
surplus will be about $_____. [Choose the closest
9. Patent and copyright laws are major sources of
a. antitrust regulation.
b. government-created monopolies.
c. resource monopolies.
d. natural monopolies.
10. In competitive markets, the payment of economic
rents increases economic efficiency, because
a. create jobs.
b. reward people for financial investments.
c. are a reward for hard work.
d. direct resources to the most productive use.
11. In market economies, goods are usually consumed by
a. those who are willing to pay the most for them.
b. those who work the hardest.
c. those who are politically well connected.
d. those who are most deserving.