econ102_Test3
pdf
School
Northeastern University *
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Course
102
Subject
Economics
Date
Apr 3, 2024
Type
Pages
14
Uploaded by HighnessNeutron15100
1
Econ
102
–
Spring
2017
–
Professor
Forbes
‐
Test
1
Instructions:
Please
fill
in
your
answers
with
pen
or
pencil
using
the
Scantron
form.
There
are
50
questions
on
10
pages
in
this
test.
You
may
use
a
basic
calculator.
No
other
aides
are
allowed.
Good
luck!
1)
If
the
total
revenue
collected
by
the
federal
government
in
a
particular
year
is
$1.2
billion
and
the
total
amount
spent
by
the
government
during
this
year
is
$3.8
billion,
what
is
the
budget
deficit?
A)
$1.6
billion
B)
$2.6
billion
C)
$2.2
billion
D)
$5
billion
2)
A
restaurant
charges
its
customers
12%
of
the
total
food
price
as
tax.
This
is
an
example
of
________
tax.
A)
payroll
B)
wealth
C)
property
D)
sales
3)
A
________
tax
system
is
one
in
which
households
pay
the
same
percentage
of
their
incomes
in
taxes
regardless
of
their
income
level.
A)
progressive
B)
regressive
C)
proportional
D)
complementary
4)
The
imposition
of
all
taxes,
except
a
lump
sum
tax,
leads
to
________.
A)
an
increase
in
consumer
surplus
B)
an
increase
in
producer
surplus
C)
a
fall
in
the
price
of
the
good
D)
a
loss
in
total
welfare
5)
If
the
sellers
of
a
good
are
taxed
for
each
unit
sold,
________.
A)
the
price
that
buyers
need
to
pay
falls
B)
a
larger
quantity
of
the
good
is
sold
C)
the
price
that
sellers
receive
increases
D)
a
smaller
quantity
of
the
good
is
sold
2
The
table
below
shows
the
tax
brackets
for
different
income
groups
in
a
country:
6)
Refer
to
the
table
above.
This
is
an
example
of
a
________
tax
system.
A)
progressive
B)
regressive
C)
proportional
D)
cardinal
7)
Refer
to
the
table
above.
If
Tom
has
a
taxable
income
of
$62,000,
he
faces
a
marginal
tax
rate
of
________.
A)
10%
B)
15%
C)
20%
D)
30%
8)
Refer
to
the
table
above.
If
Jack
has
an
annual
income
of
$50,000
and
Jill
earns
$77,500,
which
of
the
following
is
true?
A)
Jack
and
Jill
pay
an
equal
amount
of
tax.
B)
The
average
rates
of
tax
paid
by
Jack
and
Jill
are
equal.
C)
The
marginal
tax
rate
for
Jack
is
higher
than
the
marginal
tax
rate
for
Jill.
D)
Jack
and
Jill
fall
in
the
same
tax
bracket.
9)
If
a
tax
is
imposed
per
unit
of
a
good
sold,
________.
A)
the
supply
curve
of
the
good
shifts
to
the
right
B)
the
supply
curve
of
the
good
shifts
to
the
left
C)
the
demand
curve
for
the
good
shifts
to
the
right
D)
the
demand
curve
for
the
good
shifts
to
the
left
10)
The
deadweight
loss
due
to
a
________
is
always
smaller
than
the
deadweight
loss
due
to
a
________.
A)
tax
on
each
unit
sold;
per
unit
tax
on
each
unit
bought
B)
per
unit
tax
on
each
unit
sold;
per
unit
tax
on
each
unit
bought
C)
tax
on
each
unit
sold;
lump
‐
sum
tax
D)
lump
‐
sum
tax;
tax
on
each
unit
bought
3
11)
The
government
of
Westernia
imposes
a
per
‐
unit
tax
on
the
sale
of
potato
chips.
The
incidence
of
the
tax
is
higher
on
buyers
than
on
sellers
if
________.
A)
the
buyers
and
sellers
of
a
good
are
equally
sensitive
to
price
changes
B)
the
elasticity
of
the
market
demand
curve
is
higher
than
the
elasticity
of
the
market
supply
curve
C)
the
elasticity
of
the
market
supply
curve
is
higher
than
the
elasticity
of
the
market
demand
curve
D)
the
number
of
sellers
in
a
market
is
larger
than
the
number
of
buyers
The
graph
below
shows
the
demand
(D)
and
supply
(S)
curves
for
Good
X
before
and
after
a
tax
is
imposed
on
each
unit
of
the
good
sold.
12)
Refer
to
the
figure
above.
The
loss
in
consumer
surplus
due
to
the
imposition
of
the
tax
is
given
by
the
areas
________.
A)
JBIE
and
BIA
B)
EAG
AND
GHF
C)
CAE
AND
EAHF
D)
JBHF
AND
ABH
13)
Refer
to
the
figure
above.
The
region
________
shows
the
producer
surplus
after
the
imposition
of
the
tax.
A)
JBHF
B)
JBF
C)
JBC
D)
HAI
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4
14)
The
burden
of
a
per
‐
unit
tax
falls
entirely
on
buyers
if
________.
A)
the
price
elasticity
of
demand
is
zero
B)
the
price
elasticity
of
demand
is
greater
than
1
C)
the
income
elasticity
of
demand
is
high
D)
the
price
elasticity
of
supply
is
zero.
15)
One
reason
governments
impose
taxes
is
to
________.
A)
reduce
the
number
of
transactions
in
an
economy
B)
redistribute
funds
via
transfer
payments
C)
increase
competition
among
producers
D)
increase
the
volume
of
exports
16)
In
the
United
States,
the
federal
government
relies
on
________
to
limit
inequality.
A)
regressive
taxes
B)
proportional
taxes
C)
progressive
taxes
D)
marginal
taxes
17)
The
average
tax
rate
faced
by
an
individual
is
the
________.
A)
total
tax
paid
by
her
divided
by
the
total
income
earned
B)
total
revenue
received
by
the
government
divided
by
the
number
of
taxpayers
C)
percentage
of
the
last
dollar
earned
that
a
household
pays
as
a
tax
D)
difference
between
the
highest
tax
rate
and
the
lowest
tax
rate
18)
Compared
to
a
firm
under
perfect
competition,
a
monopolist:
A)
charges
less
and
produces
less.
B)
charges
less
and
produces
more.
C)
charges
more
and
produces
less.
D)
charges
more
and
produces
more.
19)
When
compared
to
a
perfectly
competitive
industry,
in
a
monopoly:
A)
both
consumer
surplus
and
social
surplus
are
larger.
B)
consumer
surplus
is
lower
but
social
surplus
is
larger.
C)
both
consumer
surplus
and
social
surplus
are
smaller.
D)
consumer
surplus
is
higher
but
social
surplus
is
smaller.
20)
Which
of
the
following
is
an
example
of
a
good
produced
under
monopoly?
A)
CDs
B)
Books
C)
Aerated
drinks
D)
Patented
software
5
21)
Which
of
the
following
statements
is
true?
A)
Monopoly
is
characterized
by
no
entry
barriers.
B)
Perfect
competition
is
characterized
by
high
entry
barriers.
C)
Firms
in
a
market
with
entry
barriers
are
likely
to
have
more
market
power
than
firms
in
a
market
with
no
entry
barriers.
D)
Firms
in
a
market
with
no
entry
barriers
are
likely
to
have
more
market
power
than
firms
in
a
market
with
entry
barriers.
22)
Economies
of
scale
in
production
act
as
a
source
of:
A)
legal
market
power.
B)
natural
market
power.
C)
restricted
market
power.
D)
regulated
market
power.
23)
A
network
externality
refers
to
a
situation
where:
A)
the
value
of
a
product
increases
as
more
consumers
start
to
use
it.
B)
firms
collude
to
sell
products
at
a
price
higher
than
the
equilibrium
market
price.
C)
a
firm
that
has
control
over
key
resources
auctions
the
resources
off
to
other
firms.
D)
the
government
interferes
to
prevent
the
concentration
of
market
power
in
the
hands
of
a
few
firms.
24)
Which
of
the
following
statements
is
true?
A)
A
monopolist
faces
an
upward
sloping
demand
curve.
B)
A
perfectly
competitive
firm
faces
an
upward
sloping
demand
curve.
C)
A
monopolist
can
increase
the
price
of
its
product
and
not
lose
all
of
its
business.
D)
A
perfectly
competitive
firm
can
increase
the
price
of
its
product
without
losing
its
business.
6
The
following
table
shows
the
quantity
of
a
good
sold
by
a
monopolist
at
different
prices.
Quantity
(units)
Price
($)
150
9
200
8
250
7
300
6
350
5
400
4
450
3
25)
Refer
to
the
table
above.
Which
of
the
following
statements
is
true
of
the
monopolist
ʹ
s
total
revenue?
A)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
its
total
revenue
decreases.
B)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
its
total
revenue
increases.
C)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
its
total
revenue
increases
then
decreases.
D)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
its
total
revenue
decreases
then
increases.
26)
Refer
to
the
table
above.
Which
of
the
following
statements
is
true
of
the
monopolist
ʹ
s
marginal
revenue?
A)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
the
marginal
revenue
decreases.
B)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
the
marginal
revenue
increases.
C)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
the
marginal
revenue
first
increases
then
decreases.
D)
As
the
monopolist
reduces
the
price
of
its
product
from
$9
to
$3,
the
marginal
revenue
first
decreases
then
increases.
27)
The
quantity
effect
of
a
price
reduction
causes:
A)
a
decrease
in
revenue
because
of
a
lower
price.
B)
an
increase
in
revenue
because
of
increased
sales.
C)
an
increase
in
labor
demand
due
to
increased
sales
of
the
product.
D)
a
decrease
in
labor
demand
because
of
a
lower
price
of
the
final
product.
28)
The
price
effect
of
a
price
decrease
by
a
monopolist
refers
to:
A)
the
loss
in
revenue
due
to
the
price
reduction.
B)
the
increase
in
sales
due
to
the
price
reduction.
C)
the
increase
in
revenue
because
of
an
increase
in
sales.
D)
the
decrease
in
the
demand
for
labor
due
to
the
lower
price
of
the
final
product.
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7
29)
When
a
monopolist
sells
positive
levels
of
output,
its
demand
curve:
A)
lies
below
its
marginal
revenue
curve.
B)
lies
above
its
marginal
revenue
curve.
C)
and
marginal
revenue
curve
overlap.
D)
is
vertical
while
its
marginal
revenue
curve
is
horizontal.
30)
A
monopolist
faces
an
average
total
cost
of
$6
when
it
produces
200
units
of
its
product.
If
it
sells
the
200
units
at
$8
per
unit,
________.
A)
the
monopolist
incurs
a
loss
of
$200
B)
the
monopolist
incurs
a
loss
of
$400
C)
the
monopolist
makes
a
profit
of
$200
D)
the
monopolist
makes
a
profit
of
$400
8
The
following
figure
shows
the
marginal
revenue
(MR)
and
demand
curves
faced
by
a
monopolist.
31)
Refer
to
the
figure
above.
If
the
monopolist
faces
a
constant
marginal
cost
of
$2,
what
is
the
optimal
quantity
that
it
should
produce?
A)
20
units
B)
40
units
C)
45
units
D)
80
units
32)
Refer
to
the
figure
above.
If
the
monopolist
faces
a
constant
marginal
cost
of
$2,
at
what
price
should
it
sell
its
output?
A)
$2
B)
$6
C)
$10
D)
$12
9
The
following
figure
shows
the
market
demand
curve
for
penicillin,
an
antibiotic
medicine.
Initially,
the
market
is
supplied
by
perfectly
competitive
firms.
Later,
the
government
grants
exclusive
rights
to
produce
and
sell
penicillin
to
one
firm.
The
figure
also
shows
the
marginal
revenue
curve
(MR)
of
the
firm
once
it
begins
to
operate
as
a
monopoly.
The
marginal
cost
is
constant
at
$3,
irrespective
of
the
market
structure.
33)
Refer
to
the
figure
above.
What
is
the
deadweight
loss
when
the
market
is
perfectly
competitive?
A)
$0
B)
$30
C)
$45
D)
$90
34)
Refer
to
the
figure
above.
What
is
the
deadweight
loss
when
the
market
is
converted
into
a
monopoly?
A)
$0
B)
$45
C)
$90
D)
$180
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10
35)
When
firms
charge
different
prices
to
different
consumers
for
the
same
good
or
service,
it
is
referred
to
as
________.
A)
price
bias
B)
shadow
pricing
C)
predatory
pricing
D)
price
discrimination
36)
In
a
simultaneous
move
game,
________.
A)
each
player
has
to
make
his
choice
after
knowing
his
rival
ʹ
s
choice
B)
each
player
has
to
make
his
choice
without
knowing
his
rival
ʹ
s
choice
C)
there
is
always
more
than
one
Nash
equilibrium
D)
there
is
always
more
than
one
dominant
strategy
equilibrium
37)
A
best
response
is
________.
A)
one
player
ʹ
s
optimal
action
choice
irrespective
of
the
action
of
the
other
player
B)
one
player
ʹ
s
optimal
action
choice
taking
the
other
player
ʹ
s
action
as
given
C)
an
action
choice
that
always
results
in
a
zero
payoff
to
the
opponent
D)
an
action
choice
that
results
in
equal
payoffs
to
all
the
players
in
a
game
Scenario:
Rita
and
Mike
have
been
caught
cheating
on
an
exam.
They
are
taken
to
separate
rooms
for
interrogation.
Their
payoff
matrix
is
given
below.
The
first
outcome
listed
in
each
cell
is
Rita’s
payoff
and
the
second
outcome
listed
is
Mike’s
payoff.
38)
Refer
to
the
scenario
above.
Which
of
the
following
is
true?
A)
Mike
ʹ
s
best
response
is
not
to
confess
if
Rita
confesses.
B)
Rita
ʹ
s
best
response
is
not
to
confess
if
she
expects
Mike
not
to
confess.
C)
Rita
ʹ
s
best
response
is
not
to
confess
irrespective
of
what
Mike
does.
D)
Mike
ʹ
s
best
response
is
to
confess
irrespective
of
what
Rita
does.
39)
Refer
to
the
scenario
above.
What
is
the
Nash
Equilibrium
of
this
game?
A)
Mike
will
confess
while
Rita
will
not
confess.
B)
Rita
will
confess
while
Mike
will
not
confess.
C)
Neither
of
them
will
confess.
D)
Both
of
them
will
confess.
11
40)
A
player
has
a
dominant
strategy
when:
A)
her
chosen
strategy
gives
her
a
lower
payoff
than
the
other
player.
B)
her
chosen
strategy
matches
the
best
response
of
other
players
in
the
game.
C)
she
has
many
best
responses
to
any
strategy
of
the
other
player
in
the
game.
D)
she
has
only
one
best
response
to
every
possible
strategy
of
the
other
player.
Scenario:
The
payoff
matrix
given
below
shows
the
payoffs
to
two
rival
firms
in
millions
of
US
dollars
for
each
strategy
they
choose.
The
first
number
listed
in
each
cell
is
the
payoff
to
Firm
A
and
the
second
number
listed
is
the
payoff
to
Firm
B.
41)
Refer
to
the
scenario
above.
In
this
game,
the
dominant
strategy
equilibrium
occurs
if
________.
A)
Firm
A
chooses
Strategy
Y,
and
Firm
B
chooses
Strategy
X
B)
Firm
B
chooses
Strategy
Y,
and
Firm
B
chooses
Strategy
X
C)
Both
Firm
A
and
Firm
B
choose
Strategy
X
D)
Both
Firm
A
and
Firm
B
choose
Strategy
Y
42)
Refer
to
the
scenario
above.
Which
of
the
following
is
true
in
this
case?
A)
This
game
has
multiple
Nash
equilibria.
B)
This
game
does
not
have
a
Nash
equilibrium.
C)
The
dominant
strategy
equilibrium
of
this
game
is
also
the
Nash
equilibrium.
D)
The
dominant
strategy
equilibrium
of
this
game
is
not
Pareto
efficient.
43)
Which
of
the
following
is
likely
to
use
the
concepts
of
game
theory?
A)
Deciding
on
how
much
to
spend
on
monthly
groceries
B)
Exit
decision
of
competitive
firms
in
the
long
run
C)
International
trade
negotiation
D)
Pricing
decision
of
a
firm
operating
in
a
competitive
market
44)
Which
of
the
following
statements
is
true?
A)
In
any
game,
the
best
response
of
a
player
is
also
her
dominant
strategy.
B)
The
best
response
of
a
player
is
not
always
her
dominant
strategy.
C)
A
prisoners
ʹ
dilemma
game
is
an
example
of
a
zero
‐
sum
game.
D)
A
prisoners
ʹ
dilemma
game
is
an
example
of
an
extensive
‐
form
game.
12
45)
Which
of
the
following
is
true
of
a
payoff
matrix?
A)
It
is
the
representation
of
only
the
best
response
of
each
player.
B)
It
takes
into
account
all
relevant
costs
and
benefits
associated
with
each
action
of
the
players.
C)
It
shows
the
payment
made
to
each
factor
of
production
for
the
production
of
a
good.
D)
It
does
not
represent
all
the
costs
and
benefits
associated
with
the
choices
of
the
players.
46)
Mr.
Smith
wants
to
go
on
a
vacation
with
his
wife.
However,
Mrs.
Smith
wants
to
go
to
a
beach
while
he
wants
to
go
for
a
trek
in
the
hills.
The
payoff
matrix
given
below
shows
the
units
of
satisfaction
derived
in
each
situation.
The
first
number
listed
in
each
cell
is
the
payoff
to
Mr.
Smith
and
the
second
number
listed
is
the
payoff
to
Mrs.
Smith.
This
game
has
________.
A)
multiple
dominant
strategy
equilibria
B)
multiple
Nash
equilibria
C)
only
one
Nash
equilibrium
D)
only
one
dominant
strategy
equilibrium
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13
Scenario:
Two
firms
in
a
market
must
choose
between
two
alternative
strategies—X
and
Y.
The
figure
below
shows
the
game
tree
that
these
firms
can
use
to
make
their
decisions.
47)
Refer
to
the
figure
above.
Which
of
the
following
is
true?
A)
Firm
2
should
follow
Strategy
X
if
Firm
1
follows
Strategy
X.
B)
Firm
2
should
follow
Strategy
Y
if
Firm
1
follows
Strategy
Y.
C)
Firm
2
should
follow
Strategy
Y
if
Firm
1
follows
Strategy
X.
D)
Firm
1
should
always
follow
Strategy
X.
48)
Refer
to
the
figure
above.
In
equilibrium,
________.
A)
Firm
1
will
follow
Strategy
Y,
and
Firm
2
will
follow
Strategy
X
B)
Firm
1
will
follow
Strategy
X,
and
Firm
2
will
follow
Strategy
Y
C)
both
firms
will
follow
Strategy
X
D)
both
firms
will
follow
Strategy
Y
49)
A
market
in
which
a
firm
emerges
as
a
monopoly
due
to
large
economies
of
scale
is
referred
to
as:
A)
a
natural
monopoly.
B)
a
regulated
monopoly.
C)
a
legal
monopoly.
D)
an
exclusive
monopoly.
14
50)
Everything
else
remaining
unchanged,
if
a
new
seller
enters
a
market
to
compete
with
an
existing
monopoly
that
is
enjoying
economies
of
scale,
it
will
lead
to:
A)
higher
profits
for
both
firms.
B)
higher
profits
for
the
existing
firm.
C)
lower
profits
for
the
existing
firm.
D)
higher
market
power
for
the
existing
firm.
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