Managerial Economics 4th Edition Luke M. Froeb - Test Bank

,1. One lesson of business:
a. is tracing the consequences of a policy.
b. promoting a policy change to eradicate inefficiencies.
c. moving assets from lower to higher value uses, thereby creating wealth.
d. None of the above
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

2. An individual’s value for a good or service is the
a. The amount of money he or she used to pay for a good
b. The amount of money he or she is willing to pay for it
c. The amount of money he or she has to spend on goods
d. None of the above
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth

3. The difference between Capitalism and Socialism is that
a. Capitalism is concerned more about how to slice up the “pie”
b. Socialism is concerned with making the “pie” as large as possible
c. Capitalism is concerned with making the “pie” as large as possible
d. Both A and B
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

4. A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at
$24,000, the transaction will generate:
a. No surplus
b. $4,000 worth of seller surplus and unknown amount of buyer surplus
c. $6,000 worth of buyer surplus and $4,000 of seller surplus
d. $6,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

5. A consumer values a car at $30,000 and a producer values the same car at $20,000. The transaction will not take place
if a tax is imposed
a. equal to the seller surplus
b. smaller than the total surplus
c. larger than the total surplus
d. smaller than the buyer surplus
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

6. A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at
$24,000, what level of sales tax will result in unconsummated transaction?
a. 0%
b. 25%
c. 20%
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, d. 40%
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth

7. A consumer values a car at $30,000 and a producer values the same car at $20,000. What amount of tax will result in
unconsummated transaction?
a. $4,000
b. $9,000
c. $15,000
d. $2,000
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

8. A consumer values a car at $30,000 and a producer values the same car at $20,000. If a tax is levied on the seller, what
level of tax will result in unconsummated transaction?
a. 0%
b. 25%
c. 60%
d. 40%
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

9. A consumer values a house at $525,000 and a producer values the same house at $485,000. If the transaction is
completed at $510,000, the transaction will generate:
a. No surplus
b. $25,000 worth of seller surplus and unknown amount of buyer surplus
c. $15,000 worth of buyer surplus and $25,000 of seller surplus
d. $25,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

10. A consumer values a house at $525,000 and a producer values the same house at $485,000. If the transaction is
completed at $510,000, what amount of tax will result in unconsummated transaction?
a. A tax of $9,000
b. A tax of $14,000
c. A tax of $15,000
d. A tax of $18,000
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth

11. A consumer values a house at $525,000 and a producer values the same house at $485,000. If the transaction is
completed at $510,000, what level of tax rate will result in unconsummated transaction?
a. 1%
b. 5%
c. 3%
d. 2%
ANSWER: b
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, TOPICS: Section 1: Capitalism and Wealth

12. A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on
the seller, then what would be the lowest price that the seller would be willing to sell at?
a. $527,000
b. $523,800
c. $525,000
d. $500,000
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth

13. A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on
the buyer, then, what would be the highest price that the buyer would be willing to pay?
a. $525,000
b. $523,800
c. $485,000
d. $486,111
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth

14. The difference between the maximum price the consumer is willing to pay and the price the consumer actually pays
for a product is referred to as:
a. market surplus.
b. market shortage.
c. consumer surplus.
d. producer surplus.
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth

15. If you are willing to sell your car business for $500,000 and someone offers you $420,000 for it, this transaction will
generate:
a. There is no surplus created
b. $80,000 worth of seller surplus and unknown amount of buyer surplus
c. $40,000 worth of buyer surplus and $40,000 of seller surplus
d. $80,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth

16. If you are willing to purchase a house for $300,000 and you purchase the house for $275,000, this transaction will
generate:
a. There is no surplus created
b. $25,000 worth of seller surplus and unknown amount of buyer surplus
c. $10,000 worth of buyer surplus and $15,000 of seller surplus
d. $25,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth


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