8. Which of the following statements is correct?
(A) Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced.
(B) Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.
(C) Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced.
(D) Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced.

9. Assume that your roommate is very messy. Suppose she gets a $50 benefit from being messy but imposes a $100 cost on you. The Coase theorem would suggest that an efficient solution would be for you to (A) pay your roommate at least $50 but no more than $100 to clean up after herself. (B) pay your roommate at least $101 to clean up after herself. (C) charge your roommate at least $50 to have you clean up after her. (D) charge your roommate at least $100 but no more than $200 to keep you from complaining about the mess.

10. Some goods can be either common resources or public goods depending on (A) whether the good is rival in consumption. (B) whether the good is excludable. (C) the marginal cost of the good. (D) None of the above is correct. 

11. Refer to Table 1. Which tax schedules are progressive? (A) Tax Schedule A only (B) Tax Schedule A and Tax Schedule B (C) Tax Schedule A, Tax Schedule B, and Tax Schedule C (D) All four Tax Schedules are progressive.

12. Since the 1980s, WalMart stores have appeared in almost every community in America. WalMart buys its goods in large quantities and, therefore, at cheaper prices. WalMart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at WalMart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that (A) consumers do not react to changing prices. (B) there are diseconomies of scale in retail sales. (C) there are economies of scale in retail sales. (D) there are diminishing returns to producing and selling retail goods.

13. When a competitive firm doubles the amount of output it sells, its (A) total revenue doubles. (B) average revenue doubles. (C) marginal revenue doubles. (D) profits must increase.

14. When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated? (i) Fixed costs are sunk in the short run. (ii) In the short run, only fixed costs are important to the decision to stay open for lunch. (iii) If revenue exceeds variable cost, the restaurant owner is making a smart decision to remain open for lunch. (A) (i) and (ii) only (B) (ii) and (iii) only (C) (i) and (iii) only (D) All are demonstrated.

15. Competitive firms differ from monopolies in which of the following ways? (i) Competitive firms do not have to worry about the price effect lowering their total revenue. (ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge. (iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not. (A) (i) and (ii) only (B) (ii) and (iii) only (C) (i) and (iii) only (D) (i), (ii), and (iii) 

16. Refer to Figure 3. What area represents the total surplus lost due to monopoly pricing? (A) the rectangle (FD)xA (B) the triangle \( 1 / 2[(F D)x(B A)] \) (C) the triangle \( 1 / 2[(F D)x(C A)] \) (D) the rectangle \( (\mathrm{F D})\mathrm{xA} \) plus the triangle \( 1 / 2[(\mathrm{F D})\mathrm{x(B A)}] \)

17. Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect (A) an increase in market output and an increase in the price of the product. (B) an increase in market output and an decrease in the price of the product. (C) a decrease in market output and an increase in the price of the product. (D) a decrease in market output and a decrease in the price of the product. 

18. Refer to Table 2. What is Paul's dominant strategy? (A) Paul has no dominant strategy. (B) Paul should always choose Turn. (C) Paul should always choose Drive Straight. (D) Paul has more than one dominant strategy.

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